What is the difference between USDT and DAI?

Difference between USDT and DAI

Making payments with crypto tokens can be difficult due to their price volatility. Stablecoins like USDT, USDC and DAI have been created to solve this problem by allowing quick digital transactions with the stability of the U.S. Dollar. With USDT and USDC backed directly by dollar reserves, how does DAI head up as an investment? When the time comes, you’ll need to choose a trustworthy exchange like Immediate Edge to purchase or sell cryptocurrencies. In this article, we’ll compare these popular stablecoins so you can decide which one is a better fit for your needs. 

What is DAI?

DAI is not your regular stablecoin. Unlike others, it’s an Ethereum-based stablecoin that is issued and maintained by the MakerDAO protocol. Every time new DAI coins are minted; a varied collection of crypto assets is collateralized within a smart contract to ensure its value remains pegged to the dollar. In order to obtain DAI, you should submit at least 150 % of its worth in some other tokens as security. Most traders tend to keep the number of securities between 300-400%, due to market volatility. In case the required level of collateral is not reached, any existing tokens will be sold off for covering the loan costs.

What are the features of DAI? 

• Financial Freedom: Generating DAI is fast and easy – all you need to do is meet the collateral threshold, and then you can easily borrow it from the network for secure transactions. With DAI, users can enjoy both the security and flexibility that comes with using a digital currency.
• Income Generation: Looking to generate passive income? The DAI Savings Rate system offers rewards to incentivize users for locking their DAI into smart contracts. It’s similar to staking, where additional tokens are continually allocated based on the prevailing savings rate. Not only do you get paid a reward but also take part in governing the platform!
• Decentralized Governance: The Maker Protocol, a smart contract – based method which drives the DAI community, is controlled and created by MakerDAO – a decentralized autonomous organization. Owners of MKR – which is the native token of the DAO – can take part in voting procedures on key initiatives or upgrades of the protocol.

What is USDT?

USDT is one of the first cryptocurrency-backed stablecoins, designed to give users protection against price volatility. Specifically, it was initially issued by Tether (based in Hong Kong) and backed on a one-to-one ratio with U.S. dollars stored in reserves managed by well-renowned financial institutions. Furthermore, to ensure transparency these third-party reserve audits are conducted regularly for accuracy and accountability.

What are the features of USDT?

• Convertibility: Thanks to its one-to-one backing with US dollars, USDT makes it easy for you to convert your tokens back into fiat money. This simplifies the process of transactions through cryptocurrencies and allows businesses to receive payment in USDT while using only US dollars.
• Low Fees: There’re zero charges in addition fees besides purchasing a purchase with USDT. The little fee is merely charged once you convert additional cryptographic assets to USDT or even if you convert your tokens back to US dollars.
• Time in the Market: Since it first entered the stablecoin market in 2014, Tether (USDT) has established an impressive track record of maintaining its $1 target value per coin. With years of proof that USDT is both secure and effective, it continues to be a popular choice among crypto investors.

Wrapping Up 

Is DAI a good investment? While Tether has maintained significant market dominance due to its convertibility and regular auditing, Ethereum-backed stablecoin DAI offers an interesting alternative. It provides users with the assurance that their ETH will be held as collateral while they make use of the token without fear of major price shifts. Despite having less than 10% of Tether’s total market capitalization, DAI is becoming popular amongst crypto investors looking for more alternatives in terms of investments.