Better Stablecoin Buy: Dai vs. Ethena USDe

Stablecoins have become the essential plumbing of the crypto economy in 2025 -- powering everything from cross-border payments and decentralized finance (DeFi) lending to on-chain savings and even payroll services. If you're getting serious about crypto investing, you can't really avoid these handy digital tools. Understanding the subtle differences between leading stablecoins can be as important as picking the right stock in a new sector.

Let's take a look at two of the most popular stablecoins today. Dai (CRYPTO: DAI) and Ethena USDe (CRYPTO: USDE) have a lot in common, from their unconventional financial models to market caps north of $5 billion. Why should you prefer one over the other?

Ethena USDe's strengths

Ethena USDe is a synthetic stablecoin designed to be worth 1 American dollar per coin. So far, so ordinary. It's using unconventional methods, though.

Instead of being backed by cash holdings or even a slate of crypto reserves, it uses an advanced model called delta-neutral trading strategies. Ethena's protocol combines a fairly small amount of crypto holdings such as Ethereum (CRYPTO: ETH), Bitcoin (CRYPTO: BTC), and Tether (CRYPTO: USDT) with short futures positions in the same cryptocurrencies. Every bullish move in the underlying cryptocurrencies is balanced out by the opposite reaction in the short-sale futures, and vice versa. Hence, the $1 balance should hold steady under most market conditions.

This may sound like a rickety mathematical structure, but it's actually surprisingly flexible. The use of futures instead of robust cash reserves should let Ethena's price stay firm even in sudden market shocks, where fiat-based stablecoins could detach from their desired stable price for a while.

You can stake your Ethena holdings, unlocking a variable interest-like yield on your investment. The yield stands at 5.5% on Oct. 12, but averaged 19% in 2024.

Dai is a different design

Dai is another decentralized stablecoin that targets a steady value of one U.S. dollar per coin, using a different, unique approach. DAI uses overcollateralized crypto assets -- mainly Ethereum and stablecoins like USDC (CRYPTO: USDC) -- as backing, all managed by smart contracts on the Ethereum blockchain.

When someone creates new Dai, they deposit a greater value of crypto as collateral than the amount of DAI they receive. If the value of that collateral drops and cannot support the outstanding DAI, the system automatically sells off assets to protect the stablecoin's peg. This overcollateralization and liquidation process keeps DAI's value stable under most market conditions. And it's all automated with the smart contracts mentioned earlier.

The MakerDAO community governs the rules and parameters as a decentralized autonomous organization (DAO). No single company or person controls Dai or its reserves. This decentralized framework appeals to users who want transparency and censorship resistance.

Dai holders can deposit their tokens into the Dai Savings Rate (DSR) program to earn variable yields. It's technically not the same thing as Ethena's staking, but the effects on your financial returns are similar. The rate changes based on market demand and community votes; rates may range from less than 1% to several percent, depending on conditions. Today, the yield stands at 1.5%.

Image source: Getty Images.

How these stablecoins handled last Friday's market wobble

Last Friday's tariff-based market crash provided a helpful example of how these stablecoins perform under stress. They both showed brief blips on their price charts, but the moves only look large in the context of their normal stability.

Dai jumped to a top price of $1.0015 per coin, according to CoinMarketCap. Ethena's largest move was a drop to $0.9912 per coin. Dai returned within 0.1% of a pure $1.00 price half an hour later, while Ethena's cleanup took about an hour.

By contrast, Bitcoin and Ethereum are down more than 5% over the weekend, and the S&P 500 (SNPINDEX: ^GSPC) stock market index took a 1.5% hit (although it rose 1.6% on Monday). Dai's and Ethena's max moves are rounding errors in this context.

Which stablecoin fits your crypto personality?

So the two stablecoins appeal to different investor groups:

• If you're looking for higher yields and don't mind trying out newer, less conventional value-backing systems, Ethena USDe could be for you. This one's good for adventurous investors willing to take on higher risks in exchange for richer annual yields.

• Dai could be up your alley if you prefer proven stability to risky payouts. Set it and forget it, and collect your modest yield earnings over time.

Anders Bylund has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.