The Polkadot community has proposed creating a strategic Bitcoin reserve to diversify the treasury’s assets. The plan involves using 501,000 DOT, with 500,000 DOT converted into decentralized, non-custodial BTC assets (tBTC) and 1,000 DOT allocated for transaction fees.
This aims to reduce reliance on a single asset class and potentially generate additional value for the treasury through the benefits of strategic asset allocation and diversification.
Polkadot Proposes Building tBTC Reserves
The execution strategy utilizes the Hydration protocol’s Rolling DCA mechanism, selling small amounts of DOT daily over a year to convert into tBTC. The treasury will generate extra income through lending.
Transactions occur every 20 blocks, resulting in approximately 500,000 DOT being issued annually. Once 0.25 tBTC accumulates, it’s injected into a liquidity pool, using Threshold Network’s non-custodial Bitcoin bridge.
At the proposed rate, 1 DOT would translate to approximately 0.000041 tBTC. This initiative not only adds BTC exposure to the treasury but also enhances on-chain liquidity.
The proposal, allocating around 2.8% of the treasury’s new funds, is deemed reasonable by some but has not yet reached the voting phase.
Community discussions are ongoing, with the proposal yet to be officially implemented. The debate continues as members weigh the potential benefits and drawbacks, considering whether this allocation will meet its intended objectives.
Bitcoin’s Reserve Asset Evolution
From a speculative fringe to mainstream acceptance, BTC has undergone significant evolution over the past decade. Once overlooked by institutions, it is now being adopted as a reserve asset by nation-states and Fortune 500 companies. Thus, marking a major shift in its legitimacy.
Corporate giants like Strategy and Metaplanet, central banks, medical firms, and retail companies are stashing Bitcoin in their treasuries. Now, decentralized protocols are following suit, exploring Bitcoin integration to enhance their financial frameworks and expand their asset bases.
For Polkadot, this move could be well-timed, given that DOT has depreciated by approximately 60% against BTC since January, potentially making it a strategic opportunity to acquire Bitcoin at current rates.
Skeptics often cite bitcoin’s volatility as a major concern, but its long-term performance suggests otherwise. Historically, the leading crypto has delivered returns up to 10 times its value in each cycle, showcasing its potential for substantial growth.
For Polkadot, strategically incorporating Bitcoin into its reserves could be a calculated bet on this long-term success, leveraging Bitcoin’s proven track record to drive growth and stability.
