How the project tokens focus and how it affects holders

Recently, Polkadot's use of 37 million USD in its treasury for marketing activities has caused the community to raise many questions about how crypto projects spend native tokens and its effects on holders.
Treasury - Where project tokens are stored and used
In the crypto market, financial management is one of the key factors determining the success of a project. One of the important tools in this is the treasury, where the project stores and manages its assets.

Assets stored in the project's treasury can be the project's native token and some other types of crypto. The treasury helps ensure operating capital for projects such as product development, marketing, employee salaries, airdrops... How assets in the treasury are used can directly affect the project ecosystem and value. tokens and the benefits of token holders.

For example, if a project uses its native tokens in the treasury for inefficient activities that do not help the ecosystem develop, then the project's native tokens will experience significant selling pressure. On the contrary, spending the project's native tokens appropriately, helping the entire ecosystem develop, will have a positive impact on the project token price.

Investors can find information about crypto projects' treasuries in the DeFiLlama Treasuries section, on the project's DAOs, or on the project's official websites. However, not all projects disclose their treasury assets or spending methods to develop their projects.

Below is how some crypto projects use their native tokens to develop the ecosystem and how it affects token holders.
Focus on external marketing
Many crypto projects use native tokens in their treasuries to pay for ecosystem development activities but are ineffective, causing native tokens to experience significant selling pressure. This adversely affects the entire project ecosystem as well as the project's token holders.

Polkadot spends heavily on marketing but revenue is 1.5% of costs

Polkadot became the focus of community attention when it used 37 million USD worth of DOT tokens in its treasury for marketing activities in H1 2024, accounting for nearly half of its total operating expenses. This cost doubles compared to H2 2023.

Meanwhile, the revenue that Polkadot received in H1 2024 accounted for only more than 1.5% of the total costs spent. This revenue level also decreased by more than half compared to H2 2023.

Polkadot Treasury financial reports.
Unreasonable spending on marketing activities using funds from DOT tokens is causing significant selling pressure in the market for DOT tokens. In fact, DOT price has been trending down from 8.2 USD to 5.3 USD since the beginning of this year. In addition, the Polkadot ecosystem has not really exploded yet.

Focus on ecosystem development
Many crypto projects use native tokens to develop the ecosystem, helping the entire ecosystem grow, but this does not mean that the project's native token price will increase sharply.

Arbitrum thrives but ARB price only goes sideways
Not spending heavily on marketing activities like Polkadot, Arbitrum uses ARB tokens for internal development, attracting many developers to the ecosystem. Every ARB spending action is approved by votes of ARB token holders, increasing transparency and transferring power to the community.

In particular, Arbitrum uses ARB tokens in the treasury to provide grants for projects in the ecosystem, develop GameFi, use in staking activities, run airdrop programs to encourage users to participate. ecosystem... Specifically:

Providing grants to develop the ecosystem: Arbitrum Foundation Grant Program, Uniswap-Arbitrum Grant Program, Pluralistic Grant Program, Short Term Incentive Program, Arbitrum’s Gaming Catalyst Program (GCP)…
Incentivize the community through airdrop activities: Arbitrum allocates 11.62% of total supply to airdrop to users, 1.13% of total supply to DAOs in the ecosystem...

Arbitrum DAO Treasury holds more than 3 billion ARB tokens. Source: Arbiscan.

Thanks to ARB token grants, many crypto projects have developed well, helping the Arbitrum ecosystem grow:

GMX received 12 million ABR tokens and became one of the projects with the largest TVL in the ecosystem with 415 million USD.
The Uniswap-Arbitrum Grant Program funding helps bring more Uniswap users to Arbitrum, Uniswap TVL in the Arbitrum ecosystem reached 258 million USD.
However, projects that receive funding in the form of ARB tokens often tend to sell tokens to continue developing, causing the ARB price to experience significant selling pressure and not be able to explode, despite the development of the Arbitrum ecosystem. Good.

Uniswap - Learn from our predecessors
Uniswap spends 60% of the total UNI supply to develop the community through activities such as airdrops, rewarding users for providing liquidity, providing funding funds for contributors...

Of which, 43% of the total UNI supply for the community is gradually unlocked over 4 years from 2020 to 2024. This causes UNI tokens to face selling pressure from the community and projects receiving funding.

In addition, the fact that Uniswap DAO's treasury only stores UNI tokens makes the project significantly affected by market fluctuations. Therefore, the Uniswap DAO is proposing to diversify the assets in its treasury so as not to significantly damage the UNI token price if the Uniswap DAO needs to fund certain activities.

Uniswap set aside 30 million USD for sponsorship funds. Source: Uniswap
If the proposal is approved, UNI's treasury will hold various cryptocurrencies and use these tokens to fund Uniswap's development activities. This helps UNI tokens significantly reduce selling pressure.

Thus, both Polkadot, Arbitrum and Uniswap are trying to develop the ecosystem but have not brought real benefits to token holders. However, in the crypto market, there are many projects that both develop good ecosystems and bring benefits to token holders. One of them is Solana.

Solana: Sponsoring more than 500 projects, total value of more than 100 million USD
Unlike Polkadot and Arbitrum, Solana does not focus on marketing and does not provide grants in the form of native tokens that could create selling pressure for the project token. Instead, Solana focuses on attracting good developers, providing rich funding funds and allowing other large organizations and projects to co-sponsor with it.

Currently, Solana has 3 main types of funding funds:

Foundation Grants: Financial support for developers lacking capital, contributing to the development of the Solana ecosystem.
Browse RFPs: Funding crypto sectors that Solana Foundation is looking to support development.
Ecosystem Funding: Provides diverse funding funds for projects through Hackathons programs, potential projects developed on the Solana ecosystem.

Solana has rich funding programs, attracting many developers. Source: Solana
Not only does it provide the necessary financial resources, Solana also accompanies the founders throughout the project development period, or allows them to join the developer community on Solana.

Other companies and projects can also participate in sponsorship, helping the Solana ecosystem develop. Google Cloud, Stripe, Microsoft, Coinbase, Amazon Web Services… have all co-sponsored hackathons on Solana in the past. Grants are not necessarily provided in the form of SOL tokens, leaving SOL tokens free from significant selling pressure.

In just the past 3 years, more than 600 million USD has been awarded to more than 60,000 developers participating in Solana Hackathons. Some prominent projects on Solana that have successfully raised capital from Solana are io.net, StepN, Tensor, Jito Labs, Dialect... All of these projects bring positive impacts to both the Solana ecosystem and prices. of SOL tokens.

Conclusion
In general, investors need to research how projects use native tokens to develop the ecosystem before investing in any project. The project's ineffective use of native tokens may cause the token to face selling pressure, negatively affecting holders. On the contrary, if a project's native token does not face selling pressure from sponsored projects or the community, token holders may benefit more.