Quick look at Polkadot Q3 financial report spending $21 million, spending money really feels like it’s in a bull market?

A Brief Analysis of Polkadot's Q3 Financial Report $21 Million Spent in the Bull Market Phenomenon

Translation | Odaily Planet Daily

Translator | Azuma

On October 19th, Alice and Bob, researchers in the Polkadot community, published the Treasury expenditure report for Polkadot in 2023 in the governance forum. The data in this report was compiled by themselves based on community proposals and the flow of Treasury funds, covering concrete expenditures and classification statistics up to October 18th.

Below is the full text of the report, translated by Odaily Planet Daily.

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Overview

Although 2023 is not over, compared to 2022, we have seen a significant increase in the expenditure of DOT and USD in the Treasury. So far this year, the Treasury has allocated a total of approximately 3.9 million DOT, equivalent to 21 million USD, while the expenditure for the same period in 2022 was approximately 1.7 million DOT, equivalent to 13 million USD.

Expenditure Categories

In this report, we have summarized all expenditures into four main categories: Development, Outreach, Operations, and Research. Some additional expenditures have been unified into the Other category.

• The “Development” expenditure mainly includes funding provided to various software development;

• The “Operations” expenditure mainly includes the software and hardware costs generated by maintaining the network and related auxiliary services (such as browsers);

• The “Outreach” expenditure mainly includes all media marketing, social activities, and education-related expenditures;

• The “Research” expenditure mainly includes the costs required to complete various research, reports, and analysis.

Compared to 2022, the expenditure on “Development” and “Operations” has doubled, the expenditure on “Outreach” has increased by less than 10%, and the expenditure on “Research” has increased by approximately 65%.

Horizontal Comparison

In the horizontal comparison of the four major expenditure categories, “Development” accounts for nearly half of the expenses, “Outreach” accounts for 38%, “Operations” accounts for 9%, and “Research” and “Other” account for only about 2%.

However, if we compare the changes in the proportions of various expenses over the past few years, we can see that the “relative importance” of various expenses (i.e. expenditure ratio) has not fluctuated much, which to some extent demonstrates the stability of ecosystem development.

More Specific Subcategories

After proposal research, we have decided to take a more microscopic view of Polkadot’s expenditure. Next, we will continue to break down into multiple subcategories within the four major categories mentioned above to see more specific proportions (Note: There is some overlap in the expenditure of each subcategory).

First is the “development” category, with a total expenditure of $18 million so far (not only in 2023), accounting for 50% of the total expenditure.

• The total funding for wallet development is $6.4 million, which is the largest subcategory of expenditure;

• The total funding for Substrate-related development (such as clients and development tools) is $3.3 million;

• The funding for cross-chain bridge development amounts to $2.6 million;

• The funding for smart contract support (mainly Ink! language) is $1.1 million;

• The funding for multi-signature tool development is $850,000;

• The funding for blockchain explorer development is $830,000;

• The funding for governance tool development is $810,000;

• The total protocol subsidy is $1.1 million, which includes expenditure on public affairs and subsidies for regular ecological projects;

• Other development work has also been funded, such as ZK, SDKs, light clients, privacy, anti-fraud, RPC, and staking, with a total expenditure of approximately $1.4 million.

Next is the “promotion” category, with a total expenditure of $14 million so far, accounting for about 38% of the total expenditure. Within this category, it is often difficult to further divide the details of expenditure, as there is always significant overlap.

• The largest expenditure items include hackathons, development training, online conferences, incubators, etc., with a total expenditure of $4.4 million;

• The total expenditure for organizing ecological conferences (such as Decoded, Sub0) amounts to $3.4 million;

• The total expenditure on media promotion and educational activities is $3.6 million;

• The total expenditure for representing Polkadot at conferences amounts to $2.3 million;

• The total funding for events (mainly LianGuairty) is $250,000.

Then there’s the “Operations” category. Although the operation of the Polkadot network is funded through staking rewards (up to $46 million per year) rather than the Treasury, auxiliary services created for regular users still incurred a total expenditure of $3.1 million, accounting for 9% of the total costs.

• RPCs, nodes, and indexing services accounted for $1.6 million in expenses;

• Governance tools and other browsers incurred expenses of $840,000;

• Anti-fraud work received a bonus of $660,000;

• Software services and expenses related to snapshots amounted to $72,000.

Lastly, in terms of “Research,” the overall costs amounted to $730,000.

• Half of this expenditure ($350,000) was paid to Messari for commissioned original research, which apparently could be completed by an intern or ChatGPT in just two months… (These are Alice and Bob’s words, and it seems they are quite unhappy with this expense…)

• Other expenses include various research on decentralization, validator selection, candle auctions, network carbon emissions, legal guidance, and data tools.

Summary and Outlook

Alice and Bob conclude that the data in this report comes from mining the Treasury’s expenditures and manually categorizing them.

Alice and Bob further express hope that this report will help the Polkadot community better understand the ecosystem’s expenditure over the past few years, provide references for future decision-making and budget considerations, and find more effective fund allocation schemes.

Furthermore, Alice and Bob suggest that Polkadot should build a dedicated infrastructure for budgeting and expenditure tracking, allowing the community to have a clearer understanding of relevant information and improve discussion and decision-making efficiency for specific topics.

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