Track: Root

Proposer: ChaosDAO, JUST Ventures, Jay Chrawnna

Date: 26 Aug, 2025

Requested allocation: 3,640,000 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 and treasury proposals in stable assets. Through this referendum, we aspire to continue schedules presented in previous proposals and convert 1,320,000 DOT into USDT and 1,320,000 DOT into USDC via the DCA mechanism described in detail below. This proposal presents a long-term solution to acquire different tokens in exchange for treasury DOT by Polkadot governance participants. Additionally this referendum proposes to add 1M DOT into the Hydration Borrow feature to earn yield and increase its supply. Total duration with current EMA7 price: 183 days.

PLEASE NOTE THAT THIS PROPOSAL, DIFFERENT TO REF 1729, INCLUDES ALL CALLS TO DCA USDC, USDT AND THE CALL AIMING TO SUPPLY 1M DOT INTO THE HYDRATION'S MONEY MARKET (BORROW FEATURE) TO PROVIDE ADDITIONAL YIELD ON IDLE DOT IN TREASURY. If you disagree with adding this last call to the submission, you can review and vote on REF 1729.

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1. Context of the proposal:

One of the most requested features for the Polkadot Treasury is the ability to submit proposals in stablecoins such as USDT or USDC. This request arises from a valid concern shared by many community members: reducing volatility in Treasury proposals. Allowing stablecoin-based submissions help preserve the value of Treasury funds, ensuring that sufficient resources remain available to support approved budgets 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.

Similarly as was done in referendum 457, this proposal aims to convert 2,640,000 DOT to USDT and USDC over the course of the next months, with 50% going to each stablecoin. This uses Hydration's DCA feature to convert a little bit each day and ensure a steady flow of stablecoins into the Treasury. Like 457, this referendum purchases a fixed amount of stables per trade rather than selling a fixed amount of DOT. 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 passively while substantially increasing the DOT supply available for borrowing: thus enabling more DeFi use cases. More details on the functioning mechanism can be found on this post.

Moreover, this submission leverages the “Rolling DCA” feature, which allows the schedule to be renewed simply by sending DOT to the proxy account. This also enables the use of governance tracks with lower security assumptions (such as Treasurer) for smaller top-ups when needed.

This amount accounts for about 22% of the new DOT expected to be minted into the Treasury over the next 6 months (this could vary based on variables like the staking rate).

Last but not least, this submission also aims to supply 1M DOT into the Hydration’s Money Market (Borrow feature) to provide additional yield on idle DOT in the treasury without the risk of impermanent loss with current average rate of 4.25% from the past month.

2. Proposal objective(s) or solution(s):

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 - Against price volatility and manipulation.

DCA schedule parameters: [USDT]

• Total duration with current EMA7 price: 183 days
• Total amount: 1,320,000 DOT
• Trade frequency: One trade every 40 blocks (approx. 4 minutes)
• Per trade: 80 USDT
• Per day: 28800 USDT
• 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: 183 days
• Total amount: 1,320,000 DOT
• Trade frequency: One trade every 40 blocks (approx. 4 minutes)
• Per trade: 80 USDC
• Per day: 28800 USDC
• 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:

a. Send 2,640,000 DOT from the Polkadot treasury to the Pure Proxy account [13JjZiX7QvmHCxwAmT92zugLE4yFNcjFFsbGirTaaYUp5xio] controlled exclusively by the Polkadot chain sovereign account on Hydration [12pPnA1aFic3ibBh9xMwssM1779vfrJBxqD4mDy8d18r4g95]

b. 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 1,320,000 DOT, swapping DOT to 80 USDT and 80 USDC every 40 blocks.

c. 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. 14520 transactions.

d. Send 1M DOT to Polkadot chain sovereign account on Hydration [12pPnA1aFic3ibBh9xMwssM1779vfrJBxqD4mDy8d18r4g95] and supply them to the money market via the Router (DOT->aDOT sell).

**3. Polkadot xcmPallet.send calldata and call hash: **

• Call Data: 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
• Call Hash: 0xa5cf82e4eee0cc71d67a652c30ad5d3e58246d7635a941a7febcdb07f423307b

4. Appendix –⁠ DCA execution - View as wallet - Polkadot chain sovereign account proxy

Preview will be available at: https://app.hydration.net/trade/swap?account=13JjZiX7QvmHCxwAmT92zugLE4yFNcjFFsbGirTaaYUp5xio.

Please review and vote at your convenience!