Polkadot’s treasury holds just under $245 million in assets, but recent reports have caused concerns about its budget sustainability over the next two years.
These worries stem from a Polkadot treasury report suggesting the project’s budget would only last two years at the current spending rate.
“Polkadot’s Treasury is becoming more complex and harder to grasp,” said Tommi Enenkel, the head ambassador, in a June 28 report for the first half of 2024.
He highlighted that Polkadot is spending directly and allocating value in bounties and collectives for future use.
“At the current rate of spending, the Treasury has about two years of runway left, although the volatile nature of crypto-denominated treasuries makes it hard to predict with confidence,” Enenkel added.
This has sparked discussions about stricter budgeting or changing the system’s inflation parameters.
Despite these concerns, the treasury is not at risk of running out of funds after the current $245 million. Around 7% of the total token inflation (staking rewards) is continually sent to the treasury.
Giotto de Filippi, a notable DOT activist, clarified to Cointelegraph that “the inflation in Polkadot is split between stakers and the treasury, to ensure that the treasury will always have money… So it doesn’t make sense to talk about money.”
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Polkadot’s treasury includes $188 million in liquid assets, primarily in Polkadot (DOT) tokens, along with stablecoins Tether (USDT) and USD Coin (USDC).
In the first half of the year, Polkadot experienced a significant increase in spending, totaling $87 million. Over 40% ($36.7 million) went towards advertising, influencers, conferences, and events.
Enenkel noted that spending became more efficient as DOT’s price peaked at $11.46 in mid-March 2024, the highest since May 2022.
Although the price has since dropped to $6.33, it is up nearly 11% on the week, according to CoinGecko.
Cointelegraph has approached Polkadot for comments on these concerns. Enenkel observed that ecosystem worries about treasury usage are growing, with balances declining since mid-2023.
Revenue dropped by 58.5% from the second half of 2023, attributed to decreased network fees.
The treasury received over 5.2 million DOT in inflation-based income in the first half of the year, down from 7.8 million DOT in the prior half-year.
Enenkel suggested creating departments represented as bounties and collectives for more effective treasury capital deployment, and proposed lowering DOT’s 10% inflation rate to reduce selling pressure and strengthen its purchasing power.
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