The differences between USDT vs USDC vs DAI - which is the best stablecoin?
by Samuel SherwoodBaker of hot, fresh content
Jun 28, 2021
in Asset Explainers, Dai (DAI), Tether (USDT), USDC
Stablecoins are the bread and butter of the crypto industry, with the two most popular dollar-pegged assets being USDT and USDC. But MakerDAO’s DAI stablecoin is also extremely important for the crypto ecosystem.
Stablecoins mean that we can pay each other for services without worrying that the value of our payment will dramatically decrease one day later.
But which stablecoin is the best for use in your daily crypto activities? Which stablecoin is more secure, and, more importantly, has a better future?
There are many differences between USDT, USDC and DAI, and so we have placed these three popular stablecoins side by side for the full lowdown.
What is a Stablecoin?
What is USDT?
What is USDC?
USDC vs USDT - Which is Better?
What is DAI - the Decentralized Stablecoin
What is a Stablecoin?
Stablecoins are cryptocurrencies that are designed to maintain a fixed price, no matter how many coins are bought or sold. They act as an antidote to cryptocurrencies like Bitcoin and Monero, which are very volatile and have a price that constantly changes according to market behavior.
Some stablecoins are centralized projects, so users of these currencies have to trust that the value of these stablecoins is backed 1:1 by reserves held in the accounts of the company that deploys the coin.
Other stablecoins are decentralized, and are backed by more novel methods of maintaining a fixed price peg which, crucially, don’t rely on intervention from any kind of centralized company or entity.
Decentralized stablecoins are transparent, meaning that anyone can check on the platform’s block explorer and see exactly how the cryptocurrency is working behind the scenes.
Most stablecoins are “pegged” to the US dollar, but as the crypto industry matures, new stablecoins that mirror the price of other government currencies and other types of assets such as company stocks (Apple, Netflix etc.) and commodities (Gold, oil etc.) are being brought in.
What is USDT?
USDT is a stablecoin issued by the Tether company, which is based in Hong Kong. As one of the oldest stablecoins on the crypto market, it has a huge amount of liquidity on various exchanges, and rarely strays out of the top 5 cryptocurrencies ranked by market capitalization (the amount of tokens in circulation multiplied by the value of the coin).
The main usage of USDT seems to be as a trading pair on exchanges, where it can shield investors from volatility, or allow traders to “stack” dollars against cryptocurrency, slowly growing the dollar value of their portfolio.
USDT was originally built on the Omni Protocol, a software layer built on top of Bitcoin which facilitates the creation and trading of custom crypto assets. The stablecoin then branched out onto Ethereum’s ERC20 network, where it was used widely until high gas fees prompted Tether to further branch out onto more scalable blockchains, such as Tron, Solana, Bitcoin Cash, EOS and Algorand.
The Tether company claims that the price of USDT will always remain at one dollar, as each new coin minted is backed by a dollar-equivalent amount of cash or assets being added to the company reserves. There has been a lot of controversy surrounding the transparency of Tether’s accounts, though, and this is something we will come back to later.
Those who are interested in using the Tether stablecoin can follow this link for a guide on how to buy USDT, and where it can be bought.