Polkadot’s treasury, which holds just under $245 million, has raised concerns about its budget limit. A report claimed the project would only have two years’ budget with current spending. The head ambassador, Tommi Enenkel, stated that Polkadot’s Treasury is becoming more complex and difficult to understand, as it is spending directly and allocating value in bounties and collectives for future use.
Heavy Spending, Less Return
Based on the current outlook, Cryptocurrency analyst Zia ul Haque has raised concerns over Polkadot’s financial strategy, predicting its potential demise within two years. Haque highlights that Polkadot holds $245 million in assets, with $188 million in tokens.
During the first half of 2024, the team spent $87M (11M DOT) in H1 2024, with 13% via executive bodies, which is 2.4 times more than the expenditure in the second half of 2023. The Treasury holds $245M (38M DOT) in assets, including $188M (29M DOT) liquid and $8M in stablecoins, plus $16M (2.5M DOT) for more stablecoin purchases.
Interestingly, Over 40% of this amount, approximately $36.7 million, was allocated to advertising, influencers, conferences, and events basically to add new users. However, these efforts have not yielded the desired results, as the number of active accounts has declined. The outreach spending included collaborations with Lionel Messi and Inter Miami CF, racing sponsorships, and various events and influencer partnerships.
Unsustainable Path
According to Haque, despite having $200 million in liquid assets, Polkadot’s current annual spending rate of $108 million means they can sustain operations for only two more years unless significant changes are made. Haque emphasizes the need for Polkadot to revise its strategy and address inflation to avoid financial collapse.
Without strategic changes, including better allocation of resources and reducing inflation, the platform risks depleting its funds, leading to potential failure within the next two years.
Is Polkadot really in Trouble?
However, DOT activist Giotto de Filippi assured Polkadot’s treasury won’t run out of funds despite decreased expenditure and balances from mid-2023. He explained to keep funds flowing, the treasury receives 7% of token inflation. Tether, USD Coin, and Polkadot’s native DOT token make up $188 million in liquid assets. This continual funding from staking rewards will help the project sustain itself in the long run.
In the meanwhile, Polkadot’s financial strategies have sparked widespread debate on stricter budgeting and potential changes to inflation parameters.
