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Topic: [2019-05-21] Bitfinex Argues Why Judge Should Dismiss NYAG Case in Latest Case (Read 673 times)

legendary
Activity: 1652
Merit: 1483
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.
legendary
Activity: 1526
Merit: 1179
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.
legendary
Activity: 3752
Merit: 1217
@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.
legendary
Activity: 3010
Merit: 1460
@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.
legendary
Activity: 2590
Merit: 3014
Welt Am Draht
@squatter. However, Tether is centralized and backed with assets in their vaults. USDT and CNHT might not need the security that the bitcoin and the Ethereum blockchains offer, I reckon.

If that security fails they'd still be landed with a large bill if someone managed to exploit it for even a short period of time. Then again knowing them they'll probably issue a token and tell the victims to buy it.
legendary
Activity: 3010
Merit: 1460
@squatter. However, Tether is centralized and backed with assets in their vaults. USDT and CNHT might not need the security that the bitcoin and the Ethereum blockchains offer, I reckon.
legendary
Activity: 1666
Merit: 1196
STOP SNITCHIN'
@gentlemand. Only 2 days after I mentioned it, some worries about Tether's congestion of the Ethereum blockchain has begun.

I predict that Tether might transfer to another blockchain or Vitalik might rush Ethereum 2.0 and create a broken platform. This might be good news for Ethereum Classic hehe.

Weird. I assumed Tether just sits there and moves around on exchange databases. I had no idea there was anywhere near that throughput.

Considering all the other stablecoins seem to run on ETH too you'd think they would've thought this through adding another one. I find it v strange that all of these dollars are depending on a clunker of a chain that no normal person can run.

Most people are just sending it between exchange accounts anyway, so full node security is a moot point. ETH is still highly secure from the perspective of POW, which is why everyone is still building on it.

Imagine relying on TRON or EOS to secure hundreds of millions of $ in value. Cheesy
legendary
Activity: 2590
Merit: 3014
Welt Am Draht
@gentlemand. Only 2 days after I mentioned it, some worries about Tether's congestion of the Ethereum blockchain has begun.

I predict that Tether might transfer to another blockchain or Vitalik might rush Ethereum 2.0 and create a broken platform. This might be good news for Ethereum Classic hehe.

Weird. I assumed Tether just sits there and moves around on exchange databases. I had no idea there was anywhere near that throughput.

Considering all the other stablecoins seem to run on ETH too you'd think they would've thought this through adding another one. I find it v strange that all of these dollars are depending on a clunker of a chain that no normal person can run.
legendary
Activity: 3010
Merit: 1460
@gentlemand. Only 2 days after I mentioned it, some worries about Tether's congestion of the Ethereum blockchain has begun.

I predict that Tether might transfer to another blockchain or Vitalik might rush Ethereum 2.0 and create a broken platform. This might be good news for Ethereum Classic hehe.



Tether transactions are currently clogging up the Ethereum Network reigniting the debate over gas limits. The issue might become further exacerbated with Tether’s latest stablecoin launch — a Chinese yuan-pegged ERC-20 token which will run on Ethereum’s blockchain.

There are complaints on Reddit from Ethereum users about delays in their transactions. According to reports, Tether transactions are the reason for the buildup of unconfirmed transactions on the network.
Trustnodes reports that Tether is using up close to half of the computing potential on the network. Data from CoinMarketCap shows daily ETH trading at about $6.5 billion but Tether’s USDT stablecoin transfers top $16 billion per day.

There is however, no clear reason for the sudden strain being put on the network by Tether transactions. Back in 2018, the network could handle more 1.4 million on-chain transactions per day but now is becoming congested with 50 percent of the transaction load.

In July 2019, Binance did state that they would drop Omni-based USDT in favor of the ERC20 USDT counterpart. Tether accounts for a significant portion of the global cryptocurrency trade, providing liquidity for exchanges who otherwise cannot transact in U.S. dollars.

Data from Ethereum network monitoring platform Etherscan shows Tether pushing through more than 100,000 on-chain transactions in a little under an eight-hour period.

With the launch of a new yuan-pegged Tether stablecoin running on Ethereum, the network may become even more clogged. Tether in recent months has proven to be a useful conduit for trade between Russia and China.


Source https://btcmanager.com/tether-transactions-ethereum-network/?q=/tether-transactions-ethereum-network/&q=/tether-transactions-ethereum-network/
legendary
Activity: 2590
Merit: 3014
Welt Am Draht
Governments in the past have been pretty swift with shutting down any attempt of centralized entities creating a new monetary system allowing people to circumvent traditional currencies, but they are sleeping on this one big time. How many Tether does there need to be in circulation for them to finally wake up? $100 billion?

This is something I've always been curious about.

I'll guess that the prime factor is that it's almost entirely a creature of crypto exchanges and very few people redeem dollars through it. If people were turning up all over the world trying to buy houses and yachts with Tether that would get them springing into action in double time.

The places that do tout their stablecoin as easily redeemed for dollars and are looking into using it for commerce are several times more uptight than the most anal bank.
legendary
Activity: 2170
Merit: 1427
I do not think that Bitfinex really deserve such a charge, I have not noticed any such cases before

I'm honestly surprised it hasn't been raided yet with so many factors pointing at not only manipulation, but also excessive issuance of non-backed Tether tokens.

Governments in the past have been pretty swift with shutting down any attempt of centralized entities creating a new monetary system allowing people to circumvent traditional currencies, but they are sleeping on this one big time. How many Tether does there need to be in circulation for them to finally wake up? $100 billion?

People don't even care anymore about the backing as they started valuing it a dollar a pop regardless of what they think about it.
legendary
Activity: 2590
Merit: 3014
Welt Am Draht
They cracked down on exchanges, but they left the P2P/OTC markets and mining sector alone. Considering the periodic rumors about mining being banned, it seems like they could do a lot worse.

I presume both P2P traders and miners in China have been fully expecting to get hammered for several years. It's just a question of when it happens rather than if and they've planned accordingly. Beyond that there's really not much else they have left to throw at it.
legendary
Activity: 1666
Merit: 1196
STOP SNITCHIN'
I shake my head at this and I am afraid that it might be the cause of something very bad for the cryptospace.

It can't really get much more dire for crypto in China. They've done all they can.

They cracked down on exchanges, but they left the P2P/OTC markets and mining sector alone. Considering the periodic rumors about mining being banned, it seems like they could do a lot worse.

This could get rather more dire for Ifinex. You'd think at this stage they would be considering easing up a little rather than provoking the biggest authoritarian regime on the planet. I'd love to know what goes on in their unusual heads.

Tethering a CNH pair shouldn't rock the boat too much. It's not controlled like the CNY. They aren't helping people evade capital controls since it's already on the offshore market.
legendary
Activity: 3010
Merit: 1460
@gentlemand. The skeptical me would say that this is Bitfinex's tactic of bringing themselves in trouble to create a reason to exit scam.

However, if I was an adviser for the PBOC, I would tell them to force 1 billion Chinese people to use CNHT everyday to congest the Ethereum blockchain and offer PBOC's digital coin as a solution hehehe.
legendary
Activity: 2590
Merit: 3014
Welt Am Draht
I shake my head at this and I am afraid that it might be the cause of something very bad for the cryptospace.

It can't really get much more dire for crypto in China. They've done all they can. This could get rather more dire for Ifinex. You'd think at this stage they would be considering easing up a little rather than provoking the biggest authoritarian regime on the planet. I'd love to know what goes on in their unusual heads.
full member
Activity: 149
Merit: 100
send &receive money instantly with no hidden cost
China is planning to roll out a state-backed coin soon, actually Bitfinex CNHT might actually assist China in having worldwide adoption of its state coin.

Same way people accepted USDT, Asians especially will adopt CNHT since China is a power house in Asia.
legendary
Activity: 3010
Merit: 1460
It appears that Bitfinex is ready to annoy another regulator. This time it is China's PBOC hehehe.

I shake my head at this and I am afraid that it might be the cause of something very bad for the cryptospace.



The Hong Kong company said in a short blog post that the new stablecoin, known as CNHT, would be pegged one-to-one to the offshore Chinese yuan. Like its popular stablecoin USDT, which is backed by the US dollar, CNHT would be issued as an ERC20 token atop the Ethereum blockchain.

The announcement follows years of debate about the correlation between the Chinese yuan and bitcoin. Many analysts believe that investors in China use bitcoin as a tool against state-imposed capital controls. And a depreciating value of yuan has prompted a majority of them to dump their yuan or yuan-based assets for bitcoin.

Tether appears to be cashing-in on the sentiment as worries over a gloomy economy – majorly led by the ongoing US-China trade dispute – sends investors fleeing towards safe-haven assets. CNHT promises to remove the necessity of exchanging yuan every time one feels the need to purchase or sell bitcoins. It could offer smooth liquidity between the two currencies, given investors trust Tether for maintaining that 1:1 stablecoin peg to yuan.

With the launch of CNHT, Tether is attempting to take on China by its collars as the latter plans to go ahead with the launch of its PBoC-backed digital yuan. A source close to the Block said Tether’s little stunt could overall hamper the cryptocurrency industry in China, given the country’s regulators would do everything to curb CNHT’s growth.


Read in full https://bitcoinist.com/tether-launches-digital-yuan-before-pboc/
legendary
Activity: 1652
Merit: 1483
I am more worried about Tether rather than Bitfinex, as I never had an account with the latter.

same owners and directors. and it's obvious that the owners see all bitfinex/tether funds as a giant slush fund to do whatever they see fit. the NYAG came after both of them for a reason. if tether goes down, bitfinex won't be far behind---and vice versa.

In general, the situation looks precarious for the cryptocurrency exchanges, with increasing government surveillance and an uptick in the hacker activity. Tether has grown too big and too rapidly and now even its inventors are unable to control it.

i certainly won't take the risk of holding tether. it's frustrating because the other stablecoins just don't have enough liquidity. the USDC market on binance is almost enough for me to get by, but they're kicking USA traders like me out next month.
sr. member
Activity: 1988
Merit: 453
I am more worried about Tether rather than Bitfinex, as I never had an account with the latter. In general, the situation looks precarious for the cryptocurrency exchanges, with increasing government surveillance and an uptick in the hacker activity. Tether has grown too big and too rapidly and now even its inventors are unable to control it.
legendary
Activity: 3010
Merit: 1460
@bryant.coleman. They will have no liquidity problems. They had an IEO for LEO tokens which raised $1 billion if bitcoin news media reporting is to be trusted hehe.

Also, I reckon exchanges do not want Tether to fail. If it fails, most of them might also fail. It is a Tethered world in the cryptospace.

https://coinmarketcap.com/currencies/bitcoin/#markets
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