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Tether (USDT) is a fiat currency stablecoin issued by Tether Ltd. USDT is pegged to the US dollar, reserved by cash, short term deposits, corporate bonds, secured loans, and other investments. Tether publishes quarterly reserves reports to show all USDT tokens are backed by its equivalent value.
As one of the earliest stablecoins, USDT achieved popularity by acting as a stable store of value for traders escaping crypto market volatility, and for users in countries with hyperinflation or tight capital controls. Its utility has also led to integrations on crypto exchanges and DeFi, allowing users to earn rewards or interest staking USDT.
Crypto staking as a term is used liberally and can have a variety of meanings. Though the term initially referred to putting your crypto assets at “stake” to verify network transactions (AKA: proof of stake) and earn staking rewards, heavy marketing from crypto platforms colloquialized it to mean earning interest on crypto assets.
Investors earn interest on Tether by engaging in financial activity like USDT lending, market making, or even trading. Crypto platforms offering staking rewards would engage in these activities on behalf of depositors, pocketing the difference in yield. This led to questionable business practices, such as lending to non-creditworthy borrowers for higher rates or trading with users’ funds. This has been exposed in the insolvencies of centralized platforms that occurred throughout 2022.
The loss of trust in centralized crypto platforms has turned users towards DeFi staking options, which offers transparent and safer yields. Beginners can follow the information below to learn how to use and stake USDT in DeFi.
To use USDT, users would have to set up a Web3 wallet. It is generally recommended to use Metamask, coupled with a Ledger hardware wallet if storing more than $1,000 worth of tokens.
Adding USDT to Metamask can be done by going to “assets”, scrolling down to click “import tokens”, adding “custom token”, and filling in USDT’s contract address. USDT is now added to your Metamask wallet, and its balance will be shown beside its token symbol if any was received on the address.
“Where do I stake USDT?” is one of the most frequently asked questions. The answer comes down to your unique financial situation and objectives. But here are a few rules of thumb to keep in mind.
There are numerous places to stake USDT and earn interest on your holdings. You can stake Tether on different networks like Ethereum or Binance Smart Chain, using applications like Aave or Compound.
Since anyone can create a blockchain and smart contract application, the options are essentially infinite. However, Ethereum and certain applications built on it are regarded as the safest DeFi platforms to earn interest on USDT. These platforms include Aave, Compound, Convex, and Curve.
Aave and Compound are smart contract applications that allow users to lend and borrow digital assets. Borrowers would post collateral onto these platforms, giving them a line of credit to borrow other assets at a variable interest rate.
Curve is a decentralized exchange allowing traders to buy and sell assets on the platform. Liquidity providers can stake capital with Curve, allowing it to quote prices for traders. Stakers would then receive yield from trading fees and CRV rewards to start earning yield. Convex is a protocol built on top of Curve, helping users optimize their CRV rewards.
Origin Dollar (OUSD) utilizes strategies built on top of these aforementioned DeFi platforms, but it has averaged a variable 9% APY on stablecoins. By creating proprietary market making strategies on top of Curve and Convex and utilizing peer-to-peer loans built on top of Aave and Compound, OUSD maintains yields over the DeFi market average.
The myriad of Web3 applications with varying interest rates and risks that allow you to earn yield on your assets, such as double digit APYs on algorithmic stablecoins. Each individual has their personal risk tolerance and goals, which means there is no universal strategy for everyone. That said, OUSD is highly recommended for users who prefer to earn passive income while taking on lesser amounts of risk.
To earn interest with OUSD, users simply hold it in their Web3 wallets to receive daily interest accruals directly. Simply obtain OUSD via exchanges such as Uniswap, Kucoin, or Gate, or directly via OUSD.com, no staking or lockup periods required.
What are the best DeFi platforms to stake USDT for earning interest?
The best DeFi platforms for staking USDT include Aave, Compound, Curve, and Convex, known for their robust security measures and transparent operations. These platforms offer variable interest rates, typically ranging from 1% to 2.06%.
How does staking USDT on DeFi platforms differ from staking on centralized crypto platforms?
Staking USDT on DeFi platforms offers greater transparency and security compared to centralized crypto platforms, which have faced issues like insolvency and questionable business practices. DeFi protocols operate with smart contracts that provide clear visibility into all transactions. Since they’re not controlled by any single entity, there’s less counterparty risk and more trust among users.
