[2019-05-21] Bitfinex Argues Why Judge Should Dismiss NYAG Case in Latest Case

[bbc.reporter]

@gentlemand. How would the hackers exploit it? Tether is centralized. It can declare that they will not honor the value of the tokens of any wallet in anytime they want.

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[bryant.coleman]

@gentlemand. How would the hackers exploit it? Tether is centralized. It can declare that they will not honor the value of the tokens of any wallet in anytime they want.

Tether claims that most of their tokens are backed up with real assets (either US Dollar or other assets that are denominated in USD). Since most of these assets are stored in the form of fiat currency (that too in physical form) I don't understand how can some hacker exploit the situation. And in case some hacker steals the tokens, then they can just reverse the transaction just like what ETH did after the DAO robbery.

But the real risk comes from the incidents such as the current lawsuit with the NYAG. There is a real possibility of their assets getting frozen or even confiscated by the authorities. In such cases, the tokens will no longer be fully backed up by the real assets and a large proportion of the users will try to sell their tokens or move to other stablecoins.

[BitHodler]

Tether claims that most of their tokens are backed up with real assets (either US Dollar or other assets that are denominated in USD). 

This alone is already pointing out how flawed Tether is. They started by claiming that EVERY token is backed by the fiat currency it is pegged to, and now they changed their terms to make it appear that they never claimed to do.

Since most of these assets are stored in the form of fiat currency (that too in physical form) I don't understand how can some hacker exploit the situation. And in case some hacker steals the tokens, then they can just reverse the transaction just like what ETH did after the DAO robbery.

That doesn't work here. It would require you to roll back the Bitcoin blockchain.... Good luck with that. Tether also can't freeze or reverse your transactions. In other words, tokens that are stolen are stolen for ever.

What you can do is blacklist the address of the hacker and hope the rest of the ecosystem follows that, but even this measure hasn't always been effective looking back at how hackers have successfully spent or sold their coins.

[figmentofmyass]

Since most of these assets are stored in the form of fiat currency (that too in physical form) I don't understand how can some hacker exploit the situation. And in case some hacker steals the tokens, then they can just reverse the transaction just like what ETH did after the DAO robbery.

That doesn't work here. It would require you to roll back the Bitcoin blockchain.... Good luck with that. Tether also can't freeze or reverse your transactions. In other words, tokens that are stolen are stolen for ever.

What you can do is blacklist the address of the hacker and hope the rest of the ecosystem follows that, but even this measure hasn't always been effective looking back at how hackers have successfully spent or sold their coins.

blacklisting outputs has worked before for tether because it's so centralized. most outstanding USDT is held by a handful of exchanges, so its relatively easy to achieve consensus change, at least if done quickly.

in november 2017 an attacker managed to steal $31 million in USDT from the tether treasury. tether successfully hard forked to blacklist the outputs: https://www.trustnodes.com/2017/11/21/tether-allegedly-hacked-30-million-hardforks-blacklist

the whole debacle shined light on how much control tether has over the ledger. they could easily reverse transactions involving third parties if they wanted to.