Polkadot's half-year financial report sparks controversy: $87 million in promotional expenses accounts for nearly half, with revenue only at $1.1 million
Recently, Polkadot's financial report for the first half of this year has drawn complaints from investors. Although the official statement claims that the treasury's funds are sufficient to support two years, the substantial expenditure of up to $87 million has still raised doubts within the community.Author: Nancy, PANews
In the past, Polkadot's financial reports have always sparked controversy, and this time is no exception. Recently, the Polkadot Treasury financial report for the first half of 2024 released on the official governance forum has drawn complaints from investors. Although the official claim states that the treasury's funds are sufficient to support two years, the substantial expenditure of $87 million has raised questions within the community.
Expenditures in the first half of the year exceed the total of the past two years, with promotion costs accounting for 42%
According to the balance sheet released by the Polkadot community, the Treasury manages assets totaling up to $245 million (38 million DOT). The Polkadot block explorer shows that as of July 2, the Treasury holds over 36.5 million DOT, a decrease of nearly 22.5% from its historical peak.
Of this, $188 million (29 million DOT) is liquid assets, including $8 million in stablecoins USDT and USDC, mainly distributed across Relaychain, AssetHub, and Hydration; $47 million (7.3 million DOT) is designated assets used by the treasury for specific purposes; $6.4 million (1 million DOT) is exclusively for Omnipool (Hydration's flagship AMM); and $3.7 million (580,000 DOT) is receivable loans providing one-year loans to DeFi ecosystem projects.
The report points out that compared to traditional entities, Polkadot's treasury balance sheet is outstanding, with ample surplus. In terms of expenditures, in just the first half of 2024, Polkadot's treasury expenditures reached $87 million (11 million DOT), a figure that far exceeds the total expenditure of $46 million for the years 2022 and 2023 combined.
In terms of specific expenditure categories, the main allocations were for promotion (42.4%), development (26.7%), economics (17.6%), talent and education (6.4%), operations (4.4%), and research (2.5%).
Among these, promotion expenditures totaled $37 million, mainly for advertising and media, online and offline community-building activities, and large conferences. Advertising costs amounted to $21 million (including $10 million in sponsorships, $4.9 million for marketing and PR firms, and $4 million for digital advertising), while event costs were $7.9 million (including $4.5 million for various events, $3.9 million for business development, and $3.2 million for media production);
Development expenditures were $23 million, including $5.1 million for Polkadot protocol and SDK feature development, $4.1 million for data services and indexing, $3.9 million flowing into SubWallet, Talisman, and Nova wallets, and $2.3 million for governance investments;
Economic expenditures were $15 million, with DEX Hydration and Stellaswap each receiving 1 million DOT to be distributed within a year;
Talent and education expenditures were $5.5 million, used for the Polkadot Blockchain Academy, hackathons, etc.;
Operational expenditures were $3.8 million, covering governance and legal packaging, etc.;
Research expenditures were $2.1 million.
The report indicates that at the current expenditure rate, the Polkadot treasury has about two years' worth of funds. However, the proportion of DOT in the Polkadot treasury is 76.7%, and its volatility means that this forecast carries uncertainty.
Large-scale marketing faces community backlash, with multiple metrics showing a downward trend
Once the financial report was released, it immediately drew backlash from the Polkadot community.
Some community members believe that Polkadot's substantial spending on marketing has not yielded significant results. For example, @trading_axe stated that Polkadot seems to provide KOLs with $300,000 per month for marketing, yet there is no substantial or valuable content being published. This marketing model itself has flaws; having accounts with over 100,000 followers does not necessarily mean they have active fans, and many KOLs post not because they believe in the project but rather for income.
Ignas, co-founder of Pink Brains, also stated that Polkadot spent $37 million to promote and attract new users, developers, and enterprises, yet it remains relatively unknown on platforms like X. For instance, Polkadot sponsored IndyCar driver Conor Daly for $1.9 million and signed a $6.8 million sports sponsorship agreement with the American soccer club Inter Miami CF.
Polkadot spent $1.9 million sponsoring IndyCar driver Conor Daly
Ignas believes that at the current rate of spending, Polkadot will face bankruptcy in less than two years. According to data released by Polkadot, its revenue in the first half of this year was only 171,000 DOT (currently valued at over $1.093 million), which is completely insufficient to cover expenditures, accounting for only 1.5% of the expenditure amount. Moreover, according to Dune data, since July 2023, the treasury's inflow of funds has begun to show negative growth and has been expanding this year, with over 1.091 million DOT flowing out in just the second quarter.
In addition to the issue of fund expenditures, Polkadot is also facing multiple challenges, such as a high inflation rate that is believed to hinder its development. Ignas pointed out that the supply of DOT tokens increases by 10% each year, and most inflationary tokens are used to fund staking rewards. If calculated at a market value of $10 billion, $1 billion will flow to stakers each year, which is an expensive cost for the security of the Polkadot network. However, the proposal to reduce inflation in Polkadot was rejected. In April of this year, the Polkadot community initiated a "#706 Reduce Inflation" proposal vote to fix the total supply of DOT at 2.1 billion, but the proposal was ultimately abandoned due to a majority of opposing votes.
From the data perspective, Polkadot's trading activity has also declined this year. Dune data shows that Polkadot's monthly transaction count in June reached 16.97 million, only 51.8% of the beginning of this year, and the number of monthly active accounts has also dropped from 516,000 at the beginning of the year by 53.2% to the current 241,000. Of course, this may also be related to the previous decline in the popularity of inscriptions.
Overall, Polkadot's financial report exposes issues such as chaotic financial expenditures and inefficiency, further highlighting the importance of introducing accountability.
