The latest report issued by the Polkadot Treasury in the first quarter of 2024 expressed concern about the coming financial crisis. The report shows that the Department of Finance’s assets, spread across multiple supply chains, have become complex and challenging to manage effectively.
Decentralized finance (DeFi) researcher DeFi Ignas has analyzed report, which highlights the Treasury Department’s estimated budget for nearly two years at the current burn rate of $87 million every six months.
Polkadot Mountain Concern Funding
Polkadot costs during the first half of 2024 paint a worrying picture. More access program 37 million dollars was calculated, aimed at attracting new users, developers, and businesses.
Additional costs include $10 million in advertising/sponsorship, $4.4 million in influencers, and $4 million in digital advertising. Surprisingly, despite such expenses, Polkadot’s visibility on social media, including “Platform X,” remains very low.
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The Treasury spent a total of $86 million in the past six months, managing $245 million (DOT 38 million) in assets, and $188 million (DOT 29 million) in cash. The level of burn indicates that the Treasury may face it bankruptcy in less than two years.
The supply of Polkadot tokens has an annual growth of 10%, which encourages huge rewards. With a market cap of $10 billion, stakeholders receive $1 billion a year, which greatly affects network security costs.
However, the proposal to reduce inflation was rejected by 57 percent of participants, which also added to the financial challenges of the Treasury.
A New Model of Governance
The report reveals that fee income remains low for Polkadot. In 2023-H2, Polkadot made 300,000 DOT through payments during the temporary registration campaign. Under normal circumstances, the income is stable at around 20,000 DOT per quarter.
On the cost side, the report highlights a 2.4x increase in DOT costs compared to 2023-H2. Ambitious proposals and large query sizes contributed to these large cost increases.
Although the average DOT price rose, leading to more value per DOT, concerns about the use of the Department of Finance are increasing within the ecosystem.
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To address these challenges, Polkadot is moving towards a more structured approach. Executive bodies, such as benefits and clusters, are emerging to play departmental roles within the ecosystem.
These bodies are responsible for security, data research, key performance improvements, network operations, marketing, and business Development activities. The key question now is how to quickly establish effective frameworks to guide Polkadot to success.
The solution, according to the blockchain treasurer, is to send more of the load to these top tiers. These bodies are made up of talented people who test new proposals and deliver value. Clusters, such as subDAOs, have OpenGov capabilities and sub-departments to facilitate their work.
Using these high-level frameworks, Polkadot can outsource operational issues and routine tasks, allowing OpenGov stakeholders to focus on making important decisions.
The effectiveness and efficiency of executive bodies is assessed, and budget allocations are negotiated with OpenGov based on the results.
At the time of writing, The DOT retails for $6.35, representing a price gain of nearly 4% in a 24-hour period. However, the 17th largest cryptocurrency by market cap is still down 10% over the past month.
Featured image from DALL-E, chart from TradingView.com
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