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Polkadot Treasury is a jar of funds collected through transaction fees, block creation rewards, slashing, and staking inefficiencies. These funds are held in system accounts that can only be accessed through the system's internal logic.
Polkadot Treasury
Polkadot’s on-chain treasury has the potential to transform the way individuals do business and collaborate for shared goals. This brings financial institutions, once reserved solely for governments and corporations, to a decentralized peer-to-peer network. The treasury can be used to fund any project or activity that benefits the Polkadot ecosystem. This includes cross-chain application development, infrastructure development and ongoing operations, ecosystem delivery, marketing activities, software development, research, community events and outreach, and network security operations.
How are treasury inflows determined?
Several mechanisms determine token deposits into the Treasury.
Slash – When a validator or candidate is slashed on Polkadot, a small portion of the slashed tokens is redirected to the Treasury. A slash is an infrequent event in the Polkadot ecosystem.
Transfer – You can also send funds directly to the Treasury. However, like the slash, this is a rare event and usually occurs because the beneficiary redeems some of the allocated tokens. Reasons for a refund may vary.
Transaction Fees – 80% of the transaction fees for each external asset submitted will go to the Treasury and the remaining 20% will be provided to the block producers.
Staking Inefficiency – The Polkadot network uses a parameter called the ideal staking ratio. Whenever the actual staking rate is not equal to the ideal staking rate, the staker's APY is reduced. To keep the inflation rate constant at 10%, a portion of the total rewards to stakers is diverted to the Treasury.
How are treasury outflows determined?
Outflows from the Treasury are determined using the following mechanisms:
Burned Tokens – At the end of each spending period, 1% of available tokens are burned.
TIP – The amount paid to the beneficiary is smaller. This usually happens within a spending period.
Treasury Offers and Bounties – Treasury offers and bounties make up the largest portion of outflows and must be approved through governance. If approved, payments may occur at the end of the disbursement period.
Submit a Financial Proposal
Let's take a look at how to submit a proposal. Proponents can put together a project plan and budget. You can then get feedback from the Polkadot community. If community feedback is positive, proposals can be submitted to an on-chain referendum. The steps below outline how to submit a Treasury proposal.
Start a conversation – Ask the community for feedback on your proposed idea.
Draft your proposal – The next step is to draft your proposal. Your proposal must have a clear goal or solve a specific problem. It should also explain how the goals will be achieved and whether ongoing maintenance will be required. To simplify things, evaluate your fees and itemize the tasks that need to be completed so you can follow important milestones.
Modify your proposal – We revise your proposal based on feedback we receive from the Polkadot community.
Submit a Proposal – Once your proposal receives positive feedback from the community, you can submit it on-chain via an OpenGov referendum.
You can also submit other types of offers, such as bounty offers and tips.
sub-treasury
Polkadot Treasury currently operates as a single account on-chain. Treasury funds are managed by six Treasury tracks: Treasurer, Big Sender, Medium Sender, Small Sender, Big Tipper, and Small Tipper. Sub-Treasury allows you to have a corresponding Treasury account for each group. This means that the Polkadot Treasury allocates funds to sub-treasuries, allowing each group to spend the funds according to a specific set of rules.
funded project
Some of the projects funded 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. A full list of funded projects can be found on the Polkadot website.
Disclaimer: This article is provided for informational purposes only. It is not provided or intended to be used as legal, tax, investment, financial or other advice.
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