Renewal of treasury USDT and USDC Acquisition

1hCM...ayRL

Root

26d ago

19 Comments

Deciding

Content

AI Summary

Track: Root

Proposer: ChaosDAO, JUST Ventures, Hydration

Date: March 2025

Requested allocation: 5,001,000 DOT

Short description: We proposed a structured approach for the Polkadot Treasury to obtain native USDT and USDC, for the purpose of diversification and enabling it to pay out expenses in a stable asset. Through this referendum, we aspire to renew the schedule presented in proposal #457 and convert 2,500,000 DOT into USDT and 2,500,000 DOT into USDC via the DCA mechanism described in detail below, where an additional 1000 DOT is reserved for transaction fees. This proposal presents a long-term solution to acquire different tokens in exchange for treasury DOT by Polkadot governance participants.

Context of the proposal:

Probably one of the most-requested features is the ability to make Treasury proposals in stablecoins like USDT and USDC. This is for many reasons, including less volatility around Treasury proposals and preserving the value of the Polkadot Treasury to ensure funds are available to support a given budget in the future.

With the latest upgrades to Substrate and the Polkadot runtime, the Treasury has a lot more tools available to it for its management, including proposals with non-DOT assets like stablecoins.

As was done in referendum 457, this proposal is to convert 5,000,000 DOT to USDT and USDC over the course of the next year, with 50% going to each. This uses Hydration's DCA feature to convert a little bit each day and ensure a steady flow of stablecoins into the Treasury.

Unlike 457, this referendum sells a fixed amount of DOT per trade rather than acquiring a fixed amount of USDT/C. For better capital efficiency, the full amount of DOT will be also initially converted into aDOT (yield-bearing collateral token) and supplied into the Hydration Borrow feature. By doing so, the Polkadot Treasury will accumulate yield on the dormant DOT, while substantially increasing the DOT supply available for borrowing, thus enabling more DeFi use cases. More details can be found in this post.

Moreover it newly utilizes the “Rolling DCA” feature, which enables renewing the schedule just by sending DOT to the proxy account. This in turn means other governance tracks with lower security assumptions, such as Treasurer, can be used for smaller topups if needed.

This amount accounts for about 22% of the new DOT expected to be minted into the Treasury over the next year (this could vary based on variables like the staking rate).

Proposal objective(s) or solution(s):

The central proposition entails the creation of a schedule that converts DOT into USDT and USDC via the DCA feature on Hydration, a parachain on Polkadot.

The attributes of this proposal are:

Cost-efficiency (approx. 0.4% of the total amount)
No necessity to appoint curators who oversee and manage the process
Conversion is done in small amounts over a longer period which provides a hedge for price volatility and manipulation

DCA schedule parameters: [USDT]

Total duration with current EMA7 price: 365 days
Total amount: 2,500,000 DOT
Trade frequency: One trade every 20 blocks (approx. 4 minutes)
Per trade: 20 DOT
Per day: 7200 DOT
Send to asset hub after accumulating: 5,000 USDT
Total fee estimation: 0.4% of total amount acquired

DCA schedule parameters: [USDC]

Total duration with current EMA7 price: 365 days
Total amount: 2,500,000 DOT
Trade frequency: One trade every 20 blocks (approx. 4 minutes)
Per trade: 20 DOT
Per day: 7200 DOT
Send to asset hub after accumulating: 5,000 USDC
Total fee estimation: 0.4% of total amount acquired

Fee estimation breakdown:

Trade fee: 0.3% (0.25% to Liquidity Providers, 0.05% to the protocol)
Slippage fee: 0.045% (→AMM)
Transaction fee on Hydration: 0.035% (→Protocol treasury)
Transaction fee on Polkadot Asset Hub: 0.02% (→Asset Hub collators)

Note: Fees depend heavily on the schedule settings and are estimated based on parameters used. It is worth mentioning that the Hydration protocol also uses dynamic fees based on block space utilization ranging 0.15-5% to protect liquidity providers in times of volatility. All time average trade fees as of proposal submission are around 0.3%.

Description of steps utilizing XCM to achieve the solution:

Send 5,000,001DOT from the Polkadot treasury to the Pure Proxy account [7N4oFqXKgeTXo6CMSY9BVZdHP5J3RhQXY77Fe7qmQwjcxa1w] controlled exclusively by the relay chain sovereign account on Hydration [7KQx4f7yU3hqZHfvDVnSfe6mpgAT8Pxyr67LXHV6nsbZo3Tm]
After 1 block to process balance state changes on Hydration, schedule sending an XCM program to Transact on Hydration. This will initiate two DCA schedules, each with a total amount of 2,500,000 DOT, swapping 20 DOT to USDT and USDC every 20 blocks.
Once the first USDT chunk is accumulated, initiate a periodic schedule that sends cross-chain chunks of 5,000 USDT and 5,000 USDC from the Pure Proxy on Hydration to the General Treasury account on the Polkadot Asset Hub [14xmwinmCEz6oRrFdczHKqHgWNMiCysE2KrA4jXXAAM1Eogk], totaling to max. 27500 transactions.

Edited

Status

Decision28d

Confirmation1d

Attempts

Tally

94.4%Aye

5.6%Nay

Aye

≈31.81MDOT

Nay

≈1.89MDOT

0.0%
0.0%
0.0%

Threshold

Support0.82%

≈12.77MDOT

Issuance

≈1.55BDOT

Votes

Nested

Flattened

Calls

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Metadata

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Comments

16Mf...QwCZ

I have noticed that the current mechanism allows for circumventing the Treasury’s 1% burn every 24 days once again. Given this, have we ever considered increasing the burn rate to 2% or even higher to enhance efficiency?

Your insights on this matter would be greatly appreciated.

Thank you for your time and consideration.

13zn...P5ju

Dear Proposer,

Thank you for your proposal. Our first vote on this proposal is AYE.

The Root track requires 60% quorum according to our voting policy. This proposal has received nine aye and zero nay votes from ten members. Below is a summary of our members' comments:

The majority of voters expressed strong support for the proposal to increase the treasury's stablecoin holdings. They highlighted the need for more stablecoins to enhance liquidity and meet community demands for funding with clearer budgets. Many acknowledged the benefits of enabling stablecoins in the treasury and viewed the proposal as a necessary step, despite concerns about potential selling pressure on the DOT token. Overall, the sentiment leaned towards embracing stablecoins as a vital component for future financial stability.

The full discussion can be found in our internal voting.

Kind regards,
Permanence DAO

14Yc...trwt

Alright, let’s really drive the point home.

Honestly, I can't wrap my head around why we're sitting on our hands and not fully utilizing our treasury and DeFi tools while we mindlessly dump our DOT!

We’ve got amazing resources at our fingertips, like DOT LST with Bifrost (vDOT) and Yield DCA of vDOT on Hydration. Why on earth wouldn’t we leverage these tools to hold onto our DOT and convert only the staking yield into targeted assets for treasury diversification? It’s baffling! By splitting the amount we put into Yield DCA across various assets, we could easily stack up on USDC, USDT, BTC, ETH, and others without even touching our treasury!

At current staking APR (11%) and DOT price (3.6$/DOT), this strategy could generat ~2M$ in USDT/USDC only by selling the yield

I may not be the sharpest tool in the shed, but this basic strategy is a no-brainer. Yet, I haven't seen anyone from the crowd pushing these ridiculous proposals even hint at this option.

So, can anyone explain to me WHY we’re not doing this? It’s time to wake up and start making smarter moves!

Edited

Up 1

135u...PfTT

I agree, why do we not do this? Can we at least explore?

1HGn...5v6Y

GM,

I think people are somewhat missing the point of this proposal. I think they are focusing on "selling DOT is bad" generally, and not understanding why this DOLLAR-COST-AVERAGE referendum, and the ones before it exist.

Before I explain why it exists, I want to point out that the treasury is a permissionless thing, anyone can request money, you are not going to stop this without a runtime upgrade making it permissioned, which likely is not going to happen.

If there are no stablecoins in the treasury, people will request DOT, this has two implications:

If the price of DOT increases from the moment it was requested to the time it was received, the treasury overpays the proponent
If the price of DOT decreases from the moment it was requested to the time it was received, the proponent does not receive enough funds, which leads to follow up referendums and is generally a nightmare

There is another issue where by if, lets say, $500k of DOT is paid out to a proponent, and they need to sell it immediately to cover expenses (what they were paid for). More than likely they will market sell the DOT on an exchange, causing quite a large downward candle in one go, which probably isn't good.

People need fiat currency to pay for shit in real life, i don't know how that is difficult to understand.

This referendum, and the ones before it, slowly acquire tokens over time via a DCA. This allows arbitrage bots to equalize the price effectively, and doesnt absolutely Judas candle the DOT chart.

If token holders believe that the treasury should out-right stop spending money, then vote NAY, its really not that difficult, we, at ChaosDAO, have been the primary NAY voters since OpenGov was launched. It's really not a hard concept to understand. If something isn't absolutely amazing and essential, vote NAY.

In any reasonable persons mind, that understands the treasury will remain permissionless, and it is impossible to get everyone to vote NAY, the next best solution is to DOLLAR COST AVERAGE OVER TIME into stablecoins to make sure people can get paid for good products/services they bring to Polkadot.

If people are mad as fuck about the token price, and think it's the treasuries fault, you are absolutely misinformed to the highest degree about the movement of DOT tokens. There are single whales who have sold more tokens than the treasury has ever done, ONE PERSON. It's not just one person, it's numerous people. Theres also validators and stakers who benefit from inflation who constantly sell DOT.

If you think the treasury is the reason the price is low, you are borderline retarded, are incapable of looking at subscan or Dune Analytics, concern trolling, or incapable of looking at the macro-economic climate.

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