Polkadot’s Treasury Faces Uncertain Future with $245M in Reserves

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Polkadot’s Treasury Faces Uncertain Future.

NAIROBI (CoinChapter.com) — Polkadot’s treasury holds just under $245 million in assets, providing approximately two years of spending at the current rate, according to a June 28 report. Tommi Enenkel, Polkadot’s head ambassador, highlighted the growing complexity of the treasury’s operations in the report for the first half of 2024.

Polkadot’s Treasury Struggles

Enenkel noted the complexity of Polkadot’s Treasury, which spends directly and allocates value in bounties and collectives for future expenditures. He emphasized that the volatile nature of crypto-denominated treasuries complicates predictions, but the current spending rate suggests about two years of runway.

The blockchain holds $188 million in liquid assets, mainly Polkadot (DOT), alongside stablecoins Tether (USDT) and USD Coin (USDC). The treasury spent significantly more in the first half of the year, totaling $87 million.

Over 40% of this expenditure, totaling $36.7 million, went towards advertising, including influencers, conferences, and events. Despite this heavy spending, Enenkel noted that the treasury achieved a better return on investment as DOT peaked at $11.46 in March, its highest since May 2022. However, DOT has since declined to $6.33.

Declining Revenue and Inflation Concerns

Revenue for the treasury dropped by 58.5% from the second half of 2023, falling from nearly 414,300 DOT to 171,700 DOT. Declining network fees likely caused the revenue drop. Furthermore, the treasury reported over 5.2 million DOT in inflation-based income in the first half of the year, down from 7.8 million DOT in the previous half-year.

Enenkel suggested that the effective deployment of treasury capital might involve creating departments represented as bounties and collectives.

The Polkadot executive also proposed lowering the DOT’s 10% inflation rate to reduce selling pressure, arguing that a strong DOT/USD exchange rate is crucial for the purchasing power of a mostly DOT-denominated treasury.

With a limited runway and declining revenue, the blockchain’s financial strategies and inflation parameters will determine its future stability. Moreover, the news could create FUD in the market, forcing DOT prices to pare gains.

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