Tornado Cash Co-Founder Arrested
Tornado Cash Co-Founder Arrested
Blog Article
Tornado cash is a popular copyright mixer that has been used to launder $7 billion worth of illicit assets since its inception in 2019. It's been a favorite for criminals who want to improve their blockchain privacy, but also for people in oppressive regimes and software employees who don't want their employer to see their financial transactions. But this week, the Dutch FIOD arrested one of its co-founders and now Tornado cash faces uncertainty.
The smart contracts that power tornado cash operate on the Ethereum network and use zk-SNARKs technology to verify the security of deposits and withdrawals. This is a form of Zero-Knowledge proof that uses encryption to verify the validity of data without revealing any secret information. It's this technology that has led to the Dutch arrest, with authorities claiming Tornado cash is being used by people connected to Iran and North Korea.
When a user makes a deposit to the pool, it generates a unique security key associated with the transaction. This is then stored by the protocol. When a user wants to withdraw their assets, they use the key to sign a withdrawal transaction. This is then processed by a relayer, who earns a fee in the process. The pool then 'disassociates' the withdrawn tokens from their original owner by redistributing them to anyone who has the original deposit transaction security key.
This means that even though a user's deposit and withdrawal addresses are linked, the link is broken by the pool process, limiting forensic analysis of the original deposits. However, it's important to note that the Tornado cash pool doesn't store the deposited assets themselves; rather, it stores a link to the deposits in the form of a hash generated by the pool, which can be verified using zk-SNARKS. This is what makes the process different from a traditional mixing service.
Because the Tornado Cash smart contracts are publicly visible, users can make deposits and withdrawals on a public Ethereum blockchain explorer. These transactions are public and can be viewed by anyone who knows the address or is aware of its existence. Tornado Cash is therefore only as private as the Ethereum blockchain itself, which has limited privacy features in the first place.
The US Treasury has now designated the smart contract that powers tornado cash as a "designated digital currency address" (SDN) and has issued sanctions against it. As a result, any services that facilitate virtual asset transactions must ensure they do not process funds from this address or any other SDN address listed by OFAC. This includes copyright exchanges, DeFi platforms, and NFT marketplaces.
Tornado Cash's proponents argue that it's unfair to punish a piece of computer code, which can be used for either good or bad, just like email was back in the early internet days. They've likened the ban to email spam sanctions and argued that it's an affront to copyright freedom. This is a complex issue, and we'll continue to monitor developments. Report this page