Polkadot Eyes Bitcoin Reserve Plan Using 501K DOT in Yearlong tBTC Strategy

The Polkadot community members have proposed a strategic initiative to create a Bitcoin reserve using the network’s treasury funds.

The plan suggests converting 501,000 DOT into tBTC over one year through an automated dollar-cost averaging system.

More so, the accumulated tBTC would be deployed in DeFi liquidity pools using a non-custodial bridge.

The move comes as other major entities, governments, corporations, and protocols explore Bitcoin holdings as a long-term reserve asset.

Polkadot May Build Bitcoin Reserve Through tBTC

In recent developments, as outlined in the Polkadot governance form, there is a community proposal to create a Bitcoin reserve.

The plan is to use 501,000 DOT of the treasury to gradually purchase tBTC, a wrapped token on Ethereum, pegged to Bitcoin. The program would be carried out in 12 12-month recurring purchase program.

This process of DOT to tBTC conversion would occur via the rolling DCA (dollar-cost averaging) mechanism offers hydration.

This is an automated system where funds can be consistently invested into tBTC purchases without the need for manual action.

More so, the strategy lessens the exposure to the short-term fluctuations in the market by diversifying the purchase over time.

Based on the report, acquired tBTC would subsequently be deposited into the Omnipool of Hydration.

This would introduce liquidity, as well as, make Bitcoin-backed assets available to DeFi users in the Polkadot crypto ecosystem.

The transaction route will consist of the non-custodial Bitcoin bridge of Threshold Network, keeping the custody under the control of the decentralized network.

Furthermore, according to the post in the Bitcoin reserve plan, there is a possibility of Polkadot treasury enjoying the long-term diversification benefit.

Hydration’s Rolling DCA Mechanism

The suggested reserve mechanism would focus on the rolling DCA mechanism of Hydration, permitting repeated DOT swaps of tBTC.

Hydration allows automated purchasing (unlike traditional DCA setups, which require manual purchases regularly) by connecting a top-up account to a self-renewing schedule.

Each transaction is designed to be small in size, maintaining low execution risk. Based on the suggested rate, 1 DOT would purchase around 0.000041 tBTC.

The process ensures gradual exposure, with limited impact on token prices or treasury reserves at any one time.

More so, the plan proposed depositing small amounts of tBTC, approximately 0.005 per transaction, into the Omnipool. This provides consistent liquidity while supporting cross-chain usage of Bitcoin-backed assets.

Its composition with the Bitcoin bridge of Threshold Network eliminates custodial issues. This allows safe transfer of assets across Bitcoin and Ethereum-compatible environments without counterparty risk.

Community Weighs Strategic Benefits

The possession of Bitcoin is rallying in both centralized and decentralized banking institutions. In the Polkadot crypto forum, the rising popularity of governments and corporations accumulating BTC in their treasuries is mentioned.

Polkadot proposal places the network in the same direction by ensuring that it takes the same route as its decentralized governance model.

Regardless of the Polkadot news about its plan to create a Bitcoin reserve, Polkadot price has been trading at $3.81, falling by 6% over the past day.

At the same time, Bitcoin price was at $105,079, showing a 0.50% increase over the last 24 hours, yet with growth in the trading volume.

Polkadot community is now debating whether exposure to Bitcoin can enhance the long-term stability of the treasury assets.

The strategy is an industry-wide movement in which institutions are attempting to hedge volatility and currency devaluation with digital reserves.

Although institutions continue to buy Bitcoin in large amounts, recent news indicates that the Strategy advocated by Michael Saylor is contributing to increasing concentration risks.

The company has acquired close to 3% of the total supply of BTC and aims to acquire 5%, which may compromise the decentralized selling point of Bitcoin.

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