Tether is a platform that utilizes blockchain technology to enable the digitization of fiat currencies. Its aim is to revolutionize the traditional financial system by introducing a contemporary approach to money. What sets Tether apart is that it is backed by assets held in reserve by the company, ensuring that the exchange rate for USDT is always equivalent to 1:1 with the US dollar.
Calculate how much you can earn by staking Tether. Results vary based on the staking amount, term, and type selected.
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- How to lend USDT?
- How do I choose a lending platform?
- Custodial lending refers to lending your crypto through a centralised entity such as Binance, Kraken, Coinbase
- Non-custodial lending means that you have sole control of your private keys, and therefore control and custody of your own assets
- How is the yield generated?
- Lending and Borrowing: On platforms such as AAVE, USDT token holders can contribute their USDT to liquidity pools, which can then be accessed by borrowers who provide collateral assets. These borrowers take out loans by borrowing against the collateral assets they have deposited. In exchange for the loan, borrowers pay an annual percentage rate (APR) to the token holders (i.e. lenders) who have added their USDT to the liquidity pools.
- What are the risks of lending USDT?
- Smart contract risks: Defi platforms like AAVE, have inherent risks associated with smart contracts. These contracts can be exploited or hacked by a malicious actor
- Counterparty risks: If you use a centralized lending platform, you may be exposed to counterparty risk. This is the risk that the other party in the transaction may not fulfill their obligations and default on the contract.
- Protocol security risks: The collateral for USDT may include loans and receivables from third parties, which implies a collateral risk. There is also a risk of unknown bugs in the protocol and the USDT investment in general.
- What is USDT?
- What consensus algorithm does Tether use?
- What are the tokenomics of USDT?
There are several ways to earn a return on your USDT, including lending them out to custodial providers or via a Defi lending protocol. We suggest using a Ledger Hardware Wallet to maintain complete control over your funds. Before delegating your tokens, ensure they are stored on your Ledger wallet and follow the instructions provided.
Step 1: Access to the Aave lending app page that features USDT.
Step 2: Click “Connect wallet” in the upper right corner. Select the Ledger option.
Step 3: Click “Supply” under “Your info”. This allows you to deposit your tokens into a smart contract in exchange for aUSDT tokens.
Please see the official lending tutorial here.
Distinguish between Custodial and Non-Custodial Lending:
Do not fall for high APR %: When you stake your crypto, you will usually be quoted an APR for your investment. Some lending platforms may offer very high APRs as a way to attract investors, but these high APRs may be unrealistic and involve additional risk
Safe USDT lending typically offers yields of less than 2%.
Stick to well-known DeFi protocols: Look for protocols that have liquid markets and choose protocols that have been audited by reputable auditors for added security.
The lending yield on USDT is generated from:
We strive to make lending as safe and transparent as possible, however, it’s important to consider factors that may influence whether a particular lending option is appropriate for you.
Keep in mind that this is not a comprehensive list of all potential risks associated with lending.
USDT is the native token of the Tether protocol and it is used to perform various important functions within the platform.
Store of value: USDT is used as a unit of measure for value exchanged on any supported blockchain. Users can interact with it by sending it to others, buying and selling on exchanges or OTC markets, or using DeFi for lending and staking. Tether tokens enable businesses, including exchanges, wallets, payment processors, financial services and ATMs, to easily use fiat currencies on blockchains.
Tether, a stablecoin pegged to the value of the US dollar, uses a consensus algorithm known as the Mastercoin/Omni Layer Protocol. The Omni Layer Protocol is built on top of the Bitcoin blockchain and uses a system of smart contracts to enable the issuance and redemption of Tether tokens.
It’s based on a trust-based model, which mean that Tether is issued on the blockchain by Tether Limited, and the holders trust that Tether Limited holds the equivalent amount of dollars in reserve to back the issued Tether. And it rely on the transparency and immutability of the blockchain to make sure the issuer doesn’t engage in any fraudulent activity or mismanagement.
The total supply of USDT can increase or decrease depending on demand for the token and the actions of Tether Limited, the issuer of Tether. As USDT is pegged to the US dollar, the total supply is typically closely tied to the amount of US dollars held in reserve by Tether Limited to back the issued Tethers. It’s important to note that Tether Limited claims to hold sufficient reserves to back the outstanding Tethers, but this has not been independently audited, so the exact total supply of Tether at any given time may be difficult to verify.
There will be times when the quoted price on exchanges may trade above or below $1, but this is usually speculation based on market volatility and does not mean that USDT is not pegged at 1:1 with USD.