Acala Proposes DOT-Backed Algorithmic Stablecoin for Polkadot - Unchained

The Polkadot community is considering the launch of a native DOT-backed algorithmic stablecoin called pUSD, with the aim of reducing reliance on external stablecoins like USDT and USDC.

The proposal, put forward by Acala CTO Bryan Chen, envisions pUSD as an overcollateralized debt token exclusively backed by DOT tokens that would operate on Acala’s decentralized Honzon protocol.

pUSD would be managed entirely by smart contracts, tracking a fiat currency peg using economic incentives and automated on-chain logic. The design aims to avoid the risks of mixed collateral models and centralized control.

This story is an excerpt from the Unchained Daily newsletter.

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Early voting on the proposal has shown over 75% support, with more than 1.1 million DOT, valued at about $4.3 million, already committed. However, some members of the community raised concerns around Acala leading the charge.

“Acala’s stablecoin (aUSD) launch was a complete disaster and it really killed my trust in the team. I don’t see myself supporting their project anymore,” said one user.

Acala’s aUSD stablecoin experienced a major depeg event due to a technical exploit in 2022 — a bug in the iBTC/aUSD liquidity pool allowed hackers to mint over 1.2 billion aUSD tokens without the necessary collateral.