How is DAI different from USDT?

DAI and USDT are both stablecoins aiming to hold a 1 dollar value, but they are backed differently. USDT is issued by a central company, Tether, and is backed mainly by cash and cash-equivalent reserves the company holds off-chain. DAI is issued by a decentralized protocol and is backed by crypto assets locked in smart contracts, usually overcollateralized. So USDT relies on trust in one issuer's reserves, while DAI relies on transparent on-chain collateral and code. For example, you can inspect DAI's backing on-chain, whereas USDT's reserves are reported through periodic disclosures.