Tether (USDT) has today became available on the non-custodial lending platform that used to be known as ETHLend and nowadays is named Aave.
By market cap, the USDT stablecoin seems to signal its move into the decentralized finance (DeFi) Ethereum (ETH). On March 10, Aave announced that it’s developing its USDRT offer of USDC, DAI, sUSD and TUSD stablecoins.
What Are Aave’s Plans for the Future?
The Aave platform allows its users to borrow and lend coins at a specified interest rate. It can be accessed only with an Ethereum account, even if it supports many options, the mobile and browser wallets included. When it comes to borrowing with Aave, this can be done either by flash loans or by providing a collateral. The first option doesn’t require any collateral, seeing the loan doesn’t exist in the eventuality of not being repaid.
Flash Loans Make Sense Only as Far as Trading Cryptocurrencies Goes
As Tether said, flash loans are great when it comes to taking advantage of liquidation opportunities and on-chain arbitrage, also when it comes to moving trading positions on DeFi platforms, which means they only make sense as far as trading cryptocurrencies goes. Their loan figures change according to the dynamics of the market. USDT had an APY rate of over 12% on Tuesday, soon after it has been launched on Aave.
The Risks Involved with DeFi
As far as the interest rates provided by DeFi in lending go, these seem very lucrative, especially if compared with the rest of the existing investment tools available. Governments from all over the world are brining interest rates below the inflation rate of 1 to 2%, whereas the stock market is showing more and more that it became exhausted. Strong yields indicate higher risks, especially since the most recent DeFi hacks involving flash loans have exposed the most important vulnerabilities in the crypto space.
Is USDT Used for Most DeFi Protocols?
Most DeFi protocols use the Maker (MKR) DAI that involves higher risks, even if its yield is high. In spite of the many controversies surrounding it, USDT has managed to stand the test of time as far as the DeFi protocols go. It has low interest rates because everyone trusts it and also because it has nothing to do with traditional finance.