The Difference Between USDT and DAI
What is USDT?
USDT is a Stablecoin created by a Hong Kong team and was founded by Tether in 2014. USDT is a digital currency that is pegged with the US dollar, where 1 USDT is equal to 1 USD.
Currently, USDT is a Stablecoin that has been accepted and utilized the most throughout the entire world. USDT was designed to store transaction information on the same blockchain network as Bitcoin, where there are about 62.5 billion USDT circulating in the market.
Due to the fact that it is pegged to the value of the USD, Tether, the founder of USDT, would have to store the same amount of US dollars as the amount of USDT. According to Tether, there are currently no companies that have verified whether there is an equal amount of US dollars to USDT in the reserve. This may be due to the fact that most companies are not willing to work with assets related to cryptocurrencies.
The prominent point is that USDT has the highest volume traded when compared to other Stablecoins, and there are a large number of traders who are holding Stablecoins to maintain its value because Stablecoins have the potential to maintain the volatility of the market.
What is DAI?
DAI is a game-changing Stablecoin, because it solves the issue of centralization that most Stablecoins have been considered to be. Most other Stablecoins require that people would have to trust their claim of owning a certain number of assets according to the amount of Stablecoins they have issued. DAI was then issued in the year 2017 by MakerDao.
The characteristics of DAI is that it is not directly pegged to the US dollar, but it is soft-pegged, which is a method of maintaining its value close to 1 US dollar. This is done through the process of increasing or decreasing the amount of DAI in the market to match its value to the US dollar, with the help of Smart Contracts.
DAI was designed to work decentralized, therefore it is able to print or issue more Stablecoins transparently, where anyone has the ability to validate it. DAI is also able to be utilized with DeFi more than any other Stablecoins. To issue a DAI Stablecoin, the user would have to rely on a decentralized application known as the MakerDAO, in order to deposit cryptocurrencies as collateral and mint DAI Stablecoins. Currently, there are about 51.6 billion DAIs circulating in the market.
Difference between USDT and DAI
Both USDT and DAI are Stablecoins, but the difference is in the development teams, market acceptance, and value maintenance. USDT maintains its value by being pegged to the US dollar, which is held by Tether. However, there have been no companies that are willing to verify the amount of US dollars that Tether owns. Therefore, investors who hold USDT would have to rely on their trust towards Tether’s claim. USDT is therefore a very centralized Stablecoin, while DAI has an infrastructure that maintains its value in a decentralized fashion through Smart Contracts. DAI is considered to be very transparent and trustworthy.