Thursday , 14 December 2017

Tether claims $31 million of USD Token were stolen by hacker

According to a post on its website, Tether has experienced a substantial hacking event, with a loss of over $30 mln from the Tether Treasury account. The loss was discovered when the tokens were sent to an unauthorized Bitcoin address. According to the post, Tether is taking all possible action to prevent further disruption, saying:

“Yesterday, we discovered that funds were improperly removed from the Tether treasury wallet through malicious action by an external attacker. Tether integrators must take immediate action, as discussed below, to prevent further ecosystem disruption.”

The site also says that all Tether wallet services have been suspended pending a thorough investigation of the cause of the hack. Further, Tether is releasing a new version of Omni Core via hard fork in order to prevent the attacker from moving funds into any other wallet. Tether is encouraging all users to immediately upgrade their Omni Core to the new, protected version. Tether will continue pursuing ways to reclaim the coins stranded by the hack.

The team of Tether has reached out to major exchanges to ask them to blacklist the addresses involved in the attack, as indicated by this comment issued by Konstantin Gladych, the CEO of Changelly:

“Tether team has warned Changelly, so we’ve immediately halted all USDT deposits and withdrawals. Currently, we are working with the largest crypto exchanges for thorough investigation of the hack issues. We’ve blacklisted the wallet address of frauds and now are waiting for the official update of the OMNI/Tether client.”

The company assured its users that Tether issuances have not been impacted by the hack and that all functionality and tokens are backed by assets as normal. According to the post:

“…all Tether tokens remain fully backed by assets in the Tether reserve. The only tokens that will not be redeemed are the ones that were stolen from Tether treasury yesterday. Those tokens will be returned to treasury once the Omni Layer protocol enhancements are in place.”

Controversy around Omni Core

According to the document entitled “Tether Critical Announcement” released by the Tether development team, Omni Core is used by Tether integrators to support Omni layer transactions. Through the software, Tether has the authority to prevent the movement of stolen coins from the hacker’s address.

But, such level of centralization exposes Tether of fund and network manipulation, considering that with pressure from the law enforcement, the Tether development team is able to prevent funds from moving the across the network and disable certain addresses indefinitely.

Public blockchain networks such as bitcoin are valuable because of their security value. Their immutable, decentralized, and unalterable nature eliminates the possibility of government interference, creating independent economies and protocols that operate by strict network rules.

The fact that addresses and funds within the Tether network can be easily altered and manipulated by a small group of network operators presents a dangerous vulnerability as a blockchain network, and also raises a question on the necessity of blockchain technology, considering that it is difficult to consider or justify Tether as a decentralized and public blockchain network.

Bitcoin reaction

Bitcoin is bouncing back from losses arising from the hack of an alternative cryptocurrency.

As per CoinMarketCap, the bitcoin-U.S. dollar (BTC/USD) exchange rate slumped to a low of $7,762 at 04:59 UTC, before quickly recovering to $8,100. At press time, the cryptocurrency is changing hands at $8,090 levels. Despite the massive gyrations, BTC is still up 0.66 percent on the day.

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