Today Tether announced that $30,950,010 USDT was removed from the Tether Treasury and moved to an unauthorised address on November 19th 2017. Because of this breach Tether have suspended their back-end wallet service until further notice. Although Tether hasn’t said much else,
they have stated that all USDT sent to the attackers address have been flagged and will not be redeemable for USD. So what is tether and what does this mean for Bitcoin and cryptocurrency as a whole?
What is Tether?
Tether currencies are cryptocurrency assets which are issued on the blockchain via a system known as the Omni Layer Protocol. The tether currency which has been stolen is USDT so that is what we will focus on. USDT was created to facilitate the the transfer of fiat currencies using the blockchain. Each USDT token is backed by a U.S Dollar held in the reserves in Tether Limited and can be redeemed through the Tether Platform which as of writing has suspended service.
What does this mean for the markets?
As previously stated Tether has announced that they will not redeem any of the stolen tokens and is in the process of attempting to recover their stolen assets before they enter the market. Upon the release of this news Bitcoin saw a sharp drop in price, although in the time since this morning the price has started to climb back up reaching a price of $8143.60 as of the time of writing. Litecoin and Ethereum also saw a steep drop in price although the price of both coins seems to climb back up towards the afternoon with Litecoin currently sitting at a price of $70.53 and Ethereum reaching back up to a price of $364.83 once most of the fear uncertainty and doubt had left the markets due to USDT being the only coin truly effected by this hack. Tether have said very little about how they plan to return the stolen tokens which leaves the future of tether to be very uncertain. Due to the tethered nature of the token, USDT seems to have suffered only minor drips in price and is now currently valued at $0.9.
Tether have announced that they are working on a new version of the Omni Core software client which aims to fix the exploit the hackers used in order to gain access to users wallets and send these tokens. Some are currently saying after this attack late for people to regain trust in these tethered currencies as a technology. Although this was also said of Bitcoin after the attack on MtGox back in 2014. We could see a similar situation play out with Tether where the technology itself will eventually be repaired but the reputation of the Tether Foundation may at this point be too damaged by the bad PR associated with this hack to save face for future investors looking to invest their money into digital tokens. It’s hard to say at this point but I’m sure a lot of people will agree that the future of Tether is highly dependant on whether they manage to recover the tokens and how smoothly the reactivation of their back-end wallet service goes. This hack seems to have come at a time where the world of blockchain technologies is still reeling over the second attack that was conducted on the Ethereal based Parity wallet just under two weeks ago which lead to the loss of around $300 million, so the future of Tether remains to be seen.