The Polkadot community is rallying behind a proposal to create pUSD, a native algorithmic stablecoin backed exclusively by DOT tokens.
Bryan Chen, co-founder and CTO of Polkadot’s Acala, introduced the initiative aiming to develop this stablecoin to enhance the Polkadot ecosystem.
Designed as an algorithmic stablecoin, pUSD will leverage the decentralized Honzon protocol within the Acala network, managing collateralized debt positions backed by DOT tokens.
This innovative approach seeks to minimize reliance on centralized stablecoins like Tether’s USDT and Circle’s USDC, promoting a more decentralized financial environment.
Voting has shown over 75% support from the Polkadot community, with more than 1.4 million DOT—valued at roughly $5.6 million—already committed, though the voting period continues for another 24 days.
The proposed pUSD stablecoin includes an optional savings feature allowing holders to lock their tokens and earn interest generated from stability fees, contributing to ecosystem growth.
According to Chen, a native DOT-backed stablecoin on the Polkadot Hub is crucial to retain liquidity, yield, and security within the network.
Algorithmic stablecoins like pUSD intend to maintain a fiat currency peg without centralized collateral, relying instead on digital assets secured by smart contracts and economic incentives.
Despite controversies sparked by prior algorithmic stablecoin failures such as TerraUSD (UST), this model remains attractive for its decentralized and permissionless nature.
Industry experts note the potential for such stablecoins to serve as censorship-resistant assets that may operate beyond conventional regulatory frameworks.
- Proposal aims to enhance Polkadot’s native financial tools with pUSD
- pUSD to be fully collateralized by DOT through the Honzon protocol
- Community voting shows strong early support with significant DOT commitments
- Designed to reduce dependence on centralized stablecoins like USDT and USDC
- Includes savings option for earning interest on locked stablecoins
- Algorithmic stablecoins offer decentralized, trustless fiat price stability
