Polkadot’s treasury, which currently holds just under $245 million, has raised concerns about its budget limits. A report suggests that with current spending levels, the project only has enough budget for the next two years.
Tommi Enenkel, the head ambassador, mentioned that the treasury is becoming increasingly complex and harder to manage. It is spending directly and allocating funds to bounties and collectives for future use.
Polkadot’s Financial Concerns and Future Risks
Cryptocurrency analyst Zia ul Haque has raised significant concerns about Polkadot’s financial strategy, predicting potential failure within the next two years. Haque points out that Polkadot holds $245 million in assets, including $188 million in tokens.
In the first half of 2024, Polkadot’s team spent $87 million (11 million DOT), with 13% of this expenditure directed through executive bodies. This amount is 2.4 times higher than the spending in the second half of 2023. The Treasury’s assets include $245 million (38 million DOT), with $188 million (29 million DOT) in liquid assets, $8 million in stablecoins, and $16 million (2.5 million DOT) reserved for further stablecoin purchases.
Interestingly, over 40% of this budget, approximately $36.7 million, was allocated to advertising, influencers, conferences, and events aimed at attracting new users. However, these efforts have not been successful in increasing the number of active accounts. The outreach included high-profile collaborations with Lionel Messi and Inter Miami CF, racing sponsorships, and various events and influencer partnerships.
Haque notes that despite having $200 million in liquid assets, Polkadot’s current annual spending rate of $108 million means the platform can only sustain operations for about two more years unless it makes significant changes. He stresses the need for Polkadot to revise its strategy and address inflation to prevent financial collapse. Without strategic adjustments, such as better resource allocation and reducing inflation, Polkadot risks depleting its funds and facing potential failure within the next two years.
Polkadot’s Financial Strategy: Reassurances and Ongoing Debate
DOT activist Giotto de Filippi has reassured that Polkadot’s treasury will not run out of funds despite decreased expenditure and balances since mid-2023. He explained that to maintain a steady flow of funds, the treasury receives 7% of token inflation. The treasury’s liquid assets include $188 million in Tether, USD Coin, and Polkadot’s native DOT token. This continual funding from staking rewards is expected to help the project sustain itself in the long run.
Meanwhile, Polkadot’s financial strategies have sparked widespread debate. There are discussions about implementing stricter budgeting measures and potential adjustments to inflation parameters to ensure the project’s financial stability.
Important: Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.
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