Using USDT in DeFi, GameFi, and digital marketplaces
Regarding trading volume exceeding $100 million per day, Tether is the absolute leader, surpassing even Bitcoin and Ethereum combined. While the latter two, in addition to trading, are used to no small extent for capital preservation and multiplication, USDT is mainly used in transactions, including in the decentralized finance (DeFi) market and other areas such as GameFi and NFT.
How is USDT used in decentralized finance?
First, USDT is the most popular medium of exchange in the crypto market: the Tether stablecoin can be used to buy or sell both fiat and cryptocurrency. For example, BTC/USDT and ETH/USDT trading pairs are among the most liquid cryptocurrency markets. The TVL of the ETH/USDT trading pair on the largest decentralized exchange, Uniswap, is $55.3 million.
*Total Value Locked (TVL) — the amount of assets locked in the DeFi protocol (in this case, a separate liquidity pool).
USDT has a special role in the decentralized finance market (DeFi), as the stablecoin is pegged to the exchange rate of the world's most liquid and stable currency: the U.S. dollar (USD). This means that Tether's stablecoin serves as the main tool to protect against the volatility of crypto assets in the DeFi market.
USDT is used in liquidity pools of practically all decentralized exchanges (DEXes). Traders use this stablecoin to buy popular cryptocurrencies such as Bitcoin, Ethereum, Binance Coin, Solana, TON, and many others and to exit these assets, locking in profits or losses.
In addition to trading on the DeFi market, the USDT stablecoin is used for collateral and cryptocurrency loans on lending platforms such as Aave or Compound.
For example, on the Aave lending platform, you can deposit USDT tokens and, in return, get a loan in Wrapped BTC (a wrapped version of Bitcoin on different networks), Ethereum (ETH), UNI, 1INCH, and even other stablecoins such as USD Coin (USDC). These same and other cryptocurrencies available on the Aave platform can be used as collateral to obtain USDT.
In addition, Tether is regulated by supervisory authorities such as the U.S. Securities and Exchange Commission (SEC) and the Financial Crimes Enforcement Agency (FinCEN). Regulation increases confidence in the asset by legally protecting USDT investors.
USDT in GameFi and on digital marketplaces
GameFi has become a distinct segment of the decentralized finance market, and in this area, USDT is also one of the key digital assets used for a variety of purposes:
- Buying characters and in-game items as NFTs;
- Paying rewards for player achievements in P2E (Play-to-Earn) games;
- Other in-game transactions, including transfers.
For example, Gala Games uses the USDT stablecoin to purchase digital NFT lands, and the popular Splinterlands game pays tournament leaders rewards in USDT tokens. Also, virtual real estate can be purchased with USDT tokens in the popular blockchain metaverses games Decentraland and Otherside.
Games often use native tokens of their own GameFi projects or the leading cryptocurrencies of a particular network (e.g., ETH or SOL) for purchases and rewards. However, the high volatility of these assets led to various problems. For example, if the ETH cryptocurrency drops in value by 20%, the value of NFT tokens that players want to sell decreases by the same amount.
Using USDT in payments avoids this problem due to the stability of the exchange rate compared to more volatile assets. For the same reason, many NFT trading platforms and digital marketplaces integrate USDT payments to protect merchants from sudden price fluctuations in cryptocurrencies.
For example, popular platforms such as OpenSea, Blur, Binance NFT, and ByBit NFT already use USDT to buy and sell NFT tokens and collections.
Conclusion
USDT is the only alternative to fiat currencies in decentralized finance, where the latter is not available. This stablecoin protects investors from the volatility of cryptocurrencies and is actively used for fast and fairly cheap transfers, including between different blockchain ecosystems.
