Stablecoins: What they are and how to choose between USDT, USDC, and DAI (without getting scammed).

Stablecoins are cryptocurrencies designed to maintain a stable value, typically pegged to a fiat currency (such as the US dollar). They are the most common bridge between fiat currencies (like euros or dollars) and the world of cryptocurrency, used for trading, payments, DeFi, and transfers.

The 3 Main Types (and Why You Should Care)

• Fiat-collateralized (e.g., USDT, USDC): A company issues the stablecoin and promises 1:1 reserves and refunds.
• Crypto-collateralized (e.g., DAI): Reserves are held in cryptocurrency with over-collateralization and automated mechanisms.
• Algorithmic: These maintain their peg using incentives and market mechanisms. This type carries a significantly higher risk.

Real Risks to Understand Before Using Them

• Depegging: The stablecoin’s value can drop below $1 (sometimes for hours or days) when the market panics.
• Issuer Risk: If the issuer has legal or financial problems, getting a refund can become complicated.
• Chain Risk: The same stablecoin on different blockchains is not “the same” (due to bridges, smart contracts, and network congestion).
• Exchange Risk: If you leave the stablecoin on an exchange, the risk isn’t the stablecoin itself, but rather the exchange’s custody practices.

USDT vs USDC vs DAI: How to Choose in Practice

• USDT: Enormous liquidity and multi-chain presence. Suitable for trading and speed, but requires trust in the issuer and its reserves.
• USDC: Often preferred in more “compliance-oriented” contexts. Generally considered more reliable for partners and payments.
• DAI: Useful if you want to avoid a centralized issuer, but it depends on cryptocurrency collateral and DeFi governance.

Related reading: Bitcoin Market Cycles: The Complete Guide to Every Phase · On-chain analysis: a guide to understanding the crypto market.