After a Slow Start, Tether Sees Increasing Usage in DeFi

Tether usage in decentralized finance appears to be growing, as lending protocol Aave reports over $7.2 million in USDT locked, out of a reported $60 million in total assets.

This result comes two months after the initial launch of Tether on the platform, which offers a wide range of other stablecoins including Dai, USD Coin, sUSD and TrueUSD. Tether says that a notable portion of that usage is made of flash loans, a loan that does not require collateral as long as it's returned in the same block.

The interest rate on depositing Tether is one of the highest among competitors, with a 30-day average of 6.2% annual interest.

This is significantly higher than DAI's average of 3.2%, but falls behind sUSD's 8.9% average APY. Nevertheless, as of press time all stablecoins show instantaneous interest rates of around 3.5%.Tether sees increased usage.

Aave has quickly risen through the ranks of DeFi protocols, now positioned fourth by value locked according to DefiPulse, just behind its main competitor Compound.

Compound does not let the stablecoin be used as collateral, similar to Aave.

Tether is currently by far the most used and most issued stablecoin, recently surpassing XRP to reach the third position in the rankings by market capitalization.

In the DeFi ecosystem USDT has been trailing behind its other centralized competitor, USDC. The DeFi-native Dai stablecoin has also chosen USDC as an additional collateral type.

The MakerDAO community, in its discussions to supplement USDC with stablecoins from other providers, is consciously ignoring USDT. Several members came out saying that USDT "Seems to have both financial and reputation as risk," and "They [Tether] are neither transparent nor compliant."

"Now that we see more traction for DeFi from Asia, USDT is picking up. Also the fact that DeFi usage is expanding to non-DeFi cryptocurrency users is strengthening the USDT liquidity."