Proposal Gains Strong Community Support Amid Stablecoin Debate
The Polkadot (DOT) community is weighing a major proposal to introduce pUSD, a native algorithmic stablecoin exclusively backed by DOT tokens. Early voting shows over 75% support, highlighting strong community interest in building an independent stablecoin for the Polkadot ecosystem.
The initiative was introduced by Bryan Chen, co-founder and CTO of Acala Network, Polkadot’s DeFi hub. The proposed stablecoin would be algorithmic, overcollateralized, and pegged to the U.S. dollar, with backing provided solely by DOT.
The system would leverage Acala’s Honzon protocol, which manages decentralized stablecoin issuance through collateralized debt positions (CDPs). According to Chen, the design aims to reduce reliance on centralized stablecoins such as USDT and USDC, strengthening Polkadot’s financial sovereignty.
At the time of writing, more than 1.4 million DOT tokens (≈$5.6 million) have been used in voting. With 24 days remaining, the final outcome could still shift, but early momentum leans heavily in favor of adoption.
How pUSD Would Work
- Overcollateralized model: Each pUSD issued would require DOT collateral above the stablecoin’s value, ensuring peg stability.
- Savings module: Users could lock their pUSD to earn interest from stability fees, creating incentives for holding.
- On-chain governance: Smart contracts would maintain peg stability through programmed economic incentives.
The motivation, Chen explained, is clear: “Polkadot Hub should have a native DOT-backed stablecoin because people need it. Otherwise, we will lose benefits, liquidity, and security.”
Risks and Controversies
Algorithmic stablecoins remain controversial after the collapse of Terra’s UST in 2022, which triggered one of the largest crashes in crypto history. Critics argue that algorithmic designs carry systemic risks, while supporters emphasize their decentralized and permissionless nature.
Industry analysts suggest that Polkadot’s cautious design—using overcollateralization rather than pure algorithmic balancing—could mitigate some risks. Still, regulators may view such experiments closely, especially as global scrutiny of stablecoins intensifies.
If approved, pUSD could become a cornerstone of Polkadot’s DeFi ecosystem, unlocking deeper liquidity and reducing dependence on external assets. The proposal reflects a broader trend in crypto networks: building native stablecoins to strengthen autonomy and reduce reliance on centralized providers.
With voting still open, the final decision will determine whether Polkadot takes the bold step of launching its own stable, DOT-backed currency.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.