Before conversion to Bitcoin begins, the 500,000 DOT will first be staked in aDOT, a yield-generating collateral token.
This will allow the treasury to earn returns on its DOT holdings while increasing liquidity for DeFi borrowing.
Additionally, 1,000 DOT will be set aside to cover transaction fees involved in executing this strategy.
From there, the Polkadot treasury would execute the BTC conversion gradually over a year, using Hydration’s rolling dollar-cost averaging (DCA) feature. This method enables daily, incremental purchases to maintain a steady Bitcoin inflow.
Once enough tBTC is accumulated, portions of it (0.005 tBTC per transaction) would be added as liquidity to the Hydration Omnipool. The proposal stated:
“This is intended as a first step towards diversification into Bitcoin where future proposals could include other bridged BTC assets. The tBTC stays under the control of the Treasury and is intended to be maintained as a reserve, not a pool for payments.”
Meanwhile, Polkadot’s move mirrors a broader industry shift of organizations and governments viewing Bitcoin as a strategic reserve asset to hedge against economic instability and currency devaluation.
Polkadot’s interest in building a Bitcoin reserve comes as its DOT token faces market challenges.
According to CryptoSlate’s data, DOT’s price has dropped 7% in the last 24 hours to $3.80, its lowest level since October 2023.
In Bitcoin terms, the token has fallen to an all-time low of 0.00003658 BTC, losing over 62% of its value in the past year.
