Story – Tether Hacked for m
Tether is a cryptocurrency built on the Omni protocol.
The Omni protocol is a toolbox that allows you to create new tokens on the Bitcoin blockchain. The benefit being that you inherit all the security and compatibility of the Bitcoin network.
Tether is designed to be a price stable coin, meaning 1 USDT should always be worth 1 US dollar.
That is achieved by the Tether Corporation keeping a minimum of 1 US dollar in their bank account for every 1 USDT that they issue. Simple idea right.
The obvious question right out of the gate and actually one that keeps coming up, is how do we know that they have enough USD dollars to back the tokens they are using?
While that is not the subject of this video, you can go back and watch the previous video I published on the 6th of October 2017 after Tether issued their last audit.
The link to that video is in the description and the Tether segment starts at 4 minutes and 18 seconds
The reason why Tether are in the news again today, is not because of the audit controversy, although that has come up again since my previous video on it, today Tether themselves have come out with an announcement of a hack.
Or as they tactfully put it here “we discovered that funds were improperly removed from the Tether treasury wallet through malicious action by an external attacker”.
Well, at least it wasn’t an inside job then.
Now because Tether is a token on the Bitcoin network all transfers are public. That means they know the address that the funds have been moved to.
Their proposed solution to this is
That all platforms that make use of the Tether token should update to a tweaked version of the Omni protocol that freezes these funds, meaning those Tether tokens cannot be transferred,
Tether Corporation will refuse to redeem any of these stolen tokens for US dollars they have in their bank account, making those specific tokens worthless, which means Tether tokens are not exactly fungible
They are working with the Omni Foundation to figured out a way to forcibly get those tokens back, meaning they are looking at doing an Ethereum style claw back of stolen funds like when The DAO was drained of investors funds
Whichever way you slice it, it seriously erodes the credibility of the Tether token, and that’s even before we include the controversy around the number of US dollars backing them.
What is not clear to me here, and perhaps you techies can help me out with this in the comments, I’m not clear on whether this was a flaw in the Omni protocol that Tether use to create Tether tokens, or whether it was Tether’s implementation that had the security flaw?
In their official announcement here they don’t give much of an indication as to where the security hole was.
To me it sounds more likely to be a flaw in Tether’s implementation because if it was a problem with the Omni protocol, then all tokens built on it would be affected, and there’s no mention of that.
If Tether could have rightfully placed blame on Omni, I’m sure they would have done it.
It’s funny because I had a chat with Johnny Harrison while we were having dinner in Bella Italia after BitBrum last weekend.
We were talking about price stable assets and how BitShares in particular created a great solution to this years ago.
There’s also efforts in the Ethereum community to achieve the same thing with the like of the Maker token.
What those price stable assets have over Tether is that instead of being backed by US dollars stored by a trusted third party in a fiat bank account, Smart assets like bitUSD maintain their value because there is a free market of traders who have a profit incentive to keep the value of that asset backed by at least an equal amount of value in BitShares.
Story – Just 2 weeks to go until RealTalk event in London
Our Facebook and YouTube ads for this event are about to go live so Tony and I are giving our friends, followers and members first refusal on tickets before we go out to the public.
If you want to come to this event then please get a ticket before Friday because after that they’re likely to get gobbled up by the general public once they hear about the event through our advertising campaigns.
I understand the appeal of Tether.
While the price of all these digital assets are so unstable, this is how people are able to make returns that are out of this world.
Where is the best place to go for stability?
I personally use both Vaultoro and Uphold:
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