Half a year expenditure of 87 million dollars, the treasury budget can only last for another 2 years, how does Polkadot plan to proceed after that?

Author: Azuma, Odaily Planet Daily

On June 29, members of the Polkadot community, Alice und Bob and Jeeper, published the Polkadot Treasury operation report for the first half of 2024 on the official governance forum. Some of the figures mentioned in the report are astonishing enough to raise questions about the current state of the Polkadot Treasury's operations and concerns about its future sustainability.

Astronomical Expenditures

The core point of the report is that in the first half of 2024, the Polkadot Treasury spent a total of $87 million (11 million DOT). Considering that the current reserve balance of the Treasury is $245 million (38.2 million DOT), if the current spending rate continues, these reserves will only last the Polkadot Treasury for another 2 years…

This unexpected set of figures has clearly shocked the entire industry. Kain Warwick, founder of Synthetix, sharply commented: "The Polkadot Treasury is burning money faster than hackers can steal it."

After the shock comes confusion, as many community members expressed on social media that it is hard to imagine how Polkadot could burn through $87 million in just six months.

Where Did the Money Go?

According to the detailed explanation in the "Payments" section of the report, compared to the second half of 2023, the Polkadot Treasury's expenditure in DOT terms increased by 2.4 times in the first half of 2024. However, due to the increase in the price of DOT itself, the Treasury's expenditure in USD terms rose by 3.2 times.

In terms of expenditure categories, the Polkadot Treasury's spending mainly falls into six major areas: research, operations, talent education, economy, development, and marketing. From the comparison in the chart below, although there has been a slight change in the expenditure structure, the absolute values of spending in these six areas have all increased compared to the second half of 2023.

The largest expenditure category is "Marketing," with a total spending of $37 million. "Marketing" expenses include advertising and media costs, online and offline community event expenses, and sponsorships for major conferences and business development activities, among others. Among these, advertising costs account for the majority, totaling $21 million, which includes a $6.8 million sponsorship for a football club, a $1.9 million sponsorship for racer Conor Daly, and a $1.3 million sponsorship for the esports organization HEROIC.

The second largest expenditure category is "Development," with a total spending of $23 million, of which $5.1 million was used for the functional development of the Polkadot protocol and SDK, $4.1 million was spent on developing data services and indexing functions, and $3.9 million was allocated to support the development of wallets like SubWallet, Talisman, and Nova.

Following closely is the expenditure in the "Economy" category, which, as a major spending item for many other public chain ecosystems to attract traffic, is relatively "low" for Polkadot, with only $15 million spent on liquidity incentives.

In the "Talent and Education" category, Polkadot invested a total of $5.5 million in the first half of the year. Ecosystem training and hackathons accounted for the vast majority of this, with $3.1 million spent on the Polkadot Blockchain Academy series of events and multiple hackathons, averaging between $60,000 and $600,000 per event.

In the "Operations" category, Polkadot spent a total of $3.8 million in the first half of the year. The largest expenditure component came from "Governance," totaling $2.5 million, which included a $640,000 grant from OpenGov to a foundation in the Cayman Islands for legal packaging.

"Research" is the smallest expenditure category for Polkadot, with a total spending of $2.1 million in the first half of the year.

How Much Is Left in Reserves? Can Revenue Increase?

As mentioned earlier, the total value of the remaining reserves in the Polkadot Treasury is $245 million, equivalent to 38.2 million DOT. However, it is necessary to further clarify the composition of these remaining reserves.

In short, the composition of the remaining reserves in the Polkadot Treasury is as follows:

• Cash and cash equivalents: 29 million DOT (approximately $188 million), mainly including DOT, USDT, and USDC held by Polkadot in the relay chain, AssetHub, and Hydration, available for immediate use by the Treasury;
• Unmanaged liquidity supply: 1 million DOT (approximately $6.4 million), mainly referring to the 1 million DOT unilateral liquidity provided by Polkadot on the Hydration Omnipool;
• Designated assets: 7.3 million DOT (approximately $47 million), referring to reserves that can only be used for specific purposes such as salaries and grants;
• Accounts receivable: 5.8 million DOT (approximately $3.7 million), referring to short-term loans provided by Polkadot to ecosystem projects such as Bifrost and Pendulum.

Overall, although facing expenditure pressure, the Polkadot Treasury still has a relatively ideal signal in terms of reserve structure—most of the reserves are in a state of immediate availability.

As for whether the Polkadot Treasury can generate further income, the report also clearly states that direct income from network fees is still negligible. Aside from earning nearly 300,000 DOT due to a short-term inscription boom in the second half of 2023, the regular fee income remains quite stable—around 20,000 DOT per quarter.

The report also specifically mentions passive income from DOT inflation (staking rewards), but the two authors of the report, Alice und Bob and Jeeper, both believe that while the Treasury can "profit" from the current 10% income, the currently high inflation rate is "destructive" and detrimental to the long-term development of the Polkadot protocol and the stability of the DOT price.

Community Concerns Are Not Without Reason

Combining the above analysis of income and expenditure and remaining reserves, it can be seen that the Polkadot Treasury is indeed facing certain sustainability pressures. Although the reserves of over $200 million are still sufficient, the excessively high expenditure figures and almost negligible income pose a real challenge.

Looking at the focal points of community concerns, they are generally concentrated on the astronomical expenditures of Polkadot and their composition, especially the nearly half of the expenditure that goes to "Marketing"—while it is understandable that development requires funding, the combined spending on operations, research, and education is relatively low, and the economic incentives seem somewhat lacking. However, the $37 million spent on marketing raises doubts not only about the scale of investment but also about its effectiveness, which seems to be described as "minimal."

In this regard, well-known overseas KOL @Ignas questioned: "Polkadot spent $37 million on marketing, yet it has almost no presence on X and other social media platforms."

@Ignas's description may be somewhat exaggerated, but it is not without reason. Looking back over the past two years, concepts such as Layer 2, modularity, chain abstraction, and Restaking have continuously captured market attention, while Polkadot, once a top-tier project, seems to have diminished in social media presence… Whether it's Jam or Coretime, how many people know what that means if they are not actively following Polkadot's ecosystem developments?

Ironically, today's controversy over Polkadot's "excessive marketing expenditure" has become the largest exposure for Polkadot on social media recently, despite its significant marketing investment.

A few months ago, a community member who has long been involved in the Polkadot ecosystem mentioned to us: "For community participants, the greatest value of Polkadot lies in its Treasury."

If the Treasury continues to be consumed in this questionable manner, the future of Polkadot may also come into doubt.