On Nov. 19, 2017, $30,950,010 of USDT was stolen from Tether’s Treasury Wallet. Tether is a cryptocurrency pegged to the US dollar used in various exchanges, notably Bitfinex. Evidence suggests the hack is connected to at least two previous hacks of Bitcoin exchanges.

Tether’s service is to provide a proxy to the US dollar in exchange environments. Since one of the challenges of cryptocurrency exchanges is to bridge effectively to the widely-accepted fiat currencies, a US-pegged asset in theory does alleviate some obstacles, at least from a user experience perspective. Tether was originally Realcoin, but changed the name to differentiate itself from the growing ‘altcoin’ market. Tether maintains a reserve of fiat currency that backs the supply of USDT, hence “tether.”

Tether released a critical announcement on their website (which was later taken down, then uploaded again) providing details of the hack and their course of action.

The Omni-Core Client, the software used to interface with the Tether blockchain, will undergo a hard-fork upgrade, which will lock funds in the now blacklisted wallet. Projects with Tether integration are expected to update their software accordingly.  

The main exchange discussed in relation to Tether is Bitfinex, currently the largest Bitcoin exchange in the world. This relationship has been the subject of an ongoing discourse regarding the persistent lack of transparency and clarity regarding their business operations and ownership links between the two. Bitfinex was victim to a hack in August 2016 involving an exploit of the multi-signature functionality the exchange utilized with BitGo. 

Further investigation detailed on Crypto Coins News has revealed a link between the BTC wallet the Tether hacker used to two previous hacks: the December 2015 Huobi hack of 8,500 BTC and the January 2015 Bitstamp hack of 18,500 BTC (about $250 million at current market rate).

Chain analysis tools, which are capable of tracking the movement of BTC amongst addresses and in some cases identifying owners, have linked associated addresses to the hacks to a Local Bitcoins address, whose last transaction was on September 22, 2015.

Between the fallout of the Tether hack and the growing friction between Bitfinex and the community, many eyes will be on the two companies moving forward.

Image via Adobe Stock

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