With or without stable coins, DEFI should thrive. The element of stability in stablecoins (USDT, USDC) makes them more advantageous than other cryptocurrencies that fluctuate during intense volatility in such a way that lending, borrowing, and insuring are made easy and less complicated.

Let's assume you lend Biba $100 worth of USD at an interest rate of 2% monthly. Biba should pay back $102 at the end of the month based on the initial agreement. Since you lend her the principal in USDT, there is a high tendency that the value of 100 USDT will still be $100 at the time of settlement. However, if the same amount was given to Biba in DEFI, such as ETH or SOL, the quantity might have fluctuated at the time.

For convenience's sake and maybe to avoid any future losses, DEFI should work well with stable coins pegged to real USD. It could also work well with non-stable coins when they maintain fair stability, but I don't see that happening soon, as evident with the crashed algorithmic stable coin, TerraUST.

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