Author: Nancy, PANews

Polkadot's financial report has always been controversial, and this time is no exception. Recently, the Polkadot Treasury financial report for the first half of 2024, published on the official governance forum, has caused complaints from investors. Despite the official claim that the treasury's funding reserves are sufficient to support two years, the large expenditure of up to $87 million still raises questions in the community.

Spending in the first half of the year exceeds the sum of the past two years, with advertising expenses accounting for 42%

According to the balance sheet of Polkadot community, the Treasury manages assets of up to $245 million (38 million DOT). The Polkadot blockchain explorer shows that as of July 2nd, the Treasury holds over 36.5 million DOT, a decrease of nearly 22.5% from its historical peak.

Of the total $188 million ($29 million in DOT), $8 million is in stablecoins USDT and USDC, mainly distributed across Relaychain, AssetHub, and Hydration; $47 million ($7.3 million in DOT) is designated assets for specific purposes by the Ministry of Finance; $6.4 million ($1 million in DOT) is specifically for Omnipool (Hydration's flagship AMM); $3.7 million ($0.58 million in DOT) is accounts receivable loans providing one-year loans for DeFi ecological projects.

The report pointed out that compared with traditional entities, the balance sheet of the Polkadot Treasury is very outstanding, with a sufficient surplus. In terms of expenditure, in the first half of 2024 alone, the expenditure of the Polkadot Treasury reached 87 million US dollars (11 million DOT), which far exceeds the total expenditure of 46 million US dollars in the two years of 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, the promotion expenses amounted to 37 million US dollars, mainly for advertising and media, online and offline community construction activities, and large-scale conferences, with advertising expenses totaling 21 million US dollars (including sponsorship fees of 10 million US dollars, marketing and public relations companies of 4.9 million US dollars, and digital advertising of 4 million US dollars) and activity expenses of 7.9 million US dollars (including 4.5 million US dollars for various activities, 3.9 million US dollars for business development, and 3.2 million US dollars for media production).

Development expenditure of 23 million US dollars, including 5.1 million US dollars for Polkadot protocol and SDK development, 4.1 million US dollars for data services and indexing, 3.9 million US dollars flowing into SubWallet, Talisman and Nova Wallet, and 2.3 million US dollars for governance investment, etc;

Economic expenditures of 15 million US dollars, 1 million DOT each for DEX Hydration and Stellaswap will be distributed within one year;

Talent and education expenditure of 5.5 million dollars, used for Polkadot blockchain academy, hackathon, etc;

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

Research costs $2.1 million.

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

The grand marketing strategy has been criticized by the community, and multiple data trends are declining

The above financial report, once released, immediately sparked a backlash in 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 stated that Polkadot seems to offer KOLs a monthly marketing budget of $300,000, but no substantial or valuable content has been published. This marketing model itself has flaws, and having accounts with over 100,000 followers doesn't necessarily mean having active fans. Many KOLs post not because they believe in the project, but for income.

Pink Brains co-founder Ignas also said that Polkadot spent $37 million to attract new users, developers, and businesses, but is still relatively unknown on platforms such as X. For example, Polkadot sponsored IndyCar racer Conor Daly for $1.9 million and signed a $6.8 million sports sponsorship agreement with the Inter Miami CF soccer club in the United States.

Polkadot spends $1.9 million to sponsor IndyCar driver Conor Daly

Ignas believes that at the current burn rate of Polkadot, 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 DOT (worth over $1.093 million), which is completely insufficient to cover expenses and only accounts for 1.5% of the expenditure amount. Moreover, according to Dune Analytics, since July 2023, the Treasury's funding has started to experience negative growth, and this trend has been expanding this year, with more than 10.91 million DOT flowing out in just the second quarter.

In addition to the problem of capital expenditure, Polkadot is also facing multiple challenges, such as high inflation, which is believed to hinder the development of Polkadot. Ignas noted that the supply of DOT tokens is being issued at a rate of 10% per year, while the majority of inflationary tokens are used to fund staking rewards. At a market cap of $10 billion, $1 billion will flow to stakers each year, which is an expensive cost for the Polkadot network. However, Polkadot's proposal to reduce inflation was rejected. In April of this year, the Polkadot community launched a vote on the "#706降低通胀" proposal, which fixed the total supply of DOT at 2.1 billion, but the proposal was rejected by a majority of votes.

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

Overall, this financial report of Polkadot exposes problems such as chaotic financial expenditures and low efficiency, highlighting the importance of introducing accountability.