A Closer Look at the DAI & USDT Stablecoins
If you’ve been following OH! Finance then you probably already know that we deployed DAI and USDT vaults in addition to our initial USDC vaults a while back. OH! Finance’s goal is to bridge DeFi and TradFi, and part of that is educating new crypto users. At some point, everyone was new after all. In earlier articles we’ve covered stablecoins generally, and USDC specifically.
So, today we’re going to take a closer look at USDT and DAI.
- USDT: Pegged 1:1 to USD. Centralized. Collateralized by a mix of non-crypto assets.
- DAI: Pegged 1:1 to USD. Decentralized. Collateralized to other cryptocurrencies.
- USDC: Pegged 1:1 to USD. Centralized. Collateralized by a mix of non crypto assets.
Stablecoin Vaults Currently Available on OH! Finance
On the Avalanche network: USDC.e, DAI.e, USDT.e
On the Moonriver network: USDC, USDT
On the Ethereum network: USDC
What are USDT & DAI?
First, let’s look at DAI and see exactly what it is and how it compares with USDC (or see this article on USDC).
DAI is governed by the Maker Protocol via smart contracts and a community of MKR token holders. This means DAI is fully decentralized. Governance of DAI is done through votes which affect the smart contracts that make DAI what it is. These votes can include changing policy for the DAI stablecoin, choosing new collateral types, and changing governance itself. In contrast, USDC is run by a joint partnership between Circle and Coinbase.
So how does a user acquire DAI?
The first and simplest method is to buy DAI on a centralized (CEX) or decentralized exchanges (DEX). Trading USDC for DAI on the FTX exchange is an example of the CEX method, whereas swapping USDC for DAI on Uniswap on the Ethereum network is an example of the DEX method. You can also find DAI on many CEX and DEXs, not just the two given in the example.
The second method is used by users who have a position in, say, ETH, and want to acquire DAI but do not want to close their position in ETH. Using the DAI protocol, a user can “mint” (create) DAI by deposit their ETH as collateral into MakerDAO. This process creates a certain number of DAI based on the collateral they provided. When locking ETH as collateral, for example, there is a minimum collateralization ratio of 150%. This means that for every $1 of DAI created, there must be at least $1.50 of ETH in collateral that is backing it. Traders tend to keep a much higher collateralization ratio (between 300–400%) because of how volatile the crypto markets can be. If the collateralization ratio drops below 150%, the trader will be liquidated to pay off their loan 😬 This means that DAI tokens are backed, or collateralized, by crypto assets.
Now let’s look at USDT (Tether), the largest stablecoin by market capitalization.
USDT, like USDC, is centralized. Tether is owned and operated by its parent company Bitfinex.
Each USDT issued is said to be backed 1:1 (one-to-one) with the US Dollar with collateral held in a custodial account by Tether Limited. So, for example, when someone deposits $20 into their Tether account, 20 USDT coins are minted (i.e., created).
USDT currently has a supply of about $80 billion and ranks third in all cryptocurrencies by market capitalization, making it the “king” of stablecoins. This makes Tether a great option for traders as it provides high liquidity to users. Daily USDT volume is in the tens of billions USD, making it the most liquid cryptocurrency in the world.
How to Stake USDC.e, USDT.e and DAI.e in OH! Finance (Avalanche)
We’ll cover moving your tokens to the Moonriver network in a future article, so here let’s recap how to stake USDC.e, USDT.e, and DAI.e on OH! Finance on the Avalanche network. It’s super easy.
First, you’ll need to have USDC.e, USDT.e, or DAI.e on the Avalanche network. Don’t know how to get there? See below. If you’re good to go on that, skip to the next section👍
- Connect your MetaMask wallet to the Avalanche network.
- Send a token identified in the Bridge’s drop-down list (USDC, DAI, and USDT are bridgeable, among others) from the Ethereum network to Avalanche using the official Avalanche bridge. If you’re not used to bridging try checking out this guide or the official Avalanche tutorials.
- If needed, swap assets to USDC.e, USDT.e, or DAI.e on the DEX of your choice on Avalanche.
🌈Note: USDC.e, USDT.e, and DAI.e are the Avalanche network’s versions of USDC, USDT, and DAI, respectively.
👍You’ve got your USDC.e, USDT.e, or DAI.e on Avalanche. Now let’s get it into the OH! Finance vaults!
- Make sure you have AVAX in your wallet. You’ll need to burn a small amount of it to execute transactions.
- Go to OH! Finance and connect your MetaMask wallet.
- Click on the “Earn” tab on the left.
- Scroll to find the USDC.e, USDT.e, and DAI.e vaults.
- Click “Deposit” (or “+” if you already have tokens in the vault).
- Select how much USDC.e, USDT.e, or DAI.e you want to deposit or hit “MAX” to deposit it all.
- Select “Deposit.”
- Review the info in the pop-up and if all looks OK, select “Deposit.”
- MetaMask gives you a transaction confirmation pop-up. Review the details and if you’re good with it, select “Confirm.”
That’s it! If you made it to this point you now have OH-USDC.e, OH-USDT.e, or OH-DAI.e tokens in your wallet. These are basically receipt tokens which represent your share of the vault. You’re gonna want to hold on to those. They’re how you would withdraw your tokens from the vault if you want to do so later.
You can add these OH-USDC.e, OH-USDT.e and OH-DAI.e tokens to MetaMask through the OH! Finance website by clicking on “Details” under the respective vault and clicking “Add ____ to MetaMask.” Or if you’re feeling fancy you can add them manually using the following contract addresses:
- OH-USDC.e 0x8B1Be96dc17875ee01cC1984e389507Bb227CaAB
- OH-USDT.e 0xd96abecf6aa022735cfa9cb512d63645b0834720
- OH-DAI.e 0xf74303dd14e511ccd90219594e8069d36da01dcd
About OH! Finance
Oh! Finance is an optimized yield-generation protocol, focused on reducing risk and increasing volume exposure. Start earning industry-leading interest rates on stablecoins in just a few clicks: https://oh.finance
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