Treasury · Polkadot Wiki (2024)

The Treasury is a pot of funds collected through a portion of block production rewards,transaction fees, slashing, andstaking inefficiencies. Treasury funds are held in asystem account that cannot be controlled by anyexternal account; only the system internal logic can access it.

Treasury Inflow and Outflow​

Tokens that are deposited into the Treasury (i.e. the inflow) is determined by the followingmechanisms:

• Transaction fees: 80% of the transaction fees of every submitted extrinsic is diverted to theTreasury, while 20% is given to the block producers.
• Staking inefficiencies: the network knows an exogenously determined parameter called idealstaking rate. The APY for stakers (nominators & validators) decreases whenever the actual stakingrate is not equal to the ideal staking rate. To keep inflation constant at 10%, the system doesnot creates less tokens, rather some share of the overall reward for stakers is diverted to theTreasury (more informationhere).
• Slashes: whenever validators and nominators are slashed, a share of theslashed tokens are diverted to Treasury. They are typically rare and unpredictable events.
• Transfers: everyone can send funds to the Treasury directly. This is a rare event andtypically due to grantees reimbursing some of the amount they got allocated for various reasons.

The outflow is determined by the following mechanisms:

• Burned tokens: at the end of each spend period,a fraction of the available funds areburned.
• Treasury proposals & Bounties: they make up the largest share of outflow tokens to thecommunity and need to be approved by governance. Then, payouts occur at the end of aspend period.
• Tips: smaller payouts directly to grantees that can happen within aspend period.

Treasury Tracks​

OpenGov allows for managing funds through six tracks, each with its ownorigin and track parameters.

• Treasurer
• Big Spender
• Medium Spender
• Small Spender
• Big Tipper
• Small Tipper

Submit Treasury Proposal via Polkassembly​

Access to Treasury funds requires successful enactment of referendum in the respective treasurytrack on-chain. Learn how to submit a treasury proposal for referendum usingPolkassembly.

Go to Polkassembly and click on the FAB button in thebottom right corner. Then,

• Click on "Create Treasury Proposal" and choose an address for the proposer

• After choosing an address, you will enter a three-stage guideline:

  • Write a proposal: you can add a detailed description for the proposal, which will be stored onPolkassembly. Alternatively, you can link an existing discussion post.

  

  • Create a preimage: an existing preimage can be linked, or a new one can be created. To create apreimage, add the beneficiary address and theDOT amount. The track will be auto-selectedand the user can proceed with the creation of a preimage.

  

  • Create a proposal: final confirmation about the proposal creation. The description of theproposal and the preimage are automatically linked to the proposal.

Sub-treasuries​

The Polkadot treasury currently operates on asingle account on-chain. The above tracks manage the outflow of the treasury on the network. Withsub-treasuries, having treasury accounts that correspond to eachcollective is also possible.

Rather than have many referenda through OpenGov, thePolkadot Treasury can allocate funds to eachsub-treasury (through governance), from which each respective collectivecan spend funds (depending on their specific rule set).

New treasuries could be added to respectivesystem chains through governance by adding moreinstances of this pallet.

Multi-Asset Treasury Support​

The treasuries can support multiple asset types and thus can spend assets other thanDOT held within the treasury, and their transfersand interactions across the chains facilitated by cross-consensus messaging. Theseassets have a few requirements:

1. The asset is listed on the AssetHub system parachain.
2. The asset is active and has sufficient liquidity to be utilized for payouts.
3. The asset has a set conversion rate, as per OpenGov referenda on the Treasurer track (set via theasset rate pallet). This conversion rate defines a fixed-point representation for converting fromthat asset to DOT.
4. The asset must be approved and onboarded via OpenGov to become spendable via the treasury as avalid spend method.

For example,see how USDT became approved as an asset on AssetHub,which can be used in the treasury.

Bounties​

Parent Bounties​

Getting treasury funding through OpenGov, depending on which treasury track you submit yourreferendum, can be a long and uncertain process. This is not always a suitable option, for example,for event organizers who need to pay costs upfront or close to the event's date. Bounties solve thisproblem by procuring access to treasury funds in a single shot and using them to fund multipleevents later on through child bounties. This is why bounties are also calledparent bounties.

Parent bounty proposals aim to reserve a portion of treasury funds once, which will be used later.They save proponents the time needed to create and obtain approval for several OpenGov referenda.Bounties are managed by curators, where the curator is usually amulti-signature account. Bounties can access a large amount of funds,so managing those funds with a multisig is a good practice to enhance security. Essentially,curators are multisig addresses with agency over a portion of the treasury to promote events, fix abug or vulnerability, develop a strategy, or monitor a set of tasks related to a specific topic, allfor the benefit of the Polkadot ecosystem.

A proposer can submit a bounty proposal toOpenGov,with a curator to be defined later, whosebackground and expertise is such that they can determine when the task is complete.

When submitting the value of the bounty, the proposer can specify a fee that will be paid tocurators willing to invest their time and expertise in the task; this amount will be included in thetotal value of the bounty. In this sense, the curator's fee can be defined as the difference betweenthe amounts paid to child bounty awardees and the total value of the bounty.

Curators are selected through OpenGov referendum after the bounty proposal passes; and they need topay an upfront deposit to take theposition. This deposit can be used to punish curators if they act maliciously. However, if they aresuccessful in managing the bounty to completion, they will receive their deposit back, and part ofthe bounty funding as a payment for their efforts.

Curators are expected to have a decent track record in addressing the issues the bounty wants tosolve. They should be very knowledgeable on the topics covered by the bounty and have proven projectmanagement skills or experience. These recommendations help ensure an effective use of the bountymechanism. A Bounty is a reward for a specified body of work or set of objectives that needs to beexecuted for a predefined treasury amount designated to be paid out. The responsibility of assigninga payout address once the specified set of objectives is completed is delegated to the curator.

The bounty has a predetermined duration, withpossible extension(s) to be requested by the curator. To maintain flexibility during the tasks’curation, the curator will also be able to create child bounties for more granularity in theallocation of funds and as part of a nested iteration of the bounty mechanism.

Child Bounties​

Child bounties are spawned from parent bounties. Child bounties are used toaccess funds directly from the parent bounty without going through an OpenGov referendum.