Polkadot is seeing strong backing regarding a proposal to create a new native algorithmic stablecoin backed only by DOT tokens.
The plan was introduced on Sunday by Bryan Chen, co-founder and CTO of Acala, a project in the Polkadot network. The proposed stablecoin will use the ticker pUSD and aims to provide a native option for Polkadot users.
The proposal explained that that stablecoin would use Acala’s decentralized stablecoin protocol, Honzon, which allows users to lock DOT tokens as collateral. This system is meant to reduce reliance on popular stablecoins like Tether’s USDT and Circle’s USDC.
Community Votes Show Strong Support
Voting on the proposal has already started, and most votes are in favor. Over three-quarters of votes support it. More than 1.4 million DOT, worth about $5.6 million, have already been used to vote. The ballot will remain open for 24 more days, allowing the Polkadot community to weigh in before a final decision.
The proposed stablecoin would be an overcollateralized debt token. This means users can lock DOT as collateral to mint pUSD. There will also be a savings option, so people can lock their pUSD and earn extra interest from fees.
Why a DOT-Backed Stablecoin Matters
Algorithmic stablecoins like pUSD do not operate the same as other stablecoins. They keep the value of a fiat currency without the assistance of traditional reserve bases held by banks or central entities. Instead, blockchain-based smart contracts administer the collateral and change the supply to keep the value static.
However, algorithmic stablecoins remain controversial, especially after the collapse of TerraUSD (UST) which caused widespread losses to those who invested in it
But some experts still see potential. Ki Young Ju, CEO of crypto analytics firm CryptoQuant, said in early May that algorithmic stablecoins could help create “dark stablecoins” that do not follow traditional regulations or sanctions.
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