Polkadot’s community is deciding whether the network should stop leaning on outside dollar tokens and mint its own. A governance vote now underway proposes creating a Polkadot native stablecoin called dotUSD, an asset designed to be owned by the protocol itself rather than by a private issuer, and eventually backed mainly by DOT. The measure, known as Referendum 1944, is currently in its decision stage, and if it clears, it would reshape how value moves through Polkadot’s treasury, its validators, and its decentralized finance ecosystem.
Key takeaways
- Polkadot OpenGov is voting on Referendum 1944 to launch dotUSD, a decentralized stablecoin native to the network with no centralized issuer.
- An archived vote snapshot showed roughly 2.4 million DOT in favor versus 59,900 against, or 97.5% Aye, though the referendum was still in its deciding phase at that point.
- The plan originally called for $5 million in initial liquidity ($2.5 million USDT plus $2.5 million DOT), later trimmed in a newer version to $3 million.
- dotUSD launches first as a USDT-backed token before shifting to a DOT-collateralized system with vaults, an oracle, and liquidations in phase two.
- Implementation hinges on a separate upgrade, Referendum 1942, which moves Polkadot’s system chains to version 2.5.
Polkadot community votes on dotUSD stablecoin proposal
Referendum 1944 asks Polkadot’s OpenGov system to formally recognize dotUSD as the network’s stablecoin and to seed a DOT/dotUSD liquidity pool on Polkadot Asset Hub. According to the proposal, dotUSD would operate autonomously through on-chain logic, with no centralized issuer standing behind it — a structural choice that sets it apart from tokens like USDT or USDC, which are issued and controlled by private companies.
The dotUSD decentralized stablecoin proposal was drafted with input from builders and developers across the Polkadot ecosystem, and it remains in what OpenGov calls the decision stage, meaning it has cleared initial support thresholds but is still running through the full voting window before any on-chain execution.
An archived Polkassembly snapshot captured roughly 2.4 million DOT voting Aye against just 59,900 DOT voting Nay — a 97.5% approval margin at that point in time. The archive itself cautioned that these numbers were frozen mid-vote and might not match the referendum’s eventual outcome once the decision period closes.
This isn’t Polkadot’s first swing at a homegrown stablecoin. An earlier DOT backed stablecoin proposal called pUSD won more than 75% support in 2025 and secured over $5.6 million in committed DOT, showing that the appetite for a native dollar asset on Polkadot has been building for some time. Gavin Wood, Polkadot’s co-founder, had already signaled this direction publicly: during the Web3 Summit in July 2025, he disclosed work on a fully decentralized stablecoin and said a treasury proposal was being prepared to bootstrap its liquidity.
Phased launch and technical design of dotUSD
dotUSD won’t arrive fully formed. The proposal splits its rollout into two phases, starting with a simpler USDT-backed version and only later graduating to the DOT-collateralized model that developers actually intend for the long run.
Phase one: USDT-backed minting and initial liquidity
In phase one, already built on-chain, users could mint dotUSD one-for-one against USDT, subject to a supply cap set by governance. Because USDT would provide the reserve backing at this stage, the system wouldn’t need an oracle, collateral vaults, or liquidation infrastructure — those pieces come later.
The version submitted with the referendum called for Polkadot Treasury assets to seed a DOT/dotUSD pool with $5 million in initial liquidity: $2.5 million in USDT to mint dotUSD, plus another $2.5 million worth of DOT for the pool itself. A more recent version posted on Subsquare trims that figure to $3 million, split evenly between $1.5 million in USDT and $1.5 million in DOT. dotUSD would also be designated a “sufficient asset,” letting accounts hold it without needing to maintain a separate DOT balance.
Phase two: DOT collateral vaults, oracle, and liquidation
Phase two is where dotUSD becomes the DOT backed stablecoin proposal its designers originally envisioned. Users would deposit DOT into collateral vaults and borrow dotUSD worth less than what they put up. The proposal’s own example: 300 DOT priced at $5 apiece produces $1,500 in collateral, against which a user could mint up to $1,000 in dotUSD — a 150% collateralization ratio. If DOT’s price falls far enough to breach that threshold, the vault becomes eligible for liquidation.
Borrowers set their own interest rates, and that choice has consequences: lower rates push a vault earlier in the redemption queue, while borrowers willing to pay more can lower the odds their collateral gets pulled for redemption. The architecture draws heavily from Liquity v2’s BOLD system, with an oracle, a stability pool, liquidations, and a redemption mechanism layered on top of the vaults. Absorbing liquidations first falls to that stability pool, funded by dotUSD deposits from participants who, in exchange, receive discounted DOT while the corresponding dotUSD gets burned. If the pool ever runs dry, collateral and debt get redistributed proportionally across the remaining vaults.
Stability mechanisms and peg maintenance
Two arbitrage paths are built in to hold dotUSD near $1. When it trades above the peg, users can lock DOT, mint dotUSD, and sell at the premium — expanding supply and pushing the price back down. When it trades below $1, traders can buy the discount and redeem it through the protocol for a dollar’s worth of DOT, shrinking supply. A capped stablecoin buffer, backed by existing stablecoins and redeemable at $1, offers an additional peg-defense route that doesn’t require selling the DOT collateral itself.
Governance and economic implications for Polkadot
Why does any of this matter beyond the mechanics? Because dotUSD would give Polkadot governance direct control over parameters that currently sit entirely with outside stablecoin issuers — including how much can be minted and how the peg is defended — while also plugging into the network’s broader push toward capped, more predictable token economics.
Tokenomics alignment and treasury utilization
The stablecoin proposal lands right after Polkadot overhauled DOT’s own economics. The DAO approved a 2.1 billion DOT supply cap in September 2025, ending the network’s old model of uncapped issuance, and a follow-up tokenomics upgrade introduced the Dynamic Allocation Pool, or DAP, which collects newly issued DOT and other network income for governance to distribute. When that framework moved into its implementation phase in March, DOT emissions dropped 53.6%, with new tokens, transaction fees, and slashes routed into the DAP instead.
Referendum 1944 slots dotUSD into the next stage of that system. Under the DAP’s second phase, validators and nominators are expected to be paid in stable assets, while the Treasury would receive a mix of stablecoins and DOT. The proposal argues dotUSD would let those payments be denominated in dollars and settled through an asset that’s actually native to Polkadot, rather than routed through USDC or USDT. USDC has been available on Polkadot Asset Hub since September 2023, so the network already knows what dependence on an external issuer looks like — dotUSD is pitched as the alternative that removes that reliance.
Role of the Polkadot Community Foundation
One point the Foundation has been careful to clarify: its role here is purely administrative. The Polkadot Community Foundation said it would not issue, control, or take custody of dotUSD, DOT, or USDT under this proposal, and it won’t operate the stablecoin or supply its liquidity. That leaves dotUSD functioning entirely through on-chain logic, with no single entity — foundation included — holding the keys.
There’s a real dependency to flag before any of this goes live. Implementation of the referendum’s preimage relies on Polkadot’s system chains being upgraded to version 2.5, a separate governance matter covered under Referendum 1942. Until that upgrade clears, phase two of dotUSD stays theoretical, even if the Polkadot governance referendum creating the asset itself passes comfortably.
Zooming out, the stakes go beyond a single referendum tally. A protocol-owned stablecoin, if it gains real usage, creates persistent demand for DOT as collateral — every dollar of dotUSD minted under phase two would require more than a dollar’s worth of DOT locked away, tightening circulating supply. It also gives Polkadot’s fragmented parachain ecosystem something it has lacked: a single stable asset that isn’t hostage to decisions made by Tether or Circle. Whether $3 million to $5 million in seed liquidity is enough to get that flywheel turning is the next question the ecosystem will have to answer.
FAQ
What is dotUSD and how is it planned to be launched?
dotUSD is a decentralized stablecoin native to Polkadot, initially minted one-for-one against USDT, with plans to transition to a DOT-backed collateral system in a second phase.
How will dotUSD maintain its dollar peg in the DOT-backed phase?
The system uses collateral vaults, an oracle, liquidations, a stability pool, and redemption mechanisms, combined with on-chain logic, to keep dotUSD pegged to the dollar.
What role does Polkadot governance have in the dotUSD system?
Governance sets key parameters such as supply caps and stability mechanisms, and it must approve the upgrades needed for dotUSD’s full implementation.
Will the Polkadot Community Foundation control dotUSD or its liquidity?
No. The Foundation has stated its role is administrative only — it will not issue, control, or take custody of dotUSD or the liquidity backing it.
Article produced with the assistance of artificial intelligence and reviewed by the editorial team.
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