What Is The Polkadot Treasury?

As a seasoned crypto investor with a background in blockchain technology and decentralized finance, I am thrilled about the potential of the Polkadot Treasury. This innovative on-chain mechanism brings financial agency to the masses, enabling individuals and organizations to collaborate and fund projects that benefit the Polkadot ecosystem.

The Polkadot Treasury represents a pooled collection of fees from transactions, block rewards, penalties for misconduct (slashing), and inefficiencies in staking. This hoard is managed within a system account that can only be accessed through the internal logic of the Polkadot system itself.

The Polkadot Treasury

As an analyst, I’d express it this way: I see Polkadot’s on-chain Treasury as a game-changer for individual participation in business and collaborative projects. Traditionally, financial power has been held by governments and corporations. However, with the Treasury, this control shifts to a decentralized peer-to-peer network. The Treasury can fund various initiatives that contribute to the Polkadot ecosystem, such as cross-chain app development, infrastructure expansion, marketing efforts, software updates, research projects, community events, and even security operations. This democratization of financial resources opens up new possibilities for collaboration and innovation within the Polkadot community.

How Are Treasury Inflows Determined?

Several mechanisms determine token deposits into the Treasury.

In the event of validator or nominator penalties on Polkadot, a certain amount of the seized tokens is transferred to the Treasury instead. Such occurrences are relatively uncommon within the Polkadot network.
Funds can be transferred directly to the Treasury as an alternative. This seldom happens, though, and typically occurs when grantees return some of the assigned tokens to repay funds. Reasons for the repayment may differ.
For every transaction fee paid, 80% goes to the Treasury and 20% is distributed among block producers.
In the Polkadot network, there’s a key metric called the optimal staking ratio. When this ratio deviates from the actual staking ratio, the Annual Percentage Yield (APY) for stakers decreases as a response. To maintain a steady 10% inflation rate, a portion of the total rewards intended for stakers is instead channeled into the Treasury.

How Are Treasury Outflows Determined?

Outflows from the Treasury are determined using the following mechanisms.

Burned tokens – At the end of every spend period, 1% of the available tokens are burned.
Tips – Smaller payouts to grantees. This generally happens within a spend period.
The Treasury’s Proposed Actions and Rewards: The Treasury’s proposed actions and rewards make up a significant portion of our expenses and require governance approval before any disbursements can take place. Following approval, payments can be made at the conclusion of each spending cycle.

Submitting A Treasury Proposal

Let’s look at how to submit a proposal. Proposers can put together a project plan and budget. They can then garner feedback from the Polkadot community. If community feedback is positive, they can submit a proposal as an on-chain referendum. The steps below outline how to submit a Treasury proposal.

Begin The Conversation – Ask the community for feedback regarding your proposal idea.
As an analyst, I would advise you to start drafting your proposal next. It’s crucial that your proposal is focused on achieving a specific objective or solving a particular issue. Be clear about the methods you will employ to reach your goal and whether any continuous upkeep will be necessary. To streamline the process, break down the tasks into distinct items. This way, you can estimate fees more accurately and keep track of significant achievements throughout the project.
Revise Proposal – Revise your proposal based on the feedback received from the Polkadot community.
Submit Proposal – If your proposal receives positive feedback from the community, you can submit it on-chain as an OpenGov referendum.

You can also submit other types of proposals, such as bounty proposals and tips.

Sub-Treasuries

As a researcher studying the Polkadot ecosystem, I’ve discovered that the current Polkadot Treasury functions with a sole on-chain account. Six distinct Treasury tracks manage the funds: Treasurer, Big Spender, Medium Spender, Small Spender, Big Tipper, and Small Tipper. Introducing sub-Treasuries would enable creating Treasury accounts associated with each collective. Consequently, the Polkadot Treasury could distribute funds to a sub-Treasury, allowing the designated collective to utilize those funds in accordance with their unique rule set.

Funded Projects

Several initiatives backed by the Treasury include DatDot’s P2P hosting network, Centrifuge’s Go Substrate RPC Client, OnFinality’s Node Infrastructure, Pinknode’s Node infrastructure, and Polkastats’ Substrate explorer. For a comprehensive listing of all supported projects, please refer to the Polkadot website.

2024-06-01 01:02