- Chainway, a web3 venture builder, has developed a tool called Proof of Innocence which allows users to prove that their withdrawals from Tornado Cash are not from a list of specified deposits.
- The recent imposition of sanctions on the popular cryptocurrency mixer, Tornado Cash, by the US Treasury Department has raised important questions about the ethics of responsibility for writing open-source code.
- The sanctions and subsequent blocking of DeFi projects’ authorization attempts have led to challenges for the average user.
Chainway, a web3 venture builder, has developed a tool called Proof of Innocence. This tool allows users to prove that their withdrawals from Tornado Cash are not from a list of specified deposits selected by the user themselves. This will enable users to clear their names and demonstrate their innocence without revealing their identities.
By providing this proof, users can show that they are not hackers or other bad actors and can confidently make withdrawals from Tornado Cash. This not only improves the system’s security and trustworthiness but also helps protect legitimate users from being associated with illegal activities without sacrificing their privacy.
Proof of Innocence is voluntary, and Chainway values the importance of open-source projects and welcomes any feedback on it. They encourage users to thoroughly evaluate the tool and carefully handle their private keys, as well as Tornado Cash notes.
Consequences of the sanctions on the crypto community
The recent imposition of sanctions on the popular cryptocurrency mixer, Tornado Cash, by the US Treasury Department has raised important questions about the ethics of responsibility for writing open-source code. Tornado Cash allows users to make private transactions by breaking the on-chain link between the recipient and destination addresses.
This has been a popular protocol on Ethereum for fraudsters and hackers to launder their illicit gains to evade law enforcement and tracing. However, the sanctions and the subsequent arrest of the service developer in the Netherlands have led to some consequences for the broader crypto community.
TRM Labs, a company that helps crypto projects monitor criminal activity and comply with regulatory requirements, released a statement saying that “the sanctions against Tornado Cash were different from the previously laid out rules of operation, making compliance less certain.”
The blocking of users by DeFi projects
One of the significant consequences has been freezing USDC tokens on wallets that have ever interacted with Tornado Cash. Leading DeFi services have also begun blocking authorization attempts from addresses that have received transfers from the mixer.
According to a report by the analytical company Chainalisys, almost half of the funds came to the mixer from DeFi-protocols. This led to blockages from Uniswap, Aave, Ren, Oasis, Balancer, dYdX, and other projects. Some decided to take preventive measures to avoid penalties from regulators, while others faced blocking from partner services that checked the addresses’ purity.
They highlighted that, theoretically, someone could send funds to Tornado Cash and then specify that those funds be deposited into an unrelated cryptocurrency address belonging to a random, unsuspecting, or even unwilling person. This is already happening.
In protest against sanctions, someone started sending small amounts of ETH from the Tornado Cash wallet to the public addresses of celebrities and well-known crypto industry representatives. This led to blocking their wallets when they tried to authorize in DeFi-protocols.
This has led to challenges for the average user, as direct interaction with a smart contract without a straightforward web interface is a highly non-trivial experience. The most technically accessible option for working with DeFi protocols without web interfaces is through direct interaction with a smart contract at etherscan. However, this requires specific technical expertise and may only be suitable for some users.
