Polkadot Expects $245 Million Multi-Chain Treasury to Run Dry in 2 Years

Polkadot’s Treasury flow has turned negative, with $87 million already spent in the first half of 2024.

Polkadot, the blockchain interoperability protocol founded in 2016, has revealed that its Treasury has around two years of runway left at its current rate of spending.

Tommi Enenkel, known on X as Alice und Bob, and a Polkadot ambassador who also oversees ecosystem development, published what he describes as the “biggest Treasury report” in the history of Polkadot’s governance. The report details the assets under Polkadot’s Treasury across three different chains, showing that the Treasury manages $245 million in assets, of which $188 million is liquid.

Polkadot has already spent $87 million in the first half of 2024, with $36.7 million of this amount going towards outreach initiatives to attract new users, businesses and developers into the ecosystem. This includes $10 million spent on advertising related to sponsorships, and $4.8 million spent on influencers. (Disclaimer: Polkadot is a sponsor of the Unchained Podcast.)

Development costs made up $23 million in the first half of the year, $15 million was spent on liquidity incentives and $3.7 million was spent on operations and governance.

A Poldadot governance dashboard on Dune shows that the protocol’s Treasury flow turned negative in July 2023, with the deficit between net inflows and outflows deepening in January this year.

According to Enenkel, the Treasury has $200 million worth of liquid assets available within the next year.

“At a net loss of currently 17m DOT (108m) USD per year, this leaves about 2 years of runway left, if the DOTUSD rate stays the same,” he said.

“The volatile nature of a mostly DOT-denominated treasury makes it hard to predict the future, but concerns in the ecosystem about the usage of the Treasury are increasing.”

The fact that the Treasury is denominated heavily by Polkadot’s native asset DOT means that the rate of its inflation is an important topic of discussions. At present, DOT’s supply grows at 10% per year, with the majority of inflation going towards staking rewards.

However, Emenkel noted that a proposal to reduce the rate of inflation was rejected by the community, with 57% of governance members voting against it.

“…many Polkadot community members are unhappy about the Treasury’s spending and the resulting DOT sell pressure. At the same time, they miss that sell pressure from stake-to-sell users can significantly outpace any selling pressure that the Treasury creates.”