An extensive report outlining the onchain treasury for Polkadot, the blockchain interoperability protocol founded in 2016, has been released. It outlines the assets under Polkadot’s onchain treasury across three different chains, showing that the treasury manages $245 million in assets, of which $188 million is liquid.
Tommi Enenkel, a Polkadot ambassador who oversees ecosystem development, published the report and described it as the “biggest treasury report” in the history of Polkadot’s governance.
The report reveals that the treasury has around two years of runway left at its current rate of spending, but the Web3 Foundation, an organization which oversees the Polkadot ecosystem’s growth, refute those claims, noting that “the treasury is continually replenished with new funds from staking.”
It’s worth saying a few things here:
1) This is not @Web3foundation spending but on-chain treasury spending voted on by the community. The foundation has a >>5 year runway without selling a single DOT.
2) The whole notion of a “runway” for the on-chain treasury is misleading.… https://t.co/wfc34jBUSE
— fabi (@FabianGompf) July 2, 2024
Polkadot’s Onchain Treasury
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, according to the report. This includes $10 million spent on advertising related to sponsorships, and $4.9 million spent on influencers. (Disclaimer: Polkadot is a sponsor of Unchained.)
Development costs made up $23 million in the first half of the year, while $15 million was spent on liquidity incentives and $3.7 million was spent on operations and governance.
A Polkadot 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.
Polkadot’s Runway
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.”
Fabian Gompf, the CEO of the Web3 Foundation, said on X that this is only Polkadot’s onchain treasury spending, which is voted on by the community, and that the foundation itself has a runway of five years.
“The whole notion of a ‘runway’ for the onchain treasury is misleading,” Gompf said. “The treasury has continuous inflows. It’s never going to run out of funds.”
The onchain treasury is denominated heavily by Polkadot’s native asset DOT, which means that the rate of its inflation is an important topic of discussion. At present, DOT’s supply grows at 10% per year, with the majority of inflation going towards staking rewards.
However, Enenkel 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.”
July 2, 12:29pm ET: This article’s headline has been updated to clarify that Tommi Enenkel’s report only refers to Polkadot’s onchain treasury, which is voted on by the community. The article also contains this update as well as additional commentary from the Web3 Foundation and its CEO, which refutes the claim that the treasury will run out of funds in a two-year window.
