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filippoweb3 committed Sep 2, 2024
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## Funding the Treasury

The Treasury is funded from different sources:

1. Slashing: When a validator is slashed for any reason, the slashed amount is sent to the Treasury
with a reward going to the entity that reported the validator (another validator). The reward is
taken from the slash amount and varies per offence and number of reporters.
2. Transaction fees: A portion of each block's transaction fees goes to the Treasury, with the
remainder going to the block author.
3. Staking inefficiency: [Inflation](../learn-staking.md#inflation) is designed to be 10% in the
first year, and the ideal staking ratio is set at 50%, meaning half of all tokens should be
locked in staking. Any deviation from this ratio will cause a proportional amount of the
inflation to go to the Treasury. In other words, if 50% of all tokens are staked, then 100% of
the inflation goes to the validators as reward. If the staking rate is greater than or less than
50%, then the validators will receive less, with the remainder going to the Treasury.
For more information about how the Polkadot Treasury is funded, see the
[treasury page](../learn-polkadot-opengov-treasury.md#treasury-inflow-and-outflow).

## Tipping

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