The recent report from the Polkadot Treasury has raised concerns about a funding crisis looming ahead. The report shows that managing the Treasury’s assets across multiple chains has become more complex and challenging. According to DeFi researcher DeFi Ignas, the Treasury only has about 24 months before it runs out of funds if the current burn rate of $87 million every six months continues.
Polkadot’s spending in the first half of 2024 reflects a troubling financial situation. An outreach program costing $37 million was launched to attract new users, developers, and businesses. Additional expenses included $10 million on ads/sponsorships, $4.4 million on influencers, and $4 million on digital ads. Despite these efforts, Polkadot’s visibility on social media platforms like “Platform X” remained low. The Treasury spent a total of $86 million in the past six months, managing $245 million in assets, with $188 million in liquid form. At this rate, the Treasury could face bankruptcy in less than two years.
The token supply for Polkadot experiences a 10% annual growth mainly due to staking rewards. With a $10 billion market cap, stakers receive $1 billion per year, significantly impacting network security costs. A proposal to reduce inflation was rejected by 57% of stakeholders, adding to the Treasury’s financial challenges.
To address these issues, Polkadot is transitioning to a new governance model. Executive bodies like bounties and collectives are being established to take on specific roles within the ecosystem, such as security, development, marketing, and business activities. The goal is to create effective structures quickly to guide Polkadot towards success by delegating more responsibilities to these executive bodies.
The effectiveness and performance of these bodies will be evaluated, and budget allocations will be based on results. The aim is to outsource operational tasks to focus on making critical decisions. At the time of writing, DOT is trading at $6.35, showing a 4% price recovery in a 24-hour timeframe but still down 10% over the past month. These financial challenges highlight the importance of strategic planning and effective governance to ensure the sustainability and growth of projects like Polkadot.