BUSD VS DAI | What's the Difference? | Notum

What Is a Stablecoin?

Stablecoins fill the gap between cryptocurrency and our usual fiat currency because their prices are pegged to such a reserve asset as the U.S. dollar or gold. This massively decreases volatility compared to something like Bitcoin or Ethereum and creates digital money that better fits everyday reality: from day-to-day commerce to making transfers between exchanges. 

The key point is a combination of traditional-asset stability with digital-asset adaptability that proved to be a working idea. No wonder a stablecoin blew the crypto world up, and billions of dollars have flowed into them as they’ve become some of the most popular and safest ways to store and trade value in the crypto ecosystem.

Stablecoins are important because:

• they are open, global, and accessible to anyone everywhere on the Internet, 24/7;
• they’re swift, cheap, and secure to transfer;
• they’re digitally native to the Internet, thus programmable.

What Is BUSD?

BUSD is a stablecoin launched by Paxos and Binance. Paxos utilizes blockchain technology to make their stablecoin as a service product to outside companies. They also have a gold-pegged stablecoin PAX Gold (PAXG). BUSD and PAXG tokens are regulated by The New York State Department of Financial Services.

BUSD is a fiat-pegged stablecoin that uses a U.S. dollar peg. When the price of the U.S. dollar rises or falls, the price of BUSD does the same in an equal ratio. This is a classic model of stablecoin.

BUSD’s bullet points:

1. BUSD is a digital-fiat currency that was issued as an ERC20 token but it also supports BEP-2. 
2. BUSD plays a crucial role in transactions, payments, and Decentralised Finance (DeFi).
3. It is pegged to the U.S. Dollar and is regulated and approved by NYDFS together with Paxos.
4. BUSD is based within the Ethereum blockchain, it runs on a highly scalable blockchain known as the Fincubate (FCB) Financial Blockchain, which uses Graphene technology for high throughput, and supports high-frequency financial applications.
5. Behind each BUSD, there is a US Dollar in capital reserve. Thus, 100% of BUSD which is in circulation has a corresponding USD asset in the custody of a third party.
6. It is a part of Binance’s Venus project, which is designed to accelerate development as well as integration of stablecoins in the global economy.
7. Binance, in partnership with other international financial corporations, offers to its users to invest in credit cards and other cryptocurrencies via its platform. As for BUSD, it can only be purchased with a credit card.

What Is DAI?

Dai is a kind of unique because it is an Ethereum-based stable coin (ERC-20 token) that has a value equal to one U.S. dollar. This is possible by utilizing an automatic system of smart contracts on the Ethereum blockchain. The Dai stablecoin price is pegged to the U.S. dollar and is collateralized by many other cryptocurrencies. 

Among the pros that we can find in this currency can be mentioned:

1. It is a secure, decentralized stablecoin with a long history of security.
2. It does not depend on banks, being a totally different stablecoin than USDT. To put it straight, there is no risk of the bank closing or owning the account that supports the entire protocol, nor is it required to trust that these funds exist in the bank.
3. It maintains the creation of decentralized ways of exchange and financing. Actually, DAI is one of the most accepted currencies in the DeFi world and DEX today.
4. Its proven stability gives confidence while having an operation with this currency. Even in the worst case, MakerDAO has been able to provide stability at acceptable values and even has improved stability over time.
5. It is highly accessible and respects its user's privacy. Anyone can access the system without KYC or giving their data to a third party.
6. Ability to generate credit and interest for the credit, which makes it a rather a strong option for investment.
7. It is one of the largest DeFi ecosystems in the world, with a value that exceeds over 1400 billion U.S. dollars.
8. It is a widely supported stablecoin on various exchanges.

BUSD and DAI Compared

BUSD could be considered a better option if you prefer trusted reserves. In terms of regulations, BUSD is the better option. If you are using Binance for your crypto activities, you gain even more as BUSD is already part of the Binance.

As it is regulated, the risk is lower, especially if authorities are placing more restrictions upon stablecoins. In case you trade across various platforms and buy less-known coins, BUSD may not be there. The token is available only on bigger exchanges. If you don’t want to be somehow restricted and are eager to have total control of your assets, then BUSD is not an ideal option for you as well.

DAI is more of a decentralized stablecoin, as it is not backed by any fiat currencies but instead by many different cryptocurrencies.

So, there is no central authority that controls the reserves, that’s why the stablecoin can be called a decentralized, and governments can’t regulate it as much as BUSD.

Worth noting that DAI has lower availability of trading pairs compared to BUSD, so it limits its use cases for trading with other cryptocurrencies.

Disclaimer: Notum does not provide any investment, tax, legal, or accounting advice. This article is written for informational purposes only. Cryptocurrency is subject to market risk. Please do your own research and trade with caution.