Tether just escaped a major controversy. The company has repeatedly been blamed of operating on fractional reserves and manipulating markets by creating tokens out of thin air, but the company still made a mistake that could have rejuvenated the same debates. According to WhaleAlert, a Twitter account that focuses on reporting large, suspicious cryptocurrency transactions, Tether created as many as 4.5 billion new USDT tokens, only to burn them immediately. Had those tokens not been burned in time, they would have left a serious impact on the price of both Bitcoin as well as Tether. And when these two cryptocurrencies are affected, the entire market is affected!
💵 💵 💵 💵 💵 💵 💵 💵 💵 💵 5,000,000,000 #USDT (4,996,932,524 USD) minted at Tether Treasury
— Whale Alert (@whale_alert) July 13, 2019
The incident happened around 3:25 AM IST on Sunday, 14th of July (i.e. yesterday). Poloniex cryptocurrency exchange was doing a USDT chain swap with help of Tether and it had transferred 50 million USDT tokens via Omni protocol on Bitcoin blockchain to Tether Treasury for the same purpose. Upon receiving those tokens, however, Tether Treasury minted 5 billion tokens of USDT instead of 50 million for being transferred to Poloniex. Fortunately, they identified their mistake before initiating the transfer and burned the extra 4.5 billion tokens immediately. Remaining 50 million tokens were then transferred to some wallet, which presumably belongs to Poloniex.
Tether CTO Paolo Ardoino later confirmed the incident in a tweet. Here’s what he said:
While preparing the issuance for Omni to Tron swap there have been an issue with the token decimals. Please check the burn transactions below @Tether_tohttps://t.co/reEW51qCqihttps://t.co/zo5i3ayTuQ https://t.co/h1Y9Mnr4Oq
— Paolo Ardoino (@paoloardoino) July 13, 2019
Cryptocurrency exchange Poloniex also confirmed that this had happened. It said:
Paolo is correct – this occurred while Poloniex was conducting a USDT chain swap with the help of Tether. An incorrect amount of USDT was accidentally minted, and this has since been resolved to the intended value.
— Poloniex Exchange (@Poloniex) July 14, 2019
Minting 5 billion tokens instead of 50 million is something that only requires the addition of a zero in the end. To be more precise, it’s a mistake of one decimal point only. But whenever money is involved, misplacement of that one decimal can result in some really cursed maths! Just imagine what would have happened if these 4.5 billion tokens would’ve entered the circulation. Though Poloniex would have returned the extra supply back to Tether as they’re backed by a reputed company (namely Circle), the incident would still have left a far worse impact on the image of Tether. Therefore, Tether team should ensure that similar incidents don’t happen again.