Is DAI Better Than USDT? Full Comparison Guide 2025

A stablecoin’s value is pegged to the price of a fiat currency or a commodity. The most common examples are pegged to the US Dollar, like the ones we’re covering here. But there are stablecoins pegged to the Euro, the Yen, or gold. Since you already know what a stablecoin is, let’s explore the areas where they differ.

5 Key Differences Between DAI and USDT

1. Decentralization

With so many different options among stablecoins, it can be difficult to know which one is trustworthy. Is it better to buy DAI or USDT?

In this article, we are going to explore these two stablecoins and compare their specific aspects, like decentralization or transparency, to figure out which one is the best option this year. This way, investors can make smarter decisions when planning their trading strategies.

One of the most striking differences between DAI and USDT is decentralization. DAI is issued and managed by the Maker Protocol and MakerDAO, a decentralized autonomous organization comprised of the participants of the network.

Instead, USDT is issued and managed by the Tether Limited company, a private entity that oversees the entire process of issuing and distributing the token. Since decentralization is one of the core values of cryptocurrencies, the degree of decentralization in a project will impact customers’ trust in the coin.

Another advantage of decentralized projects is being more censorship-resistant, since control is distributed via smart contracts and DAO governance, instead of a single ruling entity.

2. Collateral and Backing

A main difference between stablecoins is their collateralization models. USDT, for example, is backed by fiat reserves held by the Tether company, mainly short‑term U.S. Treasuries, bonds, and other assets.

DAI follows over-collateralization, where a smart contract manages issuance and collateral based on users depositing assets according to the given parameters. DAI uses multiple assets, including various tokenized stablecoins, to back its value. 

Designed to be over-collateralized, DAI requires users to lock more than they generate. For example, if a user wants to mint 100 DAI, they must deposit $200 ETH as collateral. This way, the protocol can protect the value of the token against volatility.

3. Stability

No stablecoin maintains a 1:1 value at all times. There are often variations, following rapid movements in demand and market dynamics. However, these changes are mostly imperceptible to everyday customers.

As was explained, DAI maintains its stability by backing its tokens with different cryptocurrencies and relying on over-collateralization. And USDT is backed by fiat currencies and other financial instruments. However, there have been cases where both stablecoins depegged noticeably during crises.

In the case of USDT, it went down to $0.90 in 2018 and then to $0.97 in 2023. The first case was due to withdrawal issues at Bitfinex. The second case stemmed from an imbalance in a liquidity pool in the Curve protocol.

As for DAI, the fall of the Silicon Valley Bank affected USDC, which, in turn, affected DAI, as USDC was held as collateral. In this case, the price of DAI went down to $0.97 as well, while USDC went down to $0.88.

4. Transparency

Transparency is one of the fundamental principles of blockchain technology and cryptocurrencies, including stablecoins. Since DAI is an open blockchain, anyone can verify the reserves stored in its smart contract using a block explorer.

It is impossible to check USDT reserves because they are not stored in a blockchain, but rather in banks and financial institutions. Tether, instead, presents periodic transparency reports, prepared by BDO Italia, an independent accounting firm. This way, users can trust that the USDT tokens are properly backed and monitor the overall situation.

Transparency is very important for stablecoins as it provides confidence and security to investors. The instances of depegging in both cases, for example, have impacted the trust in the coins in the past. But these projects have worked hard to make their network trustworthy and stable.

5. Regulatory Risk

Centralized models like USDT are more vulnerable to regulatory risks and uncertainty. Since they are managed by a single entity, registered in a specific jurisdiction, regulatory bodies in these countries can affect the operations of the stablecoin.

In the case of DAI, the token is managed by its users, and it’s not bound to a single company or a specific jurisdiction. Decentralized blockchains, however, can be impacted by regulations if a country prohibits the commerce of cryptocurrencies, for example. Even so, this wouldn’t affect the operation of the project. It would only impact the users who live in that country, but the project will continue with the rest of the participants.

Which One Is Better in 2025?

DAI may seem like the better choice in terms of decentralization and transparency, because it’s not managed by a single entity, like USDT. In terms of collateralization, it provides some buffer against price volatility. However, USDT is the most used stablecoin with the highest trading volume in the crypto market.

In the end, the better option will depend on each particular need. USDT is more used in trading and DeFi, but DAI’s stability can be better suited for long-term storage. When evaluating their performance in 2025, it’s obvious that the price of USDT has varied a lot more. So, in terms of stability and technical performance, DAI is the most appropriate choice.