Home / Archive / Tether Claims $31 Million Theft of USD Token by Hacker, Flags it ‘Non-Redeemable’

Tether Claims $31 Million Theft of USD Token by Hacker, Flags it ‘Non-Redeemable’

Last Updated March 4, 2021 5:01 PM
Joseph Young
Last Updated March 4, 2021 5:01 PM

The Tether Treasury wallet has been hacked, leading to the loss of $31 million in USDT, a crypto-token which pegs its value to the US dollar through an inflationary monetary policy.

In an official announcement, the development team of Tether stated:

“Yesterday, we discovered that funds were improperly removed from the Tether treasury wallet through malicious action by an external attacker. $30,950,010 USDT was removed from the Tether Treasury wallet on November 19, 2017 and sent to an unauthorized bitcoin address. As Tether is the issuer of the USDT managed asset, we will not redeem any of the stolen tokens, and we are in the process of attempting token recovery to prevent them from entering the broader ecosystem.”

Criticism From Experts

Many of the cryptocurrency industry’s experts, developers, and analysts criticized Tether due to the method that was used to deal with the hacking attack. Most of the criticisms were targeted at the Tether development team’s centralized and unilateral decision to lock funds and suspend the Tether back-end wallet service, without any community consensus or a public hard fork.

Cornell professor Emin Gun Sirer wrote:

“Tether quietly did a hard fork to blacklist a specific address and freeze funds. Three questions: 1. Who controls the Omni ledger and who can perform these kinds of operations? 2. Why was this address blacklisted? 3. Which other addresses are next in line?”

Tim Swanson, the founder of Of Numbers and PostOakLabs, expressed his concerns over the lack of transparency of Tether, given that major software updates, patches, fixes, and forks can be carried out in an opaque manner, which could ultimately trigger the involvement of the law enforcement.

“Earlier today Tether blacklisted a specific address. That address has $31m in Tether USDT their explorer has been down all day. Does this mean that law enforcement are looking into their non-transparent operations?,” added.

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.

Featured image from Shutterstock.