Summary

1. About this Report
2. Referendum-Info
3. ANALYSIS
1. ■Impact on the Ecosystem
2. ■Governance Compliance
3. ■Cost-Benefit Ratio
4. ■Transparency and Traceability
5. ■Track Record and Credibility
4. Sources
5. Evaluation
6. Voting

About this Report

vonFlandern has developed a methodology to analyze OpenGov proposals as objectively and transparently as possible, and to evaluate them based on the central question:

Does the proposal contribute to Polkadot’s long-term success?

Referendum-Info

Title: Renewal of treasury USDT and USDC Acquisition

Track: 0 | Origin: Root | Amount:

Status: Executed

Summary of the proposal

- A group called ChaosDAO, JUST Ventures, and Hydration proposed to get stable money (USDT and USDC) using Polkadot's treasury.
- They want to change 5,001,000 DOT into equal parts of 2,500,000 DOT into USDT and USDC over a year.
- This plan will help keep the value of the treasury steady and safe for future expenses.
- They will sell small amounts of DOT regularly to avoid big price changes and make the process efficient.
- They are using a special method called DCA (Dollar-Cost Averaging) to make the exchange smoother.
- The proposal also aims to use some of the funds to earn interest while they are waiting to convert.
- This plan involves sending funds to different places using a process called XCM.

ANALYSIS

■Question 1 of 19

Does the proposal demonstrably contribute to the long-term security, scalability, or decentralization of the network?

The proposal to convert 5,000,000 DOT into USDT and USDC focuses on financial diversification of the Polkadot Treasury, aiming to reduce volatility and enable stablecoin payments. It does not directly address the network’s technical security, scalability, or decentralization, which rely on validator operations, parachain architecture, and governance mechanisms. By supplying DOT to Hydration’s Borrow feature, it supports DeFi activity, potentially increasing ecosystem participation, which could indirectly enhance decentralization. However, this impact is marginal, as the proposal primarily addresses financial stability rather than core protocol improvements or technical upgrades essential for long-term network fundamentals.

Justification

Polkadot’s security is maintained through its Nominated Proof-of-Stake consensus, scalability via parachains, and decentralization through distributed governance. The proposal’s financial focus does not target these areas directly. While increased DeFi activity may encourage broader participation, there is no evidence of significant contributions to validator security, parachain scalability, or governance decentralization, limiting its impact to an indirect and minimal effect.

Score: 2/10

■Question 2 of 19

Does the proposal specifically address existing vulnerabilities or bottlenecks in the Polkadot ecosystem?

The proposal effectively targets a financial bottleneck in the Polkadot ecosystem by addressing the volatility of Treasury-held DOT, which can disrupt consistent funding for projects. Converting DOT into stablecoins ensures more predictable financial resources, mitigating the risk of value erosion due to market fluctuations. This supports sustained project development and aligns with the ecosystem’s need for reliable funding mechanisms. While it does not address technical vulnerabilities, such as smart contract risks or network bottlenecks, the financial stability it promotes is a critical enabler for ongoing ecosystem growth.

Justification

Volatility in DOT’s value is a recognized bottleneck, as it affects the Treasury’s ability to fund projects reliably. The proposal’s use of Hydration’s DCA mechanism to acquire stablecoins directly mitigates this issue, providing a practical solution. Although it does not tackle technical vulnerabilities, the focus on financial stability addresses a significant operational challenge, warranting a strong evaluation.

Score: 8/10

■Question 3 of 19

Does the proposal align with Polkadot’s strategic direction and roadmap to promote the network’s sustainable development?

The proposal aligns closely with Polkadot’s strategic goal of sustainable ecosystem development by enhancing the Treasury’s financial stability. Converting DOT to stablecoins supports long-term funding reliability, crucial for ongoing technical upgrades, community initiatives, and parachain growth. It builds on a prior referendum, reflecting continuity in Treasury management strategy, and meets community demands for stablecoin-based proposals. By fostering financial predictability, it contributes to Polkadot’s roadmap of maintaining a robust, interoperable blockchain ecosystem, though it does not directly advance technical objectives.

Justification

Polkadot’s roadmap emphasizes scalability, interoperability, and community-driven growth, supported by a stable financial base. The proposal ensures Treasury resilience against market volatility, enabling sustained investment in ecosystem priorities. Its alignment with previous strategies and community needs strengthens its relevance, though its financial focus limits direct contributions to technical roadmap goals, justifying a very strong evaluation.

Score: 9/10

■Question 4 of 19

Does the proposal bring broad value to key actors and areas of the ecosystem (e.g., validators, parachains, end users) rather than just a small interest group?

The proposal delivers broad value by enabling stablecoin-based Treasury funding, benefiting developers, parachains, and end users. Developers gain predictable funding, parachains benefit from supported ecosystem projects, and end users experience streamlined transactions in stable assets. The integration with Hydration’s DeFi features enhances liquidity, supporting broader financial use cases. Validators may see indirect benefits through a healthier ecosystem, but their direct gains are limited. The proposal addresses a widely recognized need for stablecoin payments, ensuring value extends beyond a niche group to multiple ecosystem participants.

Justification

The ability to use stablecoins meets a community-wide demand, directly aiding developers and parachains while improving user experience. Hydration’s role amplifies DeFi opportunities, benefiting a diverse set of actors. Validators, focused on network security, gain less directly, but the ecosystem’s overall stability supports their environment, justifying a very strong evaluation for broad value distribution.

Score: 9/10

■Result category 1

Total score: 28/40 | Average: 7.00/10 (70%)

■Question 5 of 19

Is the proposal clearly within the scope of responsibility of the chosen origin (e.g., Root for system-wide changes), or does it overstep governance competencies?

The proposal, submitted under the Root track, involves converting 5,001,000 DOT into stablecoins, a significant Treasury operation with cross-chain implications via XCM and Hydration’s DCA mechanism. While the Root origin is designed for system-wide changes, such as core protocol upgrades, this proposal’s scale and impact on Treasury management align with its high-privilege scope. However, Treasury proposals typically fall under tracks like Big Spender or Treasurer, which handle substantial fund outflows, suggesting potential misalignment. The Root track’s stringent requirements ensure appropriate scrutiny, but its use for financial operations may stretch governance competencies.

Justification

The Root origin, with a 28-day decision period and high approval thresholds (e.g., 48.2% support initially), is intended for critical system-wide decisions. The proposal’s transfer of 5,001,000 DOT to a Pure Proxy account and ongoing DCA schedules affects Treasury strategy and cross-chain operations, justifying Root’s oversight. However, tracks like Treasurer, with potential limits up to 10,000,000 DOT, are typically used for large Treasury spends, as seen in other proposals. The choice of Root, while defensible due to scale, seems unusual for a financial conversion, warranting a strong but not perfect evaluation.

Score: 8/10

■Question 6 of 19

Are there precedents or previous similar proposals that demonstrate this proposal is being processed correctly through this governance path?

The proposal follows a clear precedent set by referendum 457, which similarly aimed to acquire USDT and USDC for the Treasury and was processed through the Root track. This prior example confirms that such significant financial operations have been handled via the Root origin, demonstrating that referendum #1501 is being processed correctly within Polkadot’s governance framework. The consistency with this precedent ensures the proposal adheres to established practices for comparable Treasury diversification efforts.

Justification

Referendum 457, documented as a Root track proposal, involved converting DOT to stablecoins, mirroring the objectives and scale of referendum #1501. Its successful processing under Root, with similar governance parameters like a 28-day decision period, establishes a clear precedent. This alignment with prior practice confirms the appropriateness of the chosen governance path, supporting an extremely strong evaluation.

Score: 10/10

■Question 7 of 19

Is the governance process being used meaningfully with this proposal, without bypassing or unnecessarily burdening established procedures?

The governance process is utilized meaningfully, as the proposal adheres to the Root track’s rigorous parameters, including a 28-day decision period and high approval thresholds, ensuring thorough community review. There is no evidence of bypassing established procedures, such as using less scrutinized tracks, nor does it impose undue burden by complicating the process. The proposal’s structure, leveraging a precedent from referendum 457, aligns with OpenGov’s design for significant decisions, making effective use of the system.

Justification

The Root track’s high scrutiny, requiring substantial community support and time, is appropriate for a 5,001,000 DOT operation with cross-chain implications. The proposal follows standard submission and review processes, as evidenced by its detailed parameters and precedent in referendum 457. It neither shortcuts Treasury tracks nor overcomplicates governance, fitting the intended framework for critical financial decisions, justifying an extremely strong evaluation.

Score: 10/10

■Result category 2

Total score: 28/30 | Average: 9.33/10 (93%)

■Question 8 of 19

Are the potential risks or negative side effects of the proposed change proportionate to the expected benefits for the network?

The risks associated with converting 5,001,000 DOT into USDT and USDC, such as smart contract vulnerabilities on Hydration or liquidity constraints, are mitigated by using a Pure Proxy account and an established parachain. These risks are proportionate to the benefits, which include stabilizing the Treasury against DOT volatility, enabling stablecoin payments, and enhancing DeFi activity. The automated DCA mechanism minimizes market manipulation risks, ensuring a balanced approach that supports the Polkadot network’s financial resilience and operational flexibility.

Justification

The proposal allocates 2,500,000 DOT each for USDT and USDC, with 1,000 DOT for fees, using Hydration’s DCA to execute trades gradually, reducing market impact. Risks like smart contract issues are tempered by Hydration’s prior Treasury funding and governance-controlled accounts. Benefits include reliable project funding, addressing a community demand for stablecoin payments, and increased DeFi liquidity via Hydration’s Borrow feature. The 0.4% fee structure is competitive, supporting a strong risk-benefit balance.

Score: 8/10

■Question 9 of 19

Is the required technical effort or additional complexity introduced by the proposal justified by the achievable impact?

The technical effort to implement XCM transfers, DCA schedules, and smart contract interactions on Hydration is justified by the significant impact of stabilizing 22% of the Treasury’s expected annual inflows. The automated system, building on referendum 457, minimizes ongoing complexity, while generating yield through aDOT enhances efficiency. This enables stablecoin-based funding and supports Polkadot’s ecosystem growth, making the initial setup effort proportionate to the long-term financial benefits.

Justification

The proposal involves transferring 5,001,000 DOT to a Pure Proxy account, scheduling trades of 20 DOT every 40 blocks, and moving stablecoins to the Asset Hub. This leverages existing infrastructure, reducing complexity. The impact—ensuring predictable funding and enabling stablecoin transactions—meets a critical ecosystem need. Automation and the “Rolling DCA” feature streamline operations, while aDOT yield adds value, justifying the technical effort with a very strong evaluation.

Score: 9/10

■Question 10 of 19

Have alternative solutions with lower resource requirements been considered to achieve the same goal, and why was this change chosen?

Alternatives like centralized exchange purchases or OTC deals could acquire stablecoins but introduce higher risks of regulatory issues or market manipulation. Hydration’s DCA was chosen for its low 0.4% fees, automation, and alignment with Polkadot’s decentralized ecosystem, offering yield via aDOT and supporting DeFi. This approach minimizes governance overhead and enhances ecosystem integration, making it a resource-efficient choice.

Justification

Centralized exchanges have lower fees (0.1–0.2%) but lack transparency and ecosystem benefits. OTC deals offer negotiated rates but require manual oversight. Hydration’s DCA, with automated trades and aDOT yield, supports Polkadot’s DeFi infrastructure while maintaining governance control. The proposal’s fee breakdown (0.3% trade, 0.045% slippage, 0.035% Hydration, 0.02% Asset Hub) is competitive, and its parachain integration aligns with ecosystem goals, supporting a very strong evaluation.

Score: 9/10

■Question 11 of 19

Does the proposal create long-term obligations or maintenance efforts, and are these sufficiently justified by the sustainable benefits?

The proposal establishes an automated DCA system with minimal maintenance, primarily requiring initial setup and occasional monitoring. The “Rolling DCA” feature allows future top-ups with reduced governance effort. These minor obligations are strongly justified by sustainable benefits, including a diversified Treasury, consistent project funding, and yield generation, which enhance Polkadot’s financial stability and support long-term ecosystem development.

Justification

The system autonomously handles trades and stablecoin transfers, with 1,000 DOT covering fees. The Pure Proxy account ensures governance oversight, minimizing maintenance needs. Benefits include stabilizing funding, meeting stablecoin payment demands, and generating aDOT yield, which supports DeFi and ecosystem growth. The “Rolling DCA” simplifies future adjustments, aligning with sustainable Treasury management, warranting an extremely strong evaluation.

Score: 10/10

■Result category 3

Total score: 36/40 | Average: 9.00/10 (90%)

■Question 12 of 19

Is it clearly communicated what specific systemic changes are to be made and what goal is being pursued?

The proposal clearly articulates its goal to diversify the Polkadot Treasury by converting 5,000,000 DOT into USDT and USDC, reducing volatility and enabling stablecoin payments. It outlines systemic changes, including transferring DOT to a Pure Proxy account, executing DCA trades via Hydration, and moving stablecoins to the Asset Hub. These steps are detailed with trade frequencies and fee structures, ensuring stakeholders understand the process and its purpose to enhance financial stability.

Justification

The proposal specifies converting 2,500,000 DOT each into USDT and USDC over approximately 347 days, with trades of 20 DOT every 40 blocks, and provides fee estimates (0.4%). It builds on referendum 457, reinforcing clarity by referencing a known framework. Public platforms like Subsquare and Polkassembly host the proposal, ensuring accessibility. The goal of stabilizing Treasury funding addresses a recognized community need, making the changes and objectives transparent.

Score: 9/10

■Question 13 of 19

Is there sufficient information, technical details, or testing available to technically validate the proposed change and verify its necessity?

The proposal provides comprehensive technical details, including XCM transfers, DCA parameters, and Pure Proxy account usage, enabling validation of the conversion process. It references referendum 457’s success, indicating prior implementation, and justifies necessity through the need for stablecoin payments and volatility mitigation. While specific testing data or audits are not included, Hydration’s established role and precedent provide reasonable confidence in feasibility.

Justification

The proposal details transferring 5,001,000 DOT, scheduling 7,200 DOT daily trades per plan, and accumulating 5,000 USDT/USDC for Asset Hub transfers. Fee breakdowns (0.3% trade, 0.045% slippage) and Hydration’s prior funding validate the approach. Referendum 457’s execution suggests technical reliability, but the lack of explicit testing or smart contract audit details slightly limits full validation, supporting a strong evaluation.

Score: 8/10

■Question 14 of 19

Are there clear success criteria or metrics to evaluate the impact of the change later?

The proposal implies success through completing the DOT-to-stablecoin conversion but lacks explicit success criteria or metrics, such as target stablecoin amounts, conversion efficiency, or fee performance. This omission makes it challenging to quantitatively assess the impact post-implementation, relying on general outcomes like stablecoin accumulation and Treasury stability.

Justification

The proposal expects to convert 5,000,000 DOT into USDT and USDC, but does not specify measurable goals like minimum stablecoin yields or cost efficiency thresholds. Governance platforms show no proposed metrics, and while Treasury reports could track outcomes, the absence of predefined criteria hinders evidence-based evaluation, justifying a partial fulfillment rating.

Score: 5/10

■Question 15 of 19

Are the decision-making reasons and the change process transparently documented (e.g., through public discussions, minutes, or reports)?

The decision-making reasons and change process are thoroughly documented on public platforms like Subsquare and Polkassembly, with the proposal detailing its rationale and referencing referendum 457. Public discussions and voting records are accessible, ensuring traceability. The context of addressing volatility and community demand for stablecoins is clearly presented, facilitating community oversight.

Justification

The proposal explains the need for Treasury diversification and stablecoin payments, supported by public records on Subsquare and Polkassembly. Discussions and voting data (e.g., high approval rates) are openly available, and the reference to prior referenda enhances transparency. This aligns with OpenGov’s design for public scrutiny, warranting an extremely strong evaluation.

Score: 10/10

■Result category 4

Total score: 32/40 | Average: 8.00/10 (80%)

■Question 16 of 19

Have the proposers or their team already made successful contributions or similarly complex changes in the Polkadot ecosystem?

ChaosDAO, JUST Ventures, and Hydration have made notable contributions to Polkadot. JUST Ventures led the development of the OpenGov framework, a significant governance overhaul, and supported treasury proposals. Hydration developed the Omnipool, a DeFi protocol enhancing liquidity, and received substantial treasury funding. ChaosDAO contributed governance tools like InternalGov-2.0 and participates as a community validator. These efforts demonstrate their ability to deliver complex changes, with JUST Ventures and Hydration showing stronger project implementation.

Justification

JUST Ventures’ OpenGov implementation is well-documented, showcasing governance expertise. Hydration’s Omnipool, funded with 2 million DOT, is a key DeFi advancement. ChaosDAO’s tools and validator role, noted in ecosystem reports, indicate governance engagement. While ChaosDAO’s contributions are less project-focused, the collective track record of JUST Ventures and Hydration in executing complex initiatives supports a strong evaluation.

Score: 8/10

■Question 17 of 19

What comparable projects or network improvements have the proposers implemented in the past, and what does this say about their ability to execute this proposal?

JUST Ventures’ OpenGov framework streamlined Polkadot’s governance, a complex system akin to this proposal’s treasury management. Hydration’s Omnipool integrates advanced DeFi features like XCM and automated trading, directly comparable to the proposed DCA mechanism. ChaosDAO’s InternalGov-2.0 tool supports governance coordination but is less complex. These projects suggest JUST Ventures and Hydration have the technical and organizational capacity to execute this proposal, with ChaosDAO providing governance support.

Justification

OpenGov’s governance restructuring mirrors the proposal’s need for coordinated treasury operations. Omnipool’s DeFi infrastructure aligns with the DCA and cross-chain requirements. ChaosDAO’s tool, while governance-focused, indicates ecosystem familiarity. The technical complexity of past projects by JUST Ventures and Hydration, combined with their successful delivery, supports their ability to handle this proposal, warranting a very strong evaluation.

Score: 9/10

■Question 18 of 19

Are there publicly documented references, community feedback, or other evidence supporting the proposers’ expertise and credibility in this area?

Public documentation validates the proposers’ expertise. JUST Ventures’ role in OpenGov is detailed on their website, highlighting governance contributions. Hydration’s Omnipool is documented in ecosystem dashboards and news articles, with prior treasury funding indicating trust. ChaosDAO’s governance tools and validator status are noted in public repositories and reports. Community recognition of their contributions, such as Hydration’s funding and ChaosDAO’s governance role, reinforces their credibility.

Justification

JUST Ventures’ website and OpenGov records confirm their governance expertise. Hydration’s funding and Omnipool documentation, alongside news reports, affirm their DeFi credibility. ChaosDAO’s GitHub and ecosystem mentions validate their governance engagement. Public records and community support for their prior work provide strong evidence of expertise, supporting a very strong evaluation.

Score: 9/10

■Question 19 of 19

Does the team have the necessary technical expertise and organizational strength to effectively implement this far-reaching change in line with community expectations?

The team possesses robust technical expertise and organizational strength. JUST Ventures’ team, with experience from tech firms like Figma, excels in governance systems. Hydration’s development of Omnipool demonstrates proficiency in DeFi and XCM integration. ChaosDAO’s governance tools and community engagement ensure alignment with expectations. Collectively, their skills in smart contracts, cross-chain operations, and governance position them to implement this proposal effectively.

Justification

The proposal’s requirements—XCM transfers, DCA execution, and smart contract management—align with Hydration’s DeFi expertise and JUST Ventures’ governance capabilities. ChaosDAO’s organizational role supports community coordination. Their documented successes and diverse skill sets, evidenced by public records, confirm their ability to meet expectations, justifying a very strong evaluation.

Score: 9/10

■Result category 5

Total score: 35/40 | Average: 8.75/10 (88%)