Polkadot’s OpenGov system is in the decision phase of Referendum 1944, a proposal to create and recognize dotUSD as the network’s native decentralized stablecoin. The asset would be owned by the protocol, operate through autonomous on-chain logic, and carry no centralized issuer. An archived vote snapshot recorded approximately 2.4 million DOT in favor and 59,900 DOT against, equating to 97.5 percent support at that moment, though final tallies remain pending as the referendum continues.

The measure seeks to reduce Polkadot’s dependence on externally issued dollar tokens such as USDT and USDC for treasury operations, DeFi applications, and future network payments. Implementation of the full design also requires approval of a separate upgrade under Referendum 1942 that moves Polkadot system chains to version 2.5.

Phased Deployment and Initial Liquidity

dotUSD is planned in two stages. Phase one, already constructed on-chain, allows users to mint the stablecoin one-for-one against USDT under a governance-set supply cap. No oracle, collateral vaults, or liquidation mechanisms are required at this stage because USDT provides the full reserve. The token would be designated a sufficient asset, enabling accounts to hold it without maintaining a DOT balance.

Polkadot Treasury funds would seed a DOT/dotUSD liquidity pool on Asset Hub. The version accompanying the referendum originally allocated $2.5 million in USDT to mint dotUSD plus $2.5 million worth of DOT, for a $5 million pool. A more recent version lists $1.5 million in USDT and $1.5 million in DOT, bringing the proposed seed capital to $3 million.

Phase two transitions the system to its intended overcollateralized model, drawing on architecture similar to Liquity v2’s BOLD. Users deposit DOT into vaults and borrow dotUSD at amounts below the collateral value. An illustrative position of 300 DOT priced at $5 each yields $1,500 in collateral, against which up to $1,000 of dotUSD may be minted for a 150 percent collateralization ratio. Breach of the required ratio makes the vault eligible for liquidation.

Stability Mechanisms and Interest-Rate Design

Borrowers select their own interest rates. Lower rates place a vault earlier in the redemption queue; higher rates reduce the likelihood of selection. Two primary arbitrage routes support the dollar peg. When dotUSD trades above $1, users can lock DOT, mint the stablecoin, and sell at the premium, expanding supply. When it trades below $1, participants can purchase at a discount and redeem through the protocol for $1 worth of DOT, contracting supply.

A capped buffer backed by existing stablecoins and redeemable at par provides an additional defense that avoids forced sales of DOT collateral. Liquidations are first absorbed by a stability pool funded with deposited dotUSD. Pool participants receive liquidated DOT at a discount while the corresponding stablecoin is burned. If the pool is exhausted, remaining collateral and debt are redistributed proportionally across active vaults.

Integration with Polkadot Tokenomics

The proposal arrives after major changes to DOT economics. In September 2025 the DAO approved a hard cap of 2.1 billion DOT, ending the prior uncapped issuance model. A subsequent upgrade introduced the Dynamic Allocation Pool, which receives newly issued DOT, transaction fees, and slashes for governance allocation. Emissions fell 53.6 percent when the framework entered implementation in March.

Under the next stage of that system, validators and nominators are expected to receive remuneration in stable assets while the Treasury receives a mix of stablecoins and DOT. dotUSD would allow those obligations to be denominated in dollars and settled with a native Polkadot asset rather than external tokens. USDC has been available on Asset Hub since September 2023, illustrating the current reliance the new stablecoin is intended to address.

Interest in a native dollar instrument on Polkadot predates the current vote. Co-founder Gavin Wood publicly discussed work on a fully decentralized stablecoin at the Web3 Summit in July 2025 and noted that a treasury proposal to bootstrap liquidity was in preparation. An earlier proposal known as pUSD secured more than 75 percent support in 2025 along with more than $5.6 million in committed DOT.

If Referendum 1944 passes and the required system-chain upgrade is completed, dotUSD would become the protocol’s primary stable-value instrument, with DOT serving as the main collateral in its mature form. The initial liquidity commitment of $3 million to $5 million is intended to establish the Asset Hub pool and support early adoption across parachains and treasury functions.