Crypto News- Polkadot’s $245M treasury faces doubts about its 2-year sustainability

Crypto News- Despite community worries, Polkadot’s $245M treasury may not last for 2 years

Crypto News- Polkadot’s treasury holds assets valued at just under $245 million, but recent reports suggesting it has a limited two-year runway are causing unnecessary concern.

Community worries emerged following a report indicating that with current spending levels, Polkadot would only have enough budget for two years. Tommi Enenkel, Polkadot’s head ambassador, highlighted in a June 28 treasury report that the treasury’s complexity is increasing. Polkadot spends directly and allocates funds to future bounties and collectives. Enenkel noted that at the current spending rate, the treasury might have about two years left, though the volatility of crypto makes predictions challenging. This has sparked discussions about stricter budgeting and potential changes to the system’s inflation parameters.

Despite these concerns, the treasury won’t deplete after spending the current $245 million. Around 7% of total token inflation, from staking rewards, is funneled into the treasury. This continual replenishment means Polkadot doesn’t face a limited runway.

Giotto de Filippi, a well-known DOT activist, explained to Cointelegraph that the treasury is designed to always have funds due to the split inflation between stakers and the treasury. Thus, it’s misleading to talk about the treasury running out of money. Currently, Polkadot holds $188 million in liquid assets, primarily in its native DOT token, as well as in stablecoins like Tether (USDT) and USD Coin (USDC).

Rising Concerns Over Treasury Spending

Enenkel noted that concerns in the ecosystem about the usage of the Treasury are increasing, as its balances have been falling since mid-2023.

The treasury’s revenue declined by 58.5% in the second half of 2023, dropping from 414,291 DOT to 171,696 DOT, due to a decline in network fees.

In the first half of the year, the treasury had over 5.2 million DOT from inflation-based income, down from 7.8 million DOT in the previous half-year.

He added that effectively deploying Treasury capital will likely involve creating departments represented as bounties and collectives.

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