Tether (USDT), the eighth-largest cryptocurrency and the second most-traded coin behind bitcoin, is functioning as normal following an incident with the engine that feeds data from the underlying Omni protocol to the platform’s hosted node services.
For approximately eight hours on Monday, tether transactions appeared to be frozen, and in fact were — at least for the many users who do not operate full nodes.
The USD-pegged stablecoin, which its issuer says is backed by physical dollars stored in company-controlled bank accounts, operates as a token on top of the Omni protocol, which itself is secured by the Bitcoin blockchain.
On Monday, users of Omni’s hosted wallet and block explorer services noticed that transactions had stalled. Omni developers said that the issue stemmed, not from any problem with the platform’s actual protocol, but with the parsing engine that feeds data to Omni Explorer and Omniwallet. They said that the issue was isolated to the platform’s hosted services, meaning that full node operators were unaffected.
However, the incident led to nervous speculation that something far more serious had occurred, perhaps another hack or other technical issue affecting tether, which is by far the most prominent Omni asset.
The characteristically tight-lipped Tether did not address the matter publicly, other than to retweet Omni’s initial post stating that it had identified an issue with the parsing engine that feeds data to the wallet and blockchain explorer.
Nevertheless, it seems that many applications and services that support tether, including exchanges, were using Omni’s free hosted API service rather than running their own full nodes. Consequently, transactions through these platforms froze throughout the incident, which lasted nearly three times as long as three-hour downtime originally estimated by developers.
The cryptocurrency markets endured a pronounced dip during the incident, which some observers connected to lingering doubts about Tether’s solvency and USDT’s relationship to the bitcoin price. Others suggested it was likely a coincidence, or, if there was a connection, that it stemmed from the decrease in liquidity that occurred as a result of the Omni API downtime.
However, Omni’s backend services eventually came back online, restoring tether and all other Omni assets to full functionality across all services.
Tether currently ranks as the eighth-largest cryptocurrency, with a circulating market cap of $2.7 billion. The firm’s “treasury” has not issued any new tokens since Sept. 2, when it sent 100 million USDT from the treasury address to Bitfinex. Soon after, the exchange redeemed just under 96 million USDT in a series of transactions that occurred between Sept. 3 and Sept. 5, which is the last date that the treasury address was active.
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