Due to human error and fat fingers, Tether accidentally printed $5 billion of its fiat-pegged cryptocurrency out of thin air. Oops.
The mistake occurred when the Tether team was in the process of moving tokens from the Omni Layer to the Tron blockchain. What was meant to be a $50 million transfer became $5 billion after someone misplaced a decimal point.
Crypto exchange Poloniex clarified that the problem occurred after it requested Tether’s assistance to conduct a token swap.
“This occurred while Poloniex was conducting a USDT chain swap with the help of Tether. An incorrect amount of USDT was accidentally minted, and this has since been resolved to the intended value.”
Paolo Ardoino, CTO of Bitfinex and Tether, explained that his team proceeded immediately to solve the problem by burning the accidental tokens before they could disrupt the global crypto market.
Tether minted the $5 billion shortly before 6 pm ET on Saturday. Just four minutes later, they burned $500 million worth of USDT as they scrambled to address the error. Subsequently, they proceeded to burn another $4.5 billion, thus neutering the improper operation.
Tron founder Justin Sun also weighed in to correct the record.
Ardoino explained that working with multiple blockchains creates a recipe for accidents. USDT runs on Omni, Ethereum, Tron, and EOS. He assured that they are working to prevent this kind of mistake from occurring again, without clarifying what measures they are taking in this regard.
“Unfortunately we have to play with different toolchains across multiple [blockchains] and sometimes issues happen,” Ardoino wrote on Twitter. “We’re working anyway to prevent this from happening in the future.”
Initially, Tether issued USDT on Omni, which operates on top of the Bitcoin protocol.
However, Ethereum’s ability to natively support smart-contract compatible tokens provided a versatility that Bitcoin couldn’t offer. Tron and EOS also combine smart contract support with cheap and speedy transactions.
The whole incident is somewhat ironic, given the controversy over the asset’s parent company and its relationship with crypto exchange Bitfinex.
Most recently, Tether – the company behind the most important stablecoin in the entire crypto market – admitted that its tokens were not fully backed by real dollars but rather a basket of other assets.
Right now, Tether’s website reads:
Every Tether is always 100% backed by our reserves, which include traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties, which may include affiliated entities (collectively, “reserves”).
However, the original USDT Whitepaper said:
“Every tether is always backed 1-to-1, by traditional currency held in our reserves. So 1 USD₮ is always equivalent to 1 USD.”
Critics allege that this announcement diminished USDT’s already-damaged credibility and violates its status as a true stablecoin.
Last modified: June 23, 2020 2:45 PM UTC