I propose we explore adding Ethereum (ETH) to the Polkadot treasury for staking, creating a strategic diversification method that could provide multiple economic benefits:
Revenue Generation: By staking ETH, we create an additional passive income stream for the treasury without diluting our native DOT supply.
Inflation Mitigation: The rewards generated from ETH staking could be sold to fund network development, potentially reducing the need to sell DOT tokens and thereby helping to lower DOTâs inflation rate.
Cross-Ecosystem Collaboration: This approach demonstrates Polkadotâs interoperability principles by actively utilizing assets from another major blockchain ecosystem.
Risk Diversification: Holding and staking ETH provides a hedge against potential market volatilities specific to DOT.
Key considerations:
Implement robust governance checks
Establish clear parameters for staking allocation
Create transparent reporting mechanisms
Regularly review and adjust the strategy
This proposal aligns with our communityâs innovative approach to treasury management and could serve as a model for intelligent, forward-thinking blockchain economic strategies.
What are your thoughts? Letâs discuss the potential implementation and implications.
While I like the idea of showcasing cross-interoperability with other ecosystems, selling DOT for a competitorâs coins could backfire immediately. It might be regarded as a lack of confidence in Polkadot.
The treasury has already invested in Centrifuge, a project within the DOT ecosystem. I think investments in projects running on parachains or even in assets outside of crypto, such as gold, would be a much better option.
I think it comes down to narrative, which is why I stated that we could liquidate ETH rewards to pay for things while keeping DOT in treasury or further lowing inflation. Yes there is an initial buy needed. Stocking up stables in the bull to buy in the bear would be epic imo and not seen a bullish since it minimizes DOT sell pressure moving forward
Revenue Generation: By staking ETH, we create an additional passive income stream
Thatâs basically an assumption that staking ETH is a better use of whatever funds there are than investing it in own system. Not to mention that in order to buy ETH you must sell some other currency (and hurt its price).
Cross-Ecosystem Collaboration: This approach demonstrates Polkadotâs interoperability principles
Iâd say those principles would be better demonstrated if such a purchase wouldnât be necessary.
Risk Diversification: Holding and staking ETH provides a hedge against potential market volatilities
Why not buy stable coins or commodity-backed coins instead? Yes, that does sound weird, but I made this point deliberately because itâs just as weird (if not weirder) to buy another coin. Correlation among cryptocurrencies is very high, so holding another one doesnât really hedge against much.
If to add another asset, then add PHYSICAL GOLD, like Paxgold, or Tethergold. Gold will go to the moon during the coming global world order reconfiguration. Gold is already 40% up in 2025 only.
I also disagree with this proposal. To me, it doesnât reflect well if we exchange Polkadotâs funds for a competitorâs coins like ETH. While itâs a good idea to diversify investments for the sake of risk management, those investments could be in assets that arenât directly competitive to Polkadotâs position in the blockchain world.
I see things differently than some. With that being said, why wasnât the 1st suggestion Bitcoin, as it is the digital gold equivalent? With Snowbridge, this idea isnât far off⌠So I get that⌠Curious to here more regarding the mindset?
Because ETH is slightly deflational and provides yield, minimizing dot emissions with ETH rewards would allow us to eventually work towards being deflationary ourselves. The long term effect of the price up ETH far exceeds that of getting yield of stablecoins that are hyperinflating more and more each year
Buying gold means we want to sell it at a higher price, buying a deflationary asset like ETH that gains a staking yield could would be more advantageous, ETH has more upside compared to gold and the ETH rewards could supplement our DOT sell pressure in the mid to long term. Applying some measures like this would be bullish with the right perspective. Sitting back and thinking DOT price is going to get better on its own is not a good business strategy. Our network feels are next to nothing and spend like crazy. I want to see a plan that changes this massive net-sell pressure we have or things will only get worse
The issue lies in our lack of a strategy to counter the persistent, heavy sell pressure and attract more buyers. Those in charge âsee no upsideâ in creating measures to address this, yet itâs a problem thatâs actively devaluing both the price of DOT and the Treasuryâs worth.
If people canât see upside or any solutions we need to hire Corporate Restructuring Advisor (a professional) to help or things will only get worse, we wonât have a big run this bullrun and will be left hurting when the next bear market comes, which is projected to the be biggest one in history
Iâm unconvinced by those saying that buying ETH âdoesnât reflect wellâ or that staking ETH âis a better useâ of âinvestingâ it in our own system.
Those are, frankly, maxi arguments.
There are many, many, yield generating defi protocols in the ETH ecosystem that hold each othersâ tokens, just as banks hold each otherâs stock and countries hold each othersâ currencies. Diversification is sensible just in its own right.
This is even before we begin on the substantial basic point that DOT is inflationary (and given the recent stupidness, almost certainly will become increasingly more so) and ETH is (mostly) deflationary.
As to whether sitting back and thinking DOT price is going to get better on its own⌠no it certainly wonât. Thatâs not a judgement call or an opinion - the only way DOT price gets better (compared to any other major crypto) is if DOT provides value and this is seen by the market⌠ie, openGov manages the treasury and what it funds wisely. Which might happen. But Iâm not holding my breath. The rest of you can believe what you want on that point but it doesnât affect the first two:
Diversification is not a sign of weakness and anybody who thinks it does - well, that belief reflects badly on them.
ETH is deflationary, Polkadot is not.
They could be interpreted as maxi had I insisted on holding DOT, but I didnât:
I mentioned that settling for a (say) 15% ARR with ETH means admitting that you canât earn more than that by investing your holdings inside own ecosystem
That something has to be sold in order to buy ETH. Of course, that something is most likely DOT but I didnât call that out.
But if you sell DOT to buy ETH, how does that not amplify the sell pressure?
Is there something else than DOT that can be sold to buy ETH?
But you havenât proposed that these idling DOT be burned which would be deflationary and somewhat increase scarcity.
If you simply sell DOT (to buy ETH) and make even more of it available, thatâs not going to help.
As an aside, Iâm only a casual observer from a tiny Substrate chain-based project, but I notice Polkadot spends like a drunken sailor, on projects both big and small (the recent âImpact of Web3 on GenZâ meetup sponsorship). If the currency is too inflationary, either make it less inflationary or spend less and burn all excessive holdings.