Updated at 09:30 am UTC, this article has been edited to provide further clarity on Polkadot’s financial situation.
The treasury of Polkadot currently holds assets valued at nearly $245 million. However, despite recent concerns raised by reports, the runway of Polkadot is not limited to two years.
Worries within the community were sparked after a treasury report suggested that the project would only have a two-year budget at the current rate of spending.
Tommi Enenkel, the head ambassador of Polkadot, expressed the increasing complexity of Polkadot’s treasury in a report for the first half of 2024, released on June 28. He stated, “Polkadot is spending directly as well as allocating value in bounties and collectives to be spent in the future.”
Enenkel further explained that due to the current rate of spending, the Treasury has approximately two years of runway left. However, given the volatile nature of crypto-denominated treasuries, it is difficult to predict with certainty. This has led to discussions regarding a stricter budgeting approach and a potential change in the inflation parameters of the system.
Contrary to concerns, it was clarified that Polkadot’s treasury will not run out of funds after the expenditure of the current $245 million. This is because around 7% of the total token inflation (staking rewards) is directed to the treasury.
Giotto de Filippi, a prominent DOT activist, emphasized that Polkadot’s treasury is continuously replenished with new funds from staking, therefore not having a limited runway.
The blockchain holds $188 million in liquid assets, mainly in its native Polkadot (DOT) token, as well as in stablecoins Tether (USDT) and USD Coin (USDC).
In the first half of the year, Polkadot saw a substantial increase in spending, with over 40% allocated to advertising, influencers, conferences, and events, amounting to a total expenditure of $87 million.
Despite fluctuations in the price of the DOT token, Enenkel pointed out that the project managed to maximize its spending, particularly as the token’s price reached a peak of $11.46 in mid-March. Although the price has since fallen to $6.33, it has increased by nearly 11% over the week.
Enenkel acknowledged the rising concerns within the ecosystem regarding the usage of the treasury, attributing the decline in balances to a drop in network fees. He also proposed the idea of creating departments represented as bounties and collectives to effectively deploy treasury capital.
Furthermore, he suggested lowering the 10% inflation rate of DOT to reduce selling pressure, as a mostly DOT-denominated treasury relies on a stable DOT/USD exchange rate.
Cointelegraph has reached out to Polkadot for comment on these matters.