Comparison between USDT and DAI to Know Which Is More StableZachary Calvin - August 8, 2022
Digital assets called stable coins are adaptable. They offer price stability and liquidity since they are linked to other assets like paper money and other cryptocurrencies.
USD Coin (USDT) and DAI are two of the most widely used stable coins running on the Ethereum network, but which is superior?
A cryptocurrency of your Crypto wallet offered by ZenGo X is known as a stable coin, maintains value on par with a country’s paper currency. Stable coins are most frequently indexed to the value of the US dollar.
While lowering the volatility of cryptocurrencies, certain stable coins bind themselves to the yen, euro, pound, gold, and other assets to allow users enjoy decentralised finance applications.
Anxiety spread throughout the stable coin industry after Terra (Luna), a stable coin that was among the top ten by market capitalization, failed.
A stable coin can de-peg for a variety of reasons – in the instance of Terra, there was a panicked market and a rush for liquidity. Concerns have been raised about the security of the remaining stable coins after Terra (Luna) lost the majority of its value.
Key advantages of DAI:
- Financial freedom having very low volatility
A currency with a fixed price that enables users to instantaneously generate DAI according to their own rules.
- Decentralized governance
The Maker Protocol, the smart contracts that power DAI, are controlled and governed by the MKR token holder community.
- Rapidly expanding ecosystem
DAI is currently incorporated into 400+ applications, including wallets, DeFi platforms, gaming, and more.
- Limited supply but growing demand
Because MKR is burned with every transaction, the total amount of coins will eventually decline. This may be a classic case of a supply and demand imbalance. Similar to Bitcoin, the value of MKR and DAI is likely to rise as its supply declines.
Key advantages of USDT:
- Oldest in the lot
Tether is a tried-and-tested idea that has earned the trust of traders over time, thanks to its exceptional stability and track record.
- Market capitalization and also leadership position
With a 93% market share among stable coins, Tether now controls the stable coin trading volume landscape. Additionally, it is accessible across 396 cryptocurrency pairs, which increases its popularity and liquidity.
- Exchange support
The adoption of Tether by exchanges led those that do not provide US dollar customer accounts to modify and redesign their services.
Exchanges have had to make provisions for this arrangement since Tether is used more frequently as a risk management and hedging instrument to combat concerns associated with the volatility of cryptocurrency prices.
In conclusion, both stable coins essentially have the same function, but they operate very differently in terms of the network they are based on, automation, complexity, etc.
While DAI is open-source, reputable, and decentralised, Tether has the advantage of being the oldest. While DAI has a problem with its intricate architecture, Tether has counterparty and credit risk. One must choose what best meets their needs keeping this in mind.
Tether is wonderful for traders because it can be used more extensively on exchanges for trading, but DAI is useful if one wants to shop on DApps.
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