Polkadot Community Unhappy With Heavy Treasury Spend

Critics argue that Polkadot’s marketing spend is exerting significant selling pressure on the DOT markets.

Some Polkadot community members are worried that the decentralized autonomous organization (DAO) is overspending on marketing and events.

In the first half of 2024, Polkadot spent $87 million in total, with $37 million allocated to marketing, advertising, and events, according to the DAO’s H1 2024 report, published on June 28. Meanwhile, $49.4 million covered development, economy, education, operations, and research. Bounties notably accounted for $11.4 million.

With Polkadot’s Treasury overseeing $245 million in assets, Tommi Enenkel, Polkadot's head ambassador, estimated that the current rate of spending would deplete the Treasury's funds reserves after roughly two years, igniting alarm among Polkadot community members.

“It's insane to me how much money the Polkadot treasury is wasting on misplaced marketing,” said Seunlanlege, a former Polkadot developer.

Fabian Gompf, the CEO of Polkadot’s Web3 Foundation, CEO argued that Polkadot’s treasury won’t be running out of funds anytime soon, estimating its current runway is at least five years.

"The whole notion of a 'runway' for the on-chain treasury is misleading. The treasury has continuous inflows," Gompf said. “It’s never going to run out of funds. IMO the treasury *should* spend its funds on more ‘out there’ initiatives not covered by the foundation.”

However, Gompf conceded that the on-chain treasury “has spent too much” on marketing initiatives delivering poor results in recent months.

Polkadot’s treasury finances marketing, infrastructure development, and community incentives. In 2024, the Treasury earned over 5.2 million DOT from inflation.

Pushback

While the report acknowledged pushback from the community concerning the heavy spending and corresponding DOT sales, its authors argued that the users offloading staking rewards places greater downward selling pressure on DOT.

“Sell pressure from stake-to-sell users can significantly outpace any selling pressure that the Treasury creates,” the report said.

However, Swenthebuilder, a Polkadot community member, attributed the heavy selling pressure in the DOT markets to concerned investors responding to “wasteful Treasury spending.”

“The Polkadot community sees it and is rightfully concerned,” they added.

Ignas, co-founder of Pink Brains, argued that influencer marketing is the most efficient marketing strategy available to web3 companies. They argued that Polkadot should prioritize working with key opinion leaders (KOLs) and builders from the web3 community over expensive ads.

"Spend more money on devs, liquidity mining incentives, attracting unique dApps, and then invite top KOLs to write on what you have to offer," tweeted Igas. "It's also easy to criticize these KOLs in the list, but with $20k per month for a few tweets, they are the ones laughing.”

DOT inflation

The report advocated for reducing DOT’s inflation rate to ease selling pressure in the markets.

“Reducing DOT inflation… would reduce sell pressure from those stakeholders that primarily stake to sell,” the report noted. “It would create new incentives to inject DOT into the DeFi economy of Polkadot. And it would open up DOT to a new pool of potential stakeholders who see the current tokenomics as destructive.”

However, in April, a governance proposal advocating for reducing the rate of annual DOT inflation from 10% was narrowly rejected with 57% of votes cast opposing the proposed measure.

At the time of writing, the price of DOT is $6.43 after gaining 1% in the last 24 hours, according to CoinGecko.