Written by Jack

On June 29th, members of the Polkadot community released the Polkadot Treasury Operations Report for the first half of 2024. The Polkadot Treasury spent a total of $87 million, and at the current rate of spending, these reserves will only last for another two years.

Surprisingly, Polkadot has spent 37 million dollars on promotion, accounting for the majority of the treasury expenditure. Among them, advertising expenses amounted to 21 million dollars, including sponsorship of 10 million dollars, marketing and public relations companies of 4.9 million dollars, digital advertising of 4 million dollars, and event expenses of 7.9 million dollars, including event expenditure of 4.5 million dollars, business expansion of 3.9 million dollars, and media production of 3.2 million dollars. (Related reading: 'Polkadot's controversial first half financial report: 87 million dollars spent on promotion accounts for nearly half, with only 1.1 million dollars in revenue')

BlockBeats found the relevant receipt documents for Polkadot's marketing activities and sorted out the budget allocation for the first half of the year.

KOL Placement Disaster: Fake Fans, Content Wash Trading, Bot Accounts

According to the statistics released on the Polkadot Market Bounty website, KOLs account for a large proportion in the Polkadot market promotion activities, exceeding half of the overall budget. From the KPI data of content delivery, the effect of these KOLs' delivery activities seems to be good, with a total of over 15 million views, over 570,000 likes, and 60,000 replies.

In the first quarter, the KOL promotion activities of the Polkadot ecosystem include four 'Evox promotion activities' targeting North America and three 'Lunar promotion activities' targeting Europe. The average budget for each promotion activity is around 300,000 US dollars, and the duration is generally 30 days. The number of KOLs involved in the Evox activities is about 30 to 40, while the number of KOLs in the Lunar activities is significantly less, about 15. In addition, there is a community account called Dot Army with a single budget of 15,000 US dollars.

However, BlockBeats conducted in-depth research on the actual quality of these content placements based on the KOL list, and found that most of these so-called 'Content Creators' are engaging in 'Clip Coupons' activities, with many KOLs engaging in activities such as inflating the number of followers, misleading promotions, and overcharging.

For example, user X's handle is @DeFiExpertise, with only 25 followers, but the YouTube channel has over 70,000 subscriptions. Upon closer inspection, it's found that there are less than 10 videos in total, and the account is less than 3 months old. If we simply calculate based on the release time of the first video, the channel was registered or became active just at the start of the current Evox event.

And the handle @CriptoMindYT, with 12,000 followers, has little overlap with the watchlist of ordinary encryption Twitter users. Clicking on its follower list reveals that most of them are bot accounts. In addition, this account only does "customized KOL" for Polkadot, almost exclusively posting content related to Polkadot, and except for a few retweets that quote Polkadot Army and Polkadot official Twitter content, most of the tweets have only about 200 views.

There is also a KOL operation style and content for @SharkyCoins that is almost identical to @ApeCryptos, with dozens of meaningless short sentences being posted every day, and they will forward each other's tweets, which inevitably raises doubts as to whether such KOL accounts are from the same robot account studio. Similarly, @MaxGanes, which focuses on mass-producing tweets, has published a total of over 100,000 tweets, creating nearly 20 illogical tweets with AI graphics every day.

Some other KOLs who are focused on 'always profiting' will promote 20-50 projects in a single tweet. There are even many 'one-time KOLs', such as @DegenHardy, @TheCrypomist and other accounts that were still on the KOL list in April but have been cancelled at the time of writing. Accounts like @CryptoEmily have already changed their names...

It's also interesting to note that the 'DOT Army' listed separately in the budget includes an 'official community account' and about 30 KOL service packages, with a monthly fee of $15,000. The Dot Army community account often has highly read tweets, such as one on June 30th about 'DOT ETF' that reached 110,000 reads. However, when you click on the account details, you'll find that it only has around 200 followers. As mentioned earlier, these highly read tweets are the key targets for 'named KOLs' to retweet. In the accounts within their KOL service package, over 90% will show 'no one you follow follows'.

In addition to promoting on encrypted Twitter, Polkadot's KOL promotion also pays attention to the YouTube channel. However, many YouTube channel bloggers in the placement scenes often have a mismatch with encrypted users in terms of audience portraits. For example, the German YouTube blogger MilkRoad channel content in the first half of the year is mainly about general investment and has little relevance to the encryption industry. Most of the videos have only a few hundred views, and the content about Polkadot and DOT tokens is awkwardly inserted into these videos. The video has less than five hundred views in four months.

In May, it even chose to place ads in the Marvel Snap game channel, which has nothing to do with encryption, and the explanation in the bill is "precisely targeted high-net-worth audience".

Surprisingly, Polkadot governance and the foundation seem to not care much about the invalid placement of their KOL budget. After a quarter of KOL promotion activities, they actually raised the KOL budget for the second quarter again. From May to June, the budget for a KOL promotion activity can reach $600,000. However, it can be seen that the new promotion plan has submitted more detailed reports to the governance on the specific traffic evaluation and requirements of KOL.

It is also not difficult to see that the KOL investment of Polkadot is basically aimed at the European and American markets, and they are all large-scale consumption, but there is basically no investment in the Asian market. BlockBeats reported in September last year that PolkaWorld, the Chinese community of Polkadot, suspended operation for half a month because its proposal for official funding was rejected. Not long ago, Polkadot launched a new governance framework OpenGov, but PolkaWorld believes that the new treasury management mechanism has caused many long-term contributors and organizations to repeatedly fail in their funding applications, forcing them to leave the Polkadot ecosystem. Now it seems that governance efficiency may be only one aspect of the problem.

'Logo Addiction' and 'Media VIP'

In addition to KOL promotion, media placement and platform display also account for a high proportion of the budget, displayed on the Market Bounty website as "PR" and "website integrations". In addition, Polkadot seems to have some "spending habits", unexpectedly giving out huge budgets, which is difficult to understand.

In the media PR placement, The Block's extremely high fees are the first thing that catches the eye. Several research reports and sponsored articles plus one billboard maintenance cost a total of $138,000, including a $12,000 "management fee". Meanwhile, other encrypted media such as Decrypt, Defiant, and Cryptoslate are packaged as PR services, with payments executed by a governance entity named Community Project, which charges a 10% management fee, and the cost of each PR promotion is about $150,000.

Some PR promotions directly allocate funds to Community Projects, but with specific requirements: arrange for 75 articles and content distribution through 18 different channels, spending $100,000. Also, there is no specified service content for the Chainwire media PR cost of $150,000.

In addition, Polkadot seems to have a special preference for logo display, and has separately invested in the exclusive logo dynamic display services on the two major encryption price websites Coingecko and Coinmarketcap. The cost of purchasing the exclusive logo dynamic display for half a year on Coingecko is $50,000, while the cost charged by Coinmarketcap is relatively higher. The cost of logo dynamic display for two years plus management fees is nearly $480,000, which is twice the average cost of Coingecko.

Although the change has been noticed, the attractiveness of DOT itself has seen little rise. Two months ago, someone asked on X, "Why did the token logo of Polkadot on Coinmarketcap turn into a pink flame?" The first reply in the comments was: "So what? Would you buy tokens for a GIF?"

The logo display in the podcast video is also a big deal, with a total investment of $110,000 for only 8 episodes of content.

In addition to these 'conventional delivery channels', we also see some puzzling placements in Polkadot's budget bill. For example, through the PR intermediary company Future, we spent $20,000 on promoting Polkadot brand awareness on the PC hardware website Tom's Hardware.

There is also a budget to print the Impala Logo on private jets in Europe, and the $180,000 promotion plan is to "continuously expose the Logo on a fleet of private jets in Europe for 6 months", with the reason given as "a highly targeted brand promotion and awareness campaign for high-spending consumers"...

In contrast, the advertising screens at airports in Singapore and Zurich are relatively reliable, but the cost is still somewhat high. Just one advertising screen in a terminal at Singapore Airport costs $189,000.

This kind of inflated quotation is also reflected in the sponsorship costs of Polkadot. In the Web3 event in Vietnam a few months ago, Polkadot consumed a sponsorship fee of $50,000. In comparison, the platinum sponsorship during Ethereum's EDCON in Montenegro is also about $50,000, and this $50,000 can also give you the opportunity to negotiate with Vitalik in the VIP room.

Interestingly, because the budget expenses of Polkadot are mostly settled in DOT, but the recipients may be priced in USD. In the case of price fluctuations, there is often a line item in Polkadot's budget bill called 'price difference adjustment', and this adjustment is often $100,000.

KOL wash trading, have you ever considered this business?

Is Polkadot really stupid? It's an IQ tax that any sensible person can see, but Polkadot keeps closing its eyes and throwing money. Odaily mentioned in yesterday's report that the Polkadot community believes that the 'biggest value of Polkadot lies in its treasury', but in reality, the crypto world has no shortage of ways in terms of project operation and marketing.

In response to Polkadot's sky-high budget, there is no shortage of claims in the community that "big accounts have hollowed out the treasury", although it is unconfirmed, but in decentralized governance projects and organizations, there are indeed cases of arbitrage from the treasury by exploiting mechanism loopholes. When Rhythm previously researched the Nouns community, it was learned that some community members voted for their own promotion proposals with a high asking price, but in fact, very low cost and benefit, by currying favor with DAO initiators and Nouns main holders. In the RookDAO case, arbitrageurs directly controlled the protocol treasury by purchasing a large number of tokens, staging a "Baowan dispute" in the currency circle.

"There may be undisclosed agreements between KOLs, foundations, or team members, which was actually the case in the previous cycle," a person familiar with the promotion of the encryption market told BlockBeats. Although large projects like Polkadot usually follow public governance, many small project foundations only have a few people, and many decisions are directly made by the CEO, which gives decision makers many opportunities to take advantage of.

However, in the case of Polkadot, it seems difficult for individuals to complete such 'secret transactions' because proposals, voting, and foundation payments are all publicly visible. However, this does not prevent the community from 'acting stupid' in the governance of the crypto world, as the current market promotion centered around Twitter is indeed full of IQ tax and sheep.

For example, the KOL account above has almost no flaws in terms of number of fans, tweet readings, and interactions. If it weren't for the vulnerability in the watchlist, it would be difficult for ordinary people to detect that this is a batch of fake accounts. 'These accounts are generally written by studios in advance, and then batch brushed out, and they are very genuine in browsing, replying, and liking,' said a practitioner who previously worked in a KOL studio, adding that with AI tools now available, it is even more difficult to distinguish the authenticity and quality of KOL promotion content.

However, many times, small projects choose to outsource to studios out of helplessness. According to a practitioner with relevant experience, when small projects negotiate cooperation with top KOLs, either the KOLs look down on them and refuse to work, or they quote high prices randomly, making it difficult to reach an agreement. In addition, information among KOLs spreads quickly. When a team reaches an agreement with one KOL, other KOLs will soon know and immediately demand the same price. However, to have an effective TGE, at least 100 to 150 KOLs need to be involved. At this point, if the project lacks strength, it is easy to fail in negotiations, so outsourcing becomes the next best option.

However, it is not impossible, Jesse (@Jessethecook69), who specializes in KOL promotion, told BlockBeats that many projects did not look for KOLs in the early stage, but focused on doing a good job in the community, and in the end, the effect of organic communication was also very good. In addition, you can also check and supervise the studio's promotion work through manual screening, and the most effective way is to click on the KOL's follower list and comment section to see if it is bot-based. "Or just find a reputable and reliable agency, such as some mainstream media and top KOLs will have their own KOL matrix, and they generally have a clear price and will not cheat you," Jesse said.

However, whether it is possible to distinguish fake accounts is one thing, and whether you are willing to distinguish is another. Informed sources told BlockBeats that from KOL promotion to foundation market reports, it is a feedback mechanism responsible to the upper level. After the PR company or KOL studio receives the task, they need to submit a good promotion data report to the project party or foundation, and the project party needs to prove to VC that they are "still doing things". This leads to the fact that whether the promotion is really effective is not truly included in the accountability system. In some cases, after the project foundation recruits the person in charge of the Asia-Pacific market, the person in charge will once again outsource the promotion work to the studio to create a fake report, "even sometimes, the person in charge finds that the data report made by the fake account looks better and cheaper than the real one, so if the person in charge finds a KOL who does the promotion seriously, they may still have to explain to the foundation why the data is not as good as others'".

"Many project parties don't want to do anything, they just want to trap money from the treasury. I know some projects that only start to look for promotion and marketing when they are warned by the exchange to delist, but in such cases they don't actually care about the actual benefits. After all, even if they spend money properly, you can't catch them if they trap you," an industry insider told BlockBeats. In fact, in some cases, KOL is just a tool for the team to empty the treasury. According to insiders, sometimes the targets arranged for KOL may come directly from investment VC. "In many cases, exchanges, retail investors and even fund LPs have been taken for a ride, of course, LPs don't care about losing that little money."

Whether it's the sky-high FDV valuation of VC, or the sky-high promotion budget of the project party, many long-standing issues in the encryption market have erupted one after another in the recent downturn. Jesse told BlockBeats that many times the responsibility does not lie with the individual, "not everyone wants to do evil, it's just that the system is so silly that everyone has the motivation for arbitrage." Obviously, the market is entering an adjustment period, which may not be a bad thing. Without destruction, there can be no construction. Perhaps 'squeezing the abscess' is a necessary step before the start of a new bull market.