There has been some controversy surrounding U.S. cryptocurrency issuer Tether, which is pegged to the U.S. dollar.

A blockchain research firm from China called SlowMist posted a screenshot of a Tether transaction it claimed was double spent, which violates the concept of immutability, and exposed a flaw in the company protocol.

Other commentators and Tether themselves dismissed the claims as negative rumors designed to harm Tether’s reputation.

It seems the problem lies with the exchange that processed the trade, which has not been named. The exchange apparently did not check one of the flags in the transaction allowing the fraudulent transfer to be processed.

The worry is that other exchanges would have the same vulnerability. OKex, which is the second largest exchange in the world, released a statement saying they were not at risk for this problem.

The technical blame could lie with Tether, or more likely with exchanges themselves. However, while it may not pose an existential risk to the cryptocurrency, any vulnerabilities exposed could send the market into a panic.

Prices buoyed on the recent news of Tether’s independent cash reserve audit, which they claim verified that they hold the USD reserves that back the USDT tokens.

For their part, Tether emphasized that the issue rests with exchanges and not their own operation. In a statement on Reddit, a spokesperson said:

“[it] appears that what happened here is that an exchange wasn’t checking the valid flag on transactions. They accepted a transaction with valid=false (which they should not have), and then the second “double spend” transaction had valid=true, which they also accepted. Unless I am missing something, this is just poor exchange integration.”

The Tether operation is a controversial one in the cryptocurrency industry for a few reasons. Some see the very nature of pegging a cryptocurrency to a fiat as watering down and selling out crypto’s potential.

More pressingly, there has been widespread concern about whether or not Tether actually has the USD reserves to back its claim.

Rumors regarding their cash reserves have circulated for months. While the company feels they have put the issue to bed with an audit of sorts completed by a law firm, doubts persist in the community as to the veracity of these claims and the events that preceded it, where Tether had to “dissolve” its relationship with its previous audit firm.

Regardless of the details of this double-spend issue, it comes at a tricky time for Tether who are looking to build up trust in their service at a time when crypto prices remain very precarious. Last week, the company released another $250 million in currency, which many predicted would lead to some degree of a price surge as had happened in January when they released a similar amount. Cryptocurrency prices have started to rally the last few days including Bitcoin which is up over 8%.

Tether [USDT] Denied Reports of Potential Double-Spend Vulnerability was originally found on [blokt] - Blockchain, Bitcoin & Cryptocurrency News.

309 +