Polkadot spent $87 million in half a year. Has the chaotic financial spending of Polkadot caused it to run out of money?

24-07-02 16:54

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Original title: "Polkadot's first-half financial report causes controversy: nearly half of the $87 million in expenditures are for promotional expenses, and revenue is only $1.1 million"

Original author: Nancy, PANews

In the past, Polkadot's financial report has always caused controversy, and this time is no exception. Recently, the Polkadot Treasury's financial report for the first half of 2024 released on the official governance forum caused complaints from investors. Although the official claimed that the treasury's funds were sufficient to support two years, the large expenditure of up to $87 million still aroused community doubts.

Expenditures in the first half of the year exceeded the total of the past two years, and promotional expenses accounted for 42%

According to the Polkadot balance sheet released by the Polkadot community, Treasury manages assets of up to $245 million (38 million DOTs). Polkadot block explorer shows that as of July 2, Treasury holds more than 36.5 million DOTs, down nearly 22.5% from its historical peak.

Of these, $188 million (29 million DOTs) are liquid assets, including $8 million in stablecoins USDT and USDC, mainly distributed on Relaychain, AssetHub and Hydration; $47 million (7.3 million DOTs) of designated assets are used by the Treasury for specific purposes; $6.4 million (1 million DOTs) are dedicated to Omnipool (Hydration flagship AMM); $3.7 million (580,000 DOTs) of receivables provide 1-year loans for DeFi ecosystem projects.

The report points out that compared with traditional entities, the Polkadot Treasury has an excellent balance sheet and sufficient surplus. In terms of capital expenditure, in the first half of 2024 alone, the Polkadot Treasury's expenditure amounted to US$87 million (11 million DOTs), which far exceeded the total expenditure of US$46 million in 2022 and 2023.

In terms of specific expenditure categories, it is mainly used in six categories: promotion (42.4%), development (26.7%), economy (17.6%), talent and education (6.4%), operation (4.4%) and research (2.5%).

Among them, promotion expenditure was US$37 million, mainly for advertising and media, online and offline community building activities and large-scale conferences, etc., advertising expenses cost US$21 million (including US$10 million in sponsorship fees, US$4.9 million in marketing and public relations companies, and US$4 million in digital advertising), and event expenses were US$7.9 million (including US$4.5 million for various activities, US$3.9 million for business development, and US$3.2 million for media production);

Development expenditure was US$23 million, including US$5.1 million for Polkadot protocol and SDK function development, US$4.1 million for data services and indexing, US$3.9 million for SubWallet, Talisman and Nova wallets, and US$2.3 million for governance investment, etc.;

Economic expenditure was US$15 million, DEX Hydration and Stellaswap each received US$1 million, and US$2 million for governance investment;

10,000 DOTs will be distributed within one year;

Talent and education expenditures of $5.5 million, for Polkadot Blockchain Academy, hackathons, etc.;

Operational expenditures of $3.8 million, covering governance and legal packaging, etc.;

Research expenditures of $2.1 million.

The report pointed out that at the current spending rate, the Polkadot treasury has about two years of funds in reserve. However, the proportion of DOT in the Polkadot treasury is 76.7%, and its volatility also means that this forecast is uncertain.

Big marketing was criticized by the community, and many data showed a downward trend

As soon as the above financial report was released, it immediately caused criticism from the Polkadot community.

Some community members believe that Polkadot has spent so much on marketing but has not achieved significant results. For example, @trading_axe posted that Polkadot seems to provide KOLs with $300,000 per month in marketing expenses, but no substantive or valuable content has been published. This marketing model itself has flaws. In addition to some accounts with 100,000+ followers, which does not mean they have active fans, many KOLs do not post because they are optimistic about the project, but more for income.

Pink Brains co-founder Ignas also said that Polkadot spent $37 million to promote and attract new users, developers and enterprises, but it is still little known on platforms such as X. For example, Polkadot sponsored IndyCar driver Conor Daly with $1.9 million, and the American football club Inter Miami CF signed a sports sponsorship agreement worth $6.8 million.

Polkadot spends $1.9 million to sponsor IndyCar driver Conor Daly

Ignas believes that at Polkadot's current rate of burning money, it will face bankruptcy in less than two years. According to data released by Polkadot, its revenue in the first half of this year was only 171,000 DOTs (currently worth more than $1.093 million), which is completely unable to cover expenses, accounting for only 1.5% of the expenditure amount. And according to Dune data, since July 2023, Treasury's capital inflow has begun to show negative growth, and it has shown an expanding trend this year, with an outflow of more than 10.91 million DOTs in the second quarter alone.

In addition to the problem of capital expenditure, Polkadot is currently facing multiple challenges. For example, the high inflation rate is believed to hinder the development of Polkadot. Ignas pointed out that the supply of DOT tokens is increasing at a rate of 10% per year, and most of the inflation tokens are used to fund staking rewards. If calculated based on a market value of $10 billion, $1 billion will flow to pledgers every year, which is an expensive cost for Polkadot network security. However, Polkadot's proposal to reduce inflation was rejected. In April this year, the Polkadot community initiated a vote on the "#706 Reduce Inflation" proposal to fix the total supply of DOT at 2.1 billion, but the proposal was mostly rejected.

And judging from the data, Polkadot's trading activity has also declined this year. Dune data shows that Polkadot's monthly transaction volume in June reached 16.97 million, which is only 51.8% of the beginning of this year. The number of monthly active accounts has also dropped by 53.2% from 516,000 at the beginning of the year to 241,000 today. Of course, this may be related to the decline in the popularity of the previous inscription.

In general, Polkadot's financial report exposes its chaotic financial expenditure and inefficiency, and highlights the importance of introducing accountability.