Polkadot’s on-chain governance community is voting on a proposal to launch dotUSD, a dollar-pegged stablecoin that could eventually use DOT as its primary collateral.
Submitted as OpenGov Referendum 1944, the proposal would create dotUSD as a protocol-owned asset and designate it as Polkadot’s native stable-value instrument. The referendum remains in its decision period and has not yet reached a final outcome.
The proposal has received strong support so far, with 97.6% of votes cast in favor and 2.4% against. Around 2.39 million DOT has been counted on the Aye side from 31 voters, compared with about 59,900 DOT from nine voters. The referendum currently shows 60.1% support against a 48.1% threshold.
Plans for a DOT-backed Polkadot stablecoin date back to September 2025, when Acala co-founder Bryan Chen proposed pUSD as a native stablecoin using DOT as collateral.
From USDT reserves to DOT collateral
The current proposal outlines a two-phase rollout. In the first phase, users would mint dotUSD against USDT on a one-to-one basis, subject to a supply cap. This version would not require the oracle, collateral vaults or liquidation system planned for the later DOT-backed model.
The proposal also calls for Polkadot Treasury funds to provide initial liquidity for a DOT/dotUSD pool on Asset Hub’s decentralized exchange.
The referendum documentation initially proposed a $5 million allocation, consisting of $2.5 million in USDT to mint dotUSD and $2.5 million worth of DOT for the liquidity pool. A later version displayed on Subsquare lists $1.5 million each in USDT and DOT, bringing the proposed allocation to $3 million.
The funds would be used for protocol liquidity rather than distributed to individual investors. The proposal would also classify dotUSD as a “sufficient asset,” allowing accounts to hold the stablecoin without maintaining a separate DOT balance.
How the DOT-backed system would work
The second phase is where dotUSD’s core design comes into play. Users would deposit DOT into vaults and mint dotUSD against a smaller value of collateral. The proposal gives an example of 300 DOT worth $1,500 at a price of $5 per DOT, against which a user could mint $1,000 of dotUSD.
This overcollateralization would provide a buffer against declines in DOT’s market value. If a vault falls below the required collateralization level, it could be liquidated.
Liquidations would first be handled through a stability pool funded by dotUSD deposits. Participants in the pool would receive liquidated DOT at a discount, while the corresponding dotUSD debt would be burned.
If the stability pool were exhausted, the proposal says the remaining collateral and debt would be redistributed across other vaults.
The system’s design draws heavily from Liquity v2 and its BOLD stablecoin. Borrowers would set the interest rates for their own positions, with those rates also affecting their position in the redemption queue.
Keeping dotUSD near $1
The proposed system relies on arbitrage and redemptions to maintain the dollar peg.
When dotUSD trades above $1, users could deposit DOT, mint the stablecoin and sell it at the higher market price. The resulting increase in supply would be expected to put downward pressure on its price.
If dotUSD falls below $1, traders could buy it at a discount and redeem it through the protocol for $1 worth of DOT, creating an incentive to buy the stablecoin and helping support its peg.
The proposal also includes a capped buffer backed by existing stablecoins. This mechanism would provide another way to redeem dotUSD for $1 without directly using DOT collateral.
Why Polkadot wants its own stablecoin
The proposal comes as Polkadot reshapes the role of DOT within its economic system.
Polkadot approved a 2.1 billion DOT maximum supply in September 2025, replacing its previous uncapped issuance model. The network later introduced the Dynamic Allocation Pool, which channels newly issued DOT and other network income into a pool that governance can allocate to areas including staking and Treasury spending.
The proposed stablecoin is intended to give that system a native dollar-denominated asset.
In the next stage, validators and nominators are expected to receive some payments in stable assets, while the Treasury would receive a mix of stablecoins and DOT. The proposal says dotUSD could help settle these payments in dollars without depending fully on stablecoins issued by outside companies.
Polkadot already supports dollar-pegged assets such as USDC on Asset Hub. The difference is that dotUSD is designed to eventually derive its primary collateral from DOT and operate through Polkadot’s own governance and on-chain mechanisms.
Risks and next steps
The proposed design also creates a direct link between the stablecoin and DOT’s market value.
A sharp decline in DOT could reduce the value of collateral backing dotUSD while putting pressure on the broader Polkadot ecosystem. The proposal acknowledges this risk and includes overcollateralization, a stability pool and a separate stablecoin buffer as safeguards.
Adoption is another consideration. The referendum would establish the infrastructure for dotUSD, but its eventual use would depend on whether DeFi applications, users and other parts of the Polkadot ecosystem support the asset.
The Polkadot Community Foundation, which submitted the referendum, says its role is administrative and that it would not issue, control or custody dotUSD, DOT or USDT. The stablecoin is intended to operate through on-chain logic rather than a centralized issuer.
Implementation of the proposal also depends on Polkadot’s system chains being upgraded to version 2.5 under separate Referendum 1942.
For now, Referendum 1944 remains under consideration. If approved, the initial USDT-backed phase could move forward, while the DOT-collateralized system would follow after its oracle, vault, liquidation and redemption infrastructure is finalized.
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