Settle Portfolio

Modular portfolio management supporting Digital Asset and Crypto Derivatives.
Open App
DAI vs USDC: Which Stablecoin Should You Use?

DAI vs USDC: Which Stablecoin Should You Use?

Stablecoins let users transact in crypto while avoiding the volatility of many cryptoassets. Stablecoins can help drive broader crypto adoption by serving as a medium of exchange whose value doesn’t fluctuate wildly day-to-day. We’ll compare two popular stablecoins running on the Ethereum network: DAI vs USDC (USD Coin). The number of stablecoin projects shot up dramatically in 2018. And at least one high-profile stablecoin project has already shut down. So how do traders and investors know which one to use?

DAI vs USDC:

 

DAI vs USDCDai is a decentralized, collateralized stablecoin from MakerDAO first launched on the Ethereum mainnet in December 2017.

 

 

DAI vs USDCUSDC is a fiat-backed stablecoin supported by Coinbase and Circle Invest and first announced in September 2018.

 

Safety

A stable value isn’t everything. Traders and investors also must have confidence that their chosen stablecoin won’t get wiped out by an unforeseen black swan event.

  • USDC is backed by US dollars held in bank accounts.
  • In contrast, Dai is backed by ETH held in MakerDAO’s smart contracts. Even though MakerDAO has some of the most secure smart contracts around, traditional bank accounts have a much longer history and better understood risks.

Advantage USDC

Fund freezing

Decentralization matters. When a centralized entity ultimately controls your stablecoin, you risk finding your funds frozen without notice.

  • Dai is fully decentralized, and MakerDAO’s smart contracts do not allow anyone to freeze Dai.
  • On the other hand, USDC’s user agreement gives Circle the right to freeze your funds at its discretion. You might be confident that you won’t run afoul of Circle’s terms, but the money transfer industry has a history of freezing customer accounts without due process.

Advantage DAI

Ecosystem

Any company with sufficient resources can issue a stablecoin. But a stablecoin needs something more to rise above its competition. A dedicated community can help create network effects and make all the difference in the long term.

  • MakerDAO – the project behind Dai – has broad support from the Ethereum community and a thriving ecosystem. MakerDAO’s values and plans go beyond mere profit.
  • Compare that to USDC, which is a product sold by a partnership between Circle Invest and Coinbase.

Advantage DAI

Exchangeability

If users can’t get their hands on and transact with a stablecoin, it will have a hard time remaining in the market.

  • Users can trade Dai on decentralized exchanges (though Coinbase Pro recently began offering a DAI vs USDC trading pair). This makes Dai hard to censor and available to anyone. Also, it aligns Dai’s future with the success of the open finance movement.
  • USDC trades mostly on centralized exchanges. Coinbase offers free switching between USD and USDC, but centralized exchanges restrict account access to certain types of people.

Advantage: Depends on who you are

Conclusion

Choosing DAI vs USDC depends on your use-case! If you feel most comfortable in legacy finance settings and don’t worry about being subject to the changing whims of centralized entities, you might prefer USDC. On the other hand, if you don’t want a third party to have control over your funds or transactions and believe in the democratizing potential of open finance, you might choose Dai.

And if you do choose Dai, you can create a CDP and generate some Dai with Settle’s CDP Station app!


🦖 Use Settle 🦖 Twitter 🦖 Settle Blog – Open Finance | Compound Finance | Uniswap