The Real Role of USDT in the DeFi Ecosystem: A Panorama of Yields to Risks

Why is USDT still the king of stablecoins?

With a market value of over 143 billion USD, USDT remains the infrastructure for DeFi and exchanges. However, its dominance is facing challenges—USDC, PYUSD, and even more new players are eyeing the throne. Why is USDT still so strong? Simply put, there are three reasons: the best liquidity, the most supported chains (Ethereum, Tron, L2, etc.), and the widest ecological applications.

The Truth About DeFi Yield

USDT earnings from centralized exchanges: 1-5% APY

• Advantages: Foolproof operation, relatively controllable risks
• Disadvantages: Low returns, and you have to trust that the exchange won't run away.

DeFi platforms (Aave, Compound) yield: 5-12% APY

• Advantages: High returns, truly decentralized
• Disadvantages: Need to manage private keys by yourself, connect to the wallet, and worry about smart contracts being hacked.

Liquidity Mining: This segment of earnings is the most unstable, depending on the trading volume and fee extraction ratio of the coin pair. In simple terms, you provide USDT + another coin to form a trading pair and earn trading fees. High risk, high reward.

What On-Chain Data Tells You

• USDT has the strongest liquidity on the Tron chain (on-chain transfers are almost zero cost)
• USDT on Ethereum is mainly used for DeFi lending.
• USDT is used for derivatives trading on Layer2 (Arbitrum/Optimism)

This means: different chain selections lead to completely different gameplay.

Real-world Scenarios of Cross-border Payments

USBT is indeed fast (in minutes compared to days for banks), and the fees are indeed low (compared to SWIFT remittance fees). But the problem is:

• Deposits and withdrawals still have to go through centralized exchanges (this step is the slowest and most expensive).
• Regulation is tightening (especially EU MiCA and related US legislation)

Three Major Risks to Avoid

1. Smart Contract Risks

• A long history of DeFi platforms being hacked.
• Check if the project has undergone a formal audit (OpenZeppelin, CertiK, etc.)

2. Counterparty Risk

• The incident of centralized exchanges misappropriating customer funds has not happened before.
• Choosing top platforms and diversifying storage is a basic operation.

3. Policy Risk

• Regulation may suddenly prohibit USDT on a certain chain.
• A certain country may restrict the inflow and outflow of USDT.

What are USDT's competitors doing

• USDC: With a background in the United States, it has stronger compliance, but liquidity is still somewhat lacking.
• PYUSD: Produced by Paypal, mainly used for payment scenarios
• Tether's Plasma Chain: Aiming to reduce costs and increase speed

Competition will be more intense, but USDT is still the most mainstream choice in the short term.

Fresh News: The Combination of RWA + USDT

This is a new direction for DeFi - using USDT to purchase tokenized versions of real assets (real estate, gold, stocks). It sounds cool, but the risks are also significant (security of on-chain assets, valuation transparency, etc.).

Advice for Coin Holders

1. Do not go all-in on one platform — Diversify across 3-5 reliable DeFi/exchanges.
2. Pay attention to APY fluctuations — A sudden surge in yield usually means that risk is accumulating.
3. Regular Check — Check your USDT on which chain and platform once a month.
4. Learn to Withdraw Coins — Don't wait until something goes wrong with the platform to realize you don't know how to operate a wallet.

Summary: USDT is still the absolute leader among stablecoins, but opportunities for returns and risks always appear in pairs. Don't be blinded by high APYs; effective risk management is the key to long-term survival.