The Polkadot community has proposed a strategic initiative to create a Bitcoin reserve using the network's treasury funds. The proposed plan suggests converting 501,000 DOT into tBTC over one year.
Creating Bitcoin Reserves
In recent developments, as outlined in the Polkadot governance forum, there is a community proposal to create a Bitcoin reserve. The plan is to use 501,000 DOT from the treasury to gradually purchase tBTC, a wrapped token on Ethereum pegged to Bitcoin. The program would be carried out over a 12-month period using a dollar-cost averaging mechanism.
Rolling DCA Mechanism
The suggested reserve will utilize the rolling DCA mechanism of Hydration, allowing repeated DOT swaps for tBTC. Hydration provides automated purchasing, distinguishing it from traditional DCA setups that require manual purchases. Each transaction is designed to be small, minimizing execution risk.
Strategic Benefits for the Community
The possession of Bitcoin is becoming popular among both centralized and decentralized banking institutions. In the Polkadot forum, the growing popularity of governments and corporations accumulating BTC in their treasuries is discussed. The Polkadot proposal aligns with this trend, ensuring it follows its decentralized governance model.
Polkadot's strategy to create a Bitcoin reserve reflects an industry-wide trend where institutions are seeking to hedge volatility and currency devaluation with digital reserves.
