Tether (USDT) Freeze Linked to Services Not Running Own Node

Published on 19 September 2018 by Cryptovest Staff

The market-wide freeze of USDT tokens has been resolved, with the flaw attributed to USDT users not running full Omni nodes.

Tether (USDT) service providers are omitting to run their own Omni layer nodes, which led to the market-wide freeze of Tether transactions. The glitch was resolved on September 18, but the crisis showed how many USDT users were running without a node and relying on Omni’s data verification. The discovery sparked immediate outrage over this irresponsible behavior by services carrying billions of dollars in value.

https://twitter.com/Bitraged/status/1042051164869730312

The criticism highlights a serious technical flaw in USDT assets. The glitch caused another slide in the markets although it has since been resolved. However, the delays in transaction confirmations for Tether coincided with a slide in BTC prices, which slipped from the $6,400 range down to the $6,200 range on September 17.

The burden of carrying USDT safely falls not only on the Tether company but on exchanges as well. At this point, it is unknown which exchanges manage their own Omni nodes. As critical opinions kept pouring in, the need for closer scrutiny of using the Omni layer technology arises:

https://twitter.com/CasPiancey/status/1042060384100728833

The Omni layer is a technology for building and transferring tokens on the Bitcoin network. USDT is the most prominent one, used in crypto-only exchanges to establish fiat-like trading positions. USDT is also transferred between exchanges more easily, and the recent network problems with synchronization hindered that process.

Traders also noticed that the network freeze immediately led to a trading reaction, once again showing the significant influence of USDT on the price of Bitcoin. The Binance price movement reveals the effect of the freeze:

https://twitter.com/crypto_fast_guy/status/1041989217163911168

After the Omni Layer glitch, Bitcoin trading recovered, with USDT volumes once again above 51% of total trades. Prices hovered around $6,361.66 as of 07:00 UTC.