Decentral BankThe stablecoin market remains under heavy scrutiny amid the broader market downturn. Several investors question the viability of these fiat-backed assets in the long term. The bulk of the criticism surrounding stablecoins has been about their economics. However, Decentral Bank, the developer of a crypto asset, recently averted an issue that could have had tremendous ramifications for its investors.

Smart Contract Bug Fixed

On Thursday, Decentral Bank – a decentralised autonomous organisation (DAO) that operates the USN stablecoin – reported that it had fixed a bug in its smart contract that briefly allowed a user to mint $10 trillion worth of its stablecoin for just $10. In a lengthy Twitter thread, the DAO explained that the user triggered a bug in the smart contract for USN’s v2 token – which was only released last week.

As Decentral Bank explained, the user – with the tag “pavladiv.near” – tried to redeem USN for USDT. However, the smart contract could not redeem USN for a user who had never held USDT in their account. After the transaction failed, the smart contract refunded the user with his USN, and the process triggered an invalid conversion of decimal points.

As a result, instead of refunding 10 USN tokens, the smart contract credited the user’s account with 9,999,000,000,000.0 USN. Decentral Bank claimed that its team immediately found the problem. Then, they paused the USN smart contract to stop all USN transactions and fix the bug.

Decentral Bank claimed that it was able to fix the bug before any funds were lost while adding that it was in the process of fixing the minor usability issue that prevented users who haven’t held USDT before from redeeming their USN tokens. The DAO also announced that it offered a bug bounty to pavladiv.near for his help fixing the bug.

Stablecoins in the Spotlight Again

Although Decentral Bank’s ability to fix the problem is a bonus, it also shows the need for continued work on developing the crypto market – especially for stablecoins. This asset class has come under heavy scrutiny in the past few months, with the naysayers intensifying their efforts following the crash of Terra’s UST algorithmic stablecoin.

Now, USDT – the largest stablecoin by market cap – has continued to deal with doubts over its cash reserves and ability to maintain its dollar peg. Last week, a report circulated that an increasing number of traders had shorted USDT as they believe the asset will soon lose its peg against the dollar.

Reports have shown that crypto hedge funds have been sizing their short positions in USDT for about two months. They have reportedly been more aggressive since UST’s collapse, with the market broadly believing that USDT will be the next to depeg.

USDT’s reserve backing has always been an issue. Last month, the Financial Times reported that Tether Limited – the stablecoin’s issuer – had kept a small portion of its reserves, valued at about $73 billion, at a Bahamian bank called Capital Union. However, considering that the bank only has about $1 billion in assets, only a small portion of Tether’s reserves can be held there.

Tether has fought against the rumours of insolvency and financial misdeeds, but the pressure is mounting.

The company has notoriously been opaque in its reports and business dealings. Also, audits of Tether’s cash reserves have been sketchy at best. Now, all of this is weighing on USDT’s reputation. USDC, its biggest rival, is slowly gaining. The difference between USDT and the Circle-backed stablecoin in market cap is now less than $10 billion – the lowest ever on record.

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