Polkadot Proposes Native Stablecoin dotUSD for Reduced External Dependency

Polkadot is considering the launch of its own native stablecoin, dotUSD. The proposal would create a protocol-native decentralized stablecoin to serve as Polkadot's primary stable-value instrument. This would provide users with a dollar-denominated asset without carrying DOT volatility directly.

The system would use liquidations, a stability pool, and redemptions to manage falling collateral values and support the dollar peg. Borrower-selected interest rates rather than one protocol-set borrowing rate are also planned, allowing borrowers to choose lower or higher rates depending on their risk tolerance.

The rollout is divided into two phases to limit technical risk during deployment. Phase one uses a capped buffer backed one-to-one by USDT, allowing dotUSD circulation without relying on an oracle or DOT liquidation system. Phase two adds DOT-backed vaults, oracle integration, stability mechanisms, and redemption functionality once ready.

The proposal aims to reduce Polkadot's dependency on external stablecoins and give DOT a direct role in collateralized borrowing and liquidity. Users could gain dollar-denominated budgeting capabilities on-chain, linking the asset to future stablecoin payments and treasury operations.