How can @Tether_to freeze USDT?

USDT is the biggest stablecoin with a circulating supply of over 110 billion USD.

Centralized stablecoins always come with the same risk: Centralized control

Tether's ability to freeze USDT revolves around the inclusion of administrative controls in its smart contract, specifically designed to enhance compliance and security measures. Here, we'll examine the mechanics of how this control is implemented.

Understanding the Smart Contract

The USDT smart contract includes several functions that enable privileged users (typically the contract owners) to control the flow of transactions by modifying the status of addresses using a blacklist mechanism.

Here’s a breakdown of how this typically works:

1. Blacklisting Mechanism:

The smart contract maintains a mapping called isBlacklisted, which associates an addresses with a boolean value. If the value is true, the address is considered blacklisted:

2. Adding to the Blacklist:

The addBlacklist(address _user) function allows the contract owner to add an address to the blacklist. When an address is added, it sets the corresponding value in the isBlacklisted mapping to true:

3. Removing from the Blacklist:

Similarly, the removeBlacklist(address _user) function lets the owner remove an address from the blacklist, setting its value in the mapping to false.

4. Checking Blacklist Status During Transfers:

The key operational functions of the contract, such as transfer and transferFrom, include checks against the blacklist. These functions will revert (i.e., the transaction will fail and no tokens will be transferred) if the sender is blacklisted:

Interestingly, it seems that blacklisted addresses can still receive funds, which might be an unexpected edge-case in the code.

Use Cases for Blacklisting

The ability to blacklist addresses is a powerful tool used by Tether for several reasons:

Compliance with Regulations: If an address is involved in illegal activities or is subject to government sanctions, Tether can comply with legal requirements by preventing those funds from being transferred.

Preventing Fraud and Financial Crimes: If an address is suspected of fraudulent activities or other malicious behaviors, freezing the assets can prevent further harm and facilitate investigation.