Polkadot community members pitch Bitcoin as treasury stability strategy

Polkadot community members have proposed introducing a Bitcoin reserve for the Polkadot Treasury in response to the Wish-For-Change referendum. The proposal aims to convert 500,000 DOT into tBTC over the next year using Hydration’s rolling DCA feature.

The community members want the capital to be provided as liquidity into the Hydration Omnipool to put the funds into use. They also added that an additional 1000 DOT is reserved for transaction fees. All-time average trade fees as of proposal submission are around 0.3%.

Proposal aims to provide liquidity to Polkadot’s Treasury

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Recently a Discussion has sparked among the Polkadot Community to add BTC into the Treasury of the Polkadot to diversify it and… pic.twitter.com/uY8K4YcENg

— Quantum (@ItsMeQuantum) June 13, 2025

According to the proposers, BTC was mentioned in the original diversification proposal #457 and could help reduce volatility and preserve the value of the Polkadot Treasury, ensuring funds are available to support a given budget in the future. They chose Threshold BTC (tBTC), a non-custodial solution utilizing threshold-ECDSA wallets, for its decentralization, liquidity, and transparency. 

The proposal suggests selling a fixed amount of DOT per trade rather than acquiring a fixed amount of tBTC. The community members also stated that, for better capital efficiency, the full amount of DOT will be initially converted into a DOT (yield-bearing collateral token) and supplied into the Hydration Borrow feature.

According to the proposers, the Polkadot Treasury will accumulate yield on the dormant DOT while substantially increasing the DOT supply available for borrowing, enabling more DeFi use cases.

The proposal indicated that chunks of 0.005 tBTC will be provided as liquidity after a short accumulation period into the Hydration Omnipool. The community believes it will allow diversification of the Polkadot Treasury portfolio while also supporting ecosystem DeFi incentives.

Polkadot community members argued that Bitcoin continues to perform among the strongest assets of the past decade. They also believe that it’s an opportunity for Polkadot to hedge against uncertainty while signaling to the broader industry that they do believe in and support a multi-chain future. One community member hopes to bring the proposal on-chain early next week following some discussion.

One Polkadot community member reiterated that the goal of the proposal is to create a resilient treasury and ensure funding for ecosystem development through turbulent cycles, starting with a Bitcoin reserve. The individual also confirmed that the proposal is about risk management and operational continuity, not market timing or speculation.

In the proposal, the community members noted that DOT has increased ~60% vs. Bitcoin since the WFC was first proposed in January. They argued that if the Bitcoin reserve proposal had been enacted, the net gain for the treasury would have been ~$1.5M, all else being equal. According to the individuals, it could give the treasury $124M in assets instead of $122.5M, a 2.46% annualized return. 

The community members believe a 2.46% annualized return during a 60% DOT decline vs BTC is a great risk-adjusted performance. They also argued that while the upside seems small now, if the decline continues, the difference compounds and the community continues to function.

Proposal focuses on risk management and diversification 

The Polkadot members acknowledged that risk management is fundamental to every major institution. Nobody concentrates 100% of their operating capital on a single asset; even the Ethereum Foundation has diversified into other assets. They believe that by showing the ability to introduce risk management into their system, they’re signaling that Polkadot is maturing into a modern and resilient enterprise.

One community member said if Polkadot wanted a resilient treasury, it would diversify into different asset classes and not sell one highly volatile asset for another. Another member also suggested that the Polkadot Community Foundation should open an investment account on behalf of the treasury. The member argued that PCF should roll funds over time from the treasury into investments with yield and use the yield to purchase DOT and top up the treasury regularly.

Another Polkadot community member suggested using PCF as a holdings company that can issue tokens or NFTs representing the underlying asset and hold that underlying asset on behalf of the network. The individual argued that it could help the ecosystem because the treasury earns a fee for holding the assets and a premium for being the issuer.

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