pUSD vs aUSD: Will Polkadot’s Native Stablecoin Avoid Collapse?

Stablecoins are special types of cryptocurrencies that keep their value stable, usually tied to the US dollar. They play a big role in decentralised finance (DeFi) because they allow people to trade, save, and invest without worrying too much about sudden price changes.

Polkadot, a well-known blockchain network, is now working on its own stablecoin called pUSD. This coin is designed to be safer and more reliable than earlier attempts, especially compared to aUSD, a failed stablecoin project from the same ecosystem.

But can pUSD really succeed where aUSD failed? And will the Polkadot community trust it after what happened before? Let’s explore.

What Happened With aUSD?

Before pUSD, the Polkadot ecosystem had a stablecoin called aUSD, created through Acala’s Honzon protocol. aUSD was supposed to be a reliable coin backed by collateral. However, things went very wrong.

In 2022, aUSD suffered a major failure due to a technical exploit. The event destroyed confidence in the coin and caused massive losses. Many community members felt that Acala failed in terms of security, risk management, and governance.

Because of this history, aUSD has become a reminder of how difficult it is to build a safe stablecoin in a fast-moving blockchain world.

Read Also: Best Blockchain Development Trends in 2025

What Makes pUSD Different?

Polkadot’s new stablecoin, pUSD, is being built to avoid the same mistakes. Here’s how it works:

• Collateralised by DOT: Every pUSD will be backed by DOT, Polkadot’s native token.

• Over-Collateralisation: Users must deposit more DOT than the value of the pUSD they mint. This creates a safety buffer in case DOT’s price falls.

• Honzon Protocol: Just like aUSD, pUSD will use the Honzon system to manage collateral, minting, and liquidation.

This system looks a lot like DAI, Ethereum’s decentralised stablecoin. At first, DAI was also backed only by ETH, which made it risky. Later, DAI added more collateral types to reduce this risk. So, while pUSD is more secure than failed projects like Terra’s UST, it still faces challenges.

The Risks With pUSD

Even though pUSD is designed to be safer, there are still important risks to think about:

Single Collateral Risk

Since pUSD is backed only by DOT, its stability depends completely on DOT’s price. If DOT’s price drops quickly, many loans could be liquidated at once. This would cause big selling pressure on DOT, making the problem even worse.

Community Trust

Many in the Polkadot community do not fully trust Acala anymore after the aUSD disaster. For pUSD to succeed, it must prove that governance is transparent and independent. Without trust, adoption will be slow.

Competition With Other Ideas

Some developers believe Polkadot should not rely on old models like Honzon. Instead, they suggest using newer native solutions such as HOLLAR, which may take advantage of Polkadot’s unique design.

Read Also: How Do I Use Collaterals in Crypto? A Guide on Borrowing

Why Does Polkadot Need Its Own Stablecoin?

You may ask: Why does Polkadot need pUSD when USDT and USDC already exist? Here are the main reasons:

• Reduce Reliance on Centralised Stablecoins: USDT and USDC are controlled by companies and banks. They can freeze accounts or follow government orders. A Polkadot-native stablecoin would be more decentralised.

• Unlock DeFi Growth: Having a reliable native stablecoin makes it easier to build DeFi apps inside the Polkadot ecosystem.

• Use DOT More Effectively: Instead of just holding DOT, people can use it as collateral to generate stablecoins, creating more use cases.

In short, a strong native stablecoin would make Polkadot’s ecosystem healthier and more independent.

Read Also: How to Buy Polkadot (DOT)

The Road Ahead for pUSD

The future of pUSD will depend on three key factors:

Governance

The community must know who controls the rules. If Acala has too much power, people may not trust the system. Clear, transparent, and community-led governance will be vital.

Collateral Diversification

Right now, pUSD is planned to be backed only by DOT. Over time, adding more types of collateral could make it safer and more stable, just like DAI did.

Community Confidence

Winning back trust after aUSD’s failure is not easy. Polkadot must show that this time things are different, with better security, stronger risk management, and honest communication.

Read Also: Polkadot(DOT) Price Today

Conclusion

pUSD is a bold new step for Polkadot. It has the potential to make DeFi inside the ecosystem more powerful and less dependent on centralised coins like USDT and USDC. But challenges remain.

If pUSD can solve its governance issues, diversify its collateral, and rebuild community trust, it could become a cornerstone of Polkadot’s future. If not, it may end up repeating the same mistakes as aUSD.

In Bitrue blog, the world is watching closely to see whether Polkadot’s native stablecoin will rise or collapse. 

FAQ

What is pUSD?

pUSD is Polkadot’s upcoming native stablecoin, backed by DOT and managed by the Honzon protocol.

How is pUSD different from aUSD?

aUSD failed due to a major exploit and governance issues. pUSD uses over-collateralisation to be safer, but it still relies heavily on DOT’s price.

What are the risks of pUSD?

The biggest risks are DOT price crashes, liquidation cascades, and low community trust after aUSD’s failure.

Why not just use USDT or USDC?

USDT and USDC are centralised and controlled by companies. pUSD would give Polkadot a fully decentralised option.