You might think that questions about preserving a startup's treasury will arise only in a bear market. However, the concern is relevant even now, as highlighted by Polkadot, a blockchain project co-founded by Gavin Wood, who also co-founded Ethereum. Last week, a contributor to the project named alice_und_bob published a report on Polkadot's treasury for the first six months of 2024. The conclusion? Polkadot only has two years of runway if it continues its current rate of spending. How did Polkadot get here? Let's delve into the analysis: During the first half of 2024, the biggest increase in spending for Polkadot was in the category called "outreach," accounting for nearly $37 million in spending. This is a more than 300% increase from the $7.7 million spent on outreach in the second half of 2023. (Polkadot did not reply to a request for comment.) So, what does "outreach" mean? According to alice_und_bob, outreach includes all expenses aimed at attracting new users, developers, and businesses to the Polkadot ecosystem. For example, Polkadot spent $6.8 million on a sports sponsorship deal with "a prestigious soccer club" and $4.9 million paying various influencers through several marketing agencies. Additionally, the project spent approximately $7.9 million on events, including attending conferences and hosting side events, such as the Decoded conference in China, which cost $560,000. It's no secret that the crypto industry has a penchant for lavish marketing expenditures. However, what's perhaps surprising is that despite spending tens of millions of dollars in 2024, Polkadot has seen little traction. According to data from Token Terminal, weekly active users on Polkadot have dropped to about 23,300 from a peak of 94,400 at the beginning of the year. Does spending nearly $37 million make your marketing strategy more effective? Apparently not. Of course, not everyone agrees that Polkadot's hefty expenses are unnecessary. One user on X, formerly Twitter, defended the marketing strategy as a long-term investment. Imagine Lionel Messi wearing Polkadot-branded gear and posting on Instagram for millions to see, X user EstherJade1 commented about Polkadot's sponsorship with Messi's club Inter Miami CF, suggesting it could have significant future benefits. It's worth pointing out that Polkadot's challenges with growth are not unique. Despite a remarkable bull run in the past six months, one difference between this rally and past ones is that not every crypto project has performed well. Part of that is because the market hasn't seen the same influx of new investors as previous bull market before 2022. And Polkadot is likely not alone: How many other crypto projects actually have more than two years of runway? Data from DeFiLlama show that only a handful of projects have treasuries exceeding $500 million, and anyone who's worked in crypto long enough knows that it's extremely hard to be profitable. So before judging Polkadot's spending report, remember: At least Polkadot has published its treasury report. Some projects may have been spending the same or even more on marketing, while having an even smaller treasury to spend — they just don't tell us!
Note: Bloomberg Crypto will not be published on July 4. The newsletter will return on July 9. |
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