Polkadot’s Financial Outlook and Community Concerns
Polkadot’s revenue declined in the first half of 2024, leading to discussions about its financial sustainability. The platform’s head ambassador, Tommi Enenkel, has suggested lowering the token’s inflation rate to address these concerns.
Despite a report indicating Polkadot’s treasury has around $245 million in assets, there is speculation that its budget could only last for two years at the current spending rate. Enenkel highlighted the complexities of Polkadot’s treasury, noting its spending on direct expenses and future allocations through bounties and collectives.
Polkadot’s treasury is not limited to a fixed runway, as it is continuously replenished by staking rewards, with approximately 7% of total token inflation being allocated to the treasury. This mechanism ensures a steady inflow of funds, mitigating concerns about running out of money.
Currently, Polkadot holds $188 million in liquid assets, primarily in its native DOT tokens, along with stablecoins such as Tether (USDT) and USD Coin (USDC). The first half of 2024 saw a significant increase in spending, totaling $87 million, with over 40% allocated to advertising, influencers, conferences, and events.
Despite the concerns, Polkadot achieved better value for its spending during this period, as the DOT token reached a peak price of $11.46 in mid-March, its highest since May 2022. However, the token has since dropped to $6.33, though it remains up nearly 11% for the week.
Enenkel emphasized growing concerns within the ecosystem about treasury usage, noting a decline in treasury balances since mid-2023. Revenue decreased by 58.5% from the second half of 2023, largely due to a drop in network fees. The treasury received over 5.2 million DOT in inflation-based income during the first half of the year, down from 7.8 million DOT in the previous half-year.
To address these issues, Enenkel proposed creating executive bodies represented as bounties and collectives to manage the effective deployment of treasury capital. He also suggested lowering DOT’s current 10% inflation rate to reduce selling pressure and stabilize the DOT/USD exchange rate, thereby enhancing the purchasing power of the DOT-denominated treasury.
