Polkadot Community Backs Proposal For Dot-Backed Algorithmic Stablecoin Pusd

What Happened

The proposal has generated strong controversy due to its connection with Acala, whose aUSD stablecoin collapsed following a 2022 exploit that damaged trust across the ecosystem.

Wood also introduced the concept of a “stable-ish” DOT asset that would accept some volatility while avoiding massive collateral requirements.

During this time, Circle’s NYSE debut saw shares rise 400% post-IPO, valuing the USDC issuer at $30 billion, while Tether introduced a U.S.-compliant stablecoin and is seeking $500 billion in funding.

Market Context

The initiative seeks to reduce Polkadot’s dependence on USDT and USDC, which currently dominate the ecosystem with a combined market cap of $74.05 million, with USDC at 56.79% dominance.

TheGlobedotters stated that “no one from Acala should be involved with any stablecoin in the ecosystem, especially a strategic one like this, ever again,” while noting that aUSD’s failure stemmed from liquidity pool misconfiguration rather than Honzon protocol flaws.

This middle-ground approach between hyper-volatile DOT and strict dollar pegs would seek to “soften volatility” for users seeking partial stability without full collateralization costs.

The pUSD proposal arrives as Polkadot implements major tokenomics changes, having approved a 2.1 billion DOT hard cap in September through Referendum 1710 with 81% support.

Global Stablecoin Market Exceeds $300B as Regulatory Framework Solidifies

The pUSD debate unfolds against surging global stablecoin adoption, with total market capitalization surpassing $300 billion for the first time in September.

Why It Matters

The voter outlined two conditions for potential support. First, a clear assurance that no Acala team members would be involved in development; second, explicit Technical Fellowship oversight of governance and risk management.

Another community member noted that “Acala is dead because of AUSD” and warned that rushing implementation could damage Polkadot’s reputation.

Until a pure DOT stablecoin exists, Wood indicated a preference for HOLLAR over USDT and USDC, though he acknowledged that centralized stablecoins may still be needed for validator payouts and practical integrations.

Details

The Polkadot community has opened a vote on a proposal for pUSD, a native stablecoin backed entirely by DOT tokens, through a governance referendum currently underway on the network’s “Wish for Change” track.

The proposal, detailed in RFC-155 and authored by Bryan Chen, would deploy the stablecoin on Polkadot Asset Hub using the Honzon protocol previously employed by Acala’s failed aUSD project.

At the time of writing, Aye holds 74.62%, while Nay holds 25.40%, against an 80.40% approval threshold.

Community Split Over Acala’s Technical Legacy

Multiple prominent community members have voted against the proposal, specifically citing concerns about Acala’s involvement.

The White Rabbit shared similar concerns, voting against the proposal while supporting the concept of a native stablecoin in principle.

Gavin Wood Pushes Multi-Track Stablecoin Strategy

On September 10, Polkadot founder Gavin Wood outlined his vision for the ecosystem’s stablecoin approach, which preceded the pUSD proposal.

Wood emphasized that “Polkadot would be remiss not to have its own native stablecoin” and specified requirements including full DOT collateralization, Polkadot governance control, and DAI-level security guarantees.

He expressed support for Hydration’s upcoming HOLLAR stablecoin while maintaining that a protocol-level DOT-backed stablecoin remains strategically necessary.

The network is shifting from its inflationary model of 120 million annual DOT issuance to a declining schedule that will reduce minting to below 20 million by the early 2030s.

The current circulating supply stands at 1.6 billion DOT, with the total supply projected to stabilize near 1.91 billion by 2040 under the new framework.