The last report Polkadot Treasury’s H1 2024 estimates have raised concerns about a looming funding crisis. The report indicates that Treasury assets, spread across multiple chains, are becoming increasingly elaborate and hard to manage effectively.

Decentralized Finance (DeFi) researcher DeFi Ignas has analyzed The report emphasizes that the Treasury has a circumscribed capacity to act, amounting to about two years at the current rate of spending $87 million every six months.

Polkadot funding concerns grow

Polkadot’s spending in the first half of 2024 paints a worrying picture. Extensive outreach program amounted to $37 million and was aimed at attracting novel users, developers and enterprises.

Additional spending included $10 million in advertising/sponsorships, $4.4 million in influencer spending, and $4 million in digital advertising. Surprisingly, despite this spending, Polkadot’s visibility on social media platforms, including “Platform X,” remained noticeably low.

Treasury has spent a total of $86 million in the past six months, managing $245 million (DOT 38 million) in assets, of which $188 million (DOT 29 million) is liquid. The burn rate suggests that Treasury may be facing bankruptcy in less than two years.

Polkadot’s token supply is growing at a 10% annual rate, largely fueled by staking rewards. With a market cap of $10 billion, stakers receive $1 billion annually, significantly driving network security costs.

However, the proposal to limit inflation was rejected by 57% of shareholders, which further deepened the financial problems of the State Treasury.

New management model

The report reveals that direct fee revenue remains marginal for Polkadot. In 2023-H2, Polkadot generated 300,000 DOT in fees during a short-lived inscription campaign. In normal times, fee revenue stabilizes at around 20,000 DOT per quarter.

On the expenditure side, the report highlights a 2.4-fold boost in DOT expenditure compared to 2023-H2. Ambitious proposals and larger request sizes contributed to this significant boost in expenditure.

Although average DOT price increased, which translated into a higher value per DOT, there are growing concerns in the ecosystem about the operate of State Treasury funds.

To address these challenges, Polkadot is moving toward a more structured approach. Enforcement bodies like bounty and collectives are emerging to take on departmental roles in the ecosystem.

These bodies are responsible for security, data research, core functionality development, network operations, marketing and business development actions. The key question now is how to quickly establish effective structures to guide Polkadot towards success.

The solution, according to blockchain treasuries, is to delegate more responsibility to these executive bodies. These bodies are made up of educated individuals who evaluate novel proposals and deliver value. Collectives, like subDAOs, have OpenGov capabilities and sub-treasuries to make their work easier.

With the assist of these executive bodies, Polkadot can outsource operational issues and routine tasks, allowing OpenGov stakeholders to focus on making key decisions.

The effectiveness and efficiency of the executive bodies’ actions are assessed. Budget issues are negotiated with OpenGov based on the results.

At the time of writing this text, DOT is trading at $6.35, representing a price recovery of almost 4% in 24 hours. However, the 17th largest cryptocurrency by market capitalization is still down 10% over the past month.

Featured image from DALL-E, chart from TradingView.com