How do Polkadot’s monetary practices, spending $87M with a internet lack of $108M yearly, evaluate to FTX’s pre-collapse habits?
Desk of Contents
Polkadot (DOT), one of many early opponents to Ethereum (ETH), has not too long ago come beneath the highlight after publishing its newest treasury report.
The report revealed that Polkadot spent a whopping $87 million value of DOT tokens within the first half of this yr. This spending spree is double the tempo in comparison with the earlier six months, elevating eyebrows from observers and buyers.
The majority of Polkadot’s spending, over $36 million, about 42.4%, went in direction of advertising and outreach actions. This included commercials, influencer endorsements, occasions, meetups, and convention internet hosting geared toward attracting new customers, builders, and companies to the Polkadot ecosystem.
Supply: Polkadot Treasury Report
Growth accounted for the second-largest chunk of Polkadot’s price range, with about $23 million (26.7%) allotted to constructing important providers reminiscent of wallets and toolkits for builders.
Polkadot’s head ambassador, Tommi Enenkel, highlighted within the report that the Treasury holds about 32 million DOT (roughly $200 million) in liquid property, with an annual internet lack of 17 million DOT (round $108 million).
At this price, Polkadot has about two years of runway left if the DOT to USD price stays fixed, portray a precarious image, particularly when juxtaposed with the extravagant spending habits.
This state of affairs brings again recollections of FTX, which additionally exhibited an analogous sample of lavish spending earlier than its downfall.
Critics argue that Polkadot’s heavy deal with advertising over growth might be a crimson flag. Others fear in regards to the sustainability of its monetary practices.
Polkadot rebranded to KOLKADOT after losing $37m on advertising with none tangible outcome.
Here is my query
After spending large quantity on KOL, how are they going to trace the outcome?
Crypto remains to be a wild west.
The CMO and the advertising workforce deserves a correct questioning. pic.twitter.com/tMg0HuV8il
— Victor Fawole.nft (@Victorfawole0) July 3, 2024
Let’s delve deeper into the criticisms Polkadot has confronted, the controversies surrounding its current monetary strikes, and whether or not it’s headed for an abrupt finish much like FTX.
Public backlash and controversies
Polkadot’s current treasury report has sparked widespread criticism on social media, with many customers expressing outrage over the challenge’s spending habits and inside practices.
One of the vital contentious factors is Polkadot’s allocation of practically $5 million to influencer advertising within the first half of 2024.
Observers like Stacy Muur have identified that for this quantity, Polkadot ought to have garnered roughly 100 million views, given the common price per view of 5 cents. Nonetheless, the challenge’s visibility on platforms like Twitter (rebranded as X) stays minimal.
Right here we slide to the influencer adverts half ($4.9M complete spend).
For $4.9M, with a mean price per view of 5 cents, Polkadot ought to have acquired 100M views.
On X, they continue to be just about invisible, however most posts in high focus on the Treasury spendings. https://t.co/Y3ai7Dv0Px
— Stacy Muur (@stacy_muur) July 2, 2024
Delving deeper into the expenditures reveals why these considerations have surfaced. Polkadot engaged a number of businesses for its advertising efforts, together with EVOX, an Italian Web2 company specializing in Esports and Gaming, which acquired $2.2 million.
Lunar Technique, a Web3 company, achieved 2.7 million views and 180 collaborations for $1.3 million, equating to $0.48 per view and $7,000 per collaboration—figures that many discover excessively excessive.
In influencer advertising, I’ve quite a few studies at my disposal and contemplate it a catastrophe if prices exceed $0.1 per view.
In media placements, whereas the main focus is on consciousness and popularity, it’s a very poor supply for consumer acquisition.
Polkadot’s outcomes are only a facepalm.
— Stacy Muur (@stacy_muur) July 2, 2024
Moreover, extravagant expenditures reminiscent of paying CoinMarketCap $500,000 for an animated brand and utilizing branded personal jets have been derided as pointless and extreme.
Polkadot paid Coinmarketcap $500k to place an animated brand on the homepage
Glad to see VC funds being put to good use 🤝 pic.twitter.com/hWjVdnZBUW
— Taiki Maeda (@TaikiMaeda2) July 2, 2024
Past the monetary scrutiny, Polkadot has additionally been accused of discriminatory conduct in direction of its builders, notably these of Asian descent.
A developer named Victor from the Polkadot China group not too long ago alleged that Asian builders, particularly these from China, face unfair therapy throughout the ecosystem.
By responding, I hope the core members of the Polkadot workforce can publicly state whether or not there may be any unfair and even discriminatory conduct in direction of Asian builders, particularly Chinese language builders. If I hadn’t spoken up yesterday, neither the Polkadot workforce nor non-Asian builders… pic.twitter.com/sbA0oVHeUR
— victorji.eth ✨🌊✈️EthCC (@victorJi15) July 3, 2024
Victor has additionally alleged that his accusation resonates with different builders locally, together with these from initiatives like Bifrost, Phala Community, and OneBlock, who’ve, in keeping with him, voiced comparable grievances about discrimination and a perceived lack of true democratic processes inside Polkadot.
Because the criticism mounts, it turns into obvious that Polkadot’s strategy to managing its assets and group relations might have a major overhaul.
The challenge’s heavy deal with advertising over growth and the reported discriminatory practices inside its ranks increase critical questions on its sustainability and moral grounding.
Are advertising and growth Aligned?
Polkadot’s advertising expenditures, when in comparison with its developmental efforts, reveal misaligned priorities.
Initially, there was immense hype surrounding Polkadot, particularly with the launch of its DOT token. Establishments had been bullish, and Messari ranked it because the third most-held token by establishments, following Bitcoin (BTC) and Ethereum.
The potential appeared limitless, with billions of {dollars} value of DOT locked up. Nonetheless, actuality rapidly set in—past staking, there was baby may do with their DOT tokens.
Promised functionalities in DeFi had been both non-existent or severely restricted. Previously, customers encountered crucial challenges utilizing decentralized exchanges (DEXs), which starkly contrasted with the seamless experiences provided by competing chains like Ethereum and Solana (SOL).
The introduction of governance additional difficult issues. As a substitute of supporting innovation, it grew to become a battleground for grifters to use the treasury, draining assets that might have been allotted to significant growth.
The core problem lies in Polkadot’s failure to prioritize usability and liquidity. The consumer interface, particularly Polkadot JS, has confronted widespread criticism for being troublesome to navigate. Even with wallets like NovaWalletApp and FearlessWallet, the method stays cumbersome.
Liquidity on DEXs is one other crucial problem. Swapping tokens or onboarding stablecoins like USDC and USDT includes complicated steps that deter many customers.
Such practices have eroded belief and diverted funds from extra crucial growth efforts. Furthermore, Polkadot’s strategy to dealing with its developmental challenges has prioritized public relations efforts over substantial technological developments.
As an example, Chainwire, a press launch distribution company, was paid $490,000, and Unchained, a generally used company identify, acquired $460,000, as per the current treasury report.
Whereas different chains like Ethereum and Solana confronted their very own points with excessive gasoline charges and community congestion, they continued to draw customers and builders by delivering tangible worth and sustaining a robust ecosystem.
In distinction, Polkadot appeared extra centered on advertising and public posturing, usually criticizing different initiatives fairly than addressing its inside shortcomings.
With out obligatory modifications, Polkadot dangers fading into obscurity, very like EOS and Tezos, regardless of its early promise and technical benefits.
Might Polkadot collapse like FTX?
The query of whether or not Polkadot may collapse like FTX is on many minds, particularly given the current scrutiny of its monetary practices. To know the potential dangers, let’s evaluate the 2.
FTX was a serious crypto alternate that gained speedy recognition via aggressive advertising and high-profile sponsorships. It spent tens of millions on adverts, movie star endorsements, and naming rights for sports activities arenas.
Nonetheless, behind this facade of success, FTX had critical monetary mismanagement and hidden money owed. When these points got here to gentle, it led to a catastrophic collapse, wiping out billions in investor funds.
Polkadot, equally, has been spending closely on advertising, about 40% of its complete expense, far larger than typical advertising budgets of 8-15%.
Regardless of this, Polkadot’s visibility and consumer engagement haven’t seen proportional development. For the sake of argument, this mirrors FTX’s strategy of prioritizing picture over substance.
Financially, Polkadot’s current treasury report reveals troubling indicators. With $87 million spent in simply six months and a internet lack of 17 million DOT (round $108 million) per yr, Polkadot’s runway is restricted to about two years if present spending continues. This monetary pressure raises considerations about sustainability, particularly if market circumstances worsen and revenues decline.
One other parallel is the dealing with of governance and useful resource allocation. FTX confronted inside turmoil and poor decision-making, which contributed to its downfall. Polkadot’s governance has additionally been criticized for approving questionable proposals and inefficient spending, diverting funds from crucial growth wants.
Nonetheless, it’s essential to notice key variations. FTX’s collapse was accelerated by its position as an alternate, the place liquidity points can rapidly spiral uncontrolled.
Polkadot, as a blockchain platform, operates in a different way. Its collapse would seemingly be slower, pushed by a lack of consumer and developer belief fairly than a direct liquidity disaster.
Polkadot’s success hinges on its potential to pivot. Addressing consumer expertise points, enhancing liquidity on its DEXs, and higher governance are essential steps.
Not like FTX, Polkadot has an opportunity to right course and leverage its technological strengths to regain group belief.
Polkadot can keep away from the pitfalls that led to FTX’s dramatic collapse. The subsequent few months might be crucial in figuring out whether or not Polkadot can realign its methods and maintain its development.