Like that Natalie Imbruglia song, many of us are left feeling torn about what went down with Tornado Cash recently. We witnessed a protocol solve a real problem and evolve, only to spin off into the sunset. So, let’s sift through the rubble to discover what Tornado Cash was, talk privacy, and discuss what’s next.
Tornado Cash was a decentralized and non-custodial project first launched in 2019. Founded by Roman Semenov and Roman Storm, Tornado Cash was a go-to protocol for keeping things private.
Its primary function was to act as a privacy tool. Essentially it is what you would call a transaction mixer. It would mix the funds and transactions from different users to make them virtually untraceable.
It’s well-known that Bitcoin and Ethereum are public blockchains and, therefore, very transparent. They function as a ledger and are efficient at doing so. That’s great and all but it leaves a void by way of privacy. Sure, Tornado Cash helped funnel over $7 billion in digital currency but there were all types of users.
You can’t leave out that many who transact with any form of currency, fiat or crypto, want choices regarding keeping things private. For example, most of us probably wouldn’t want all our purchases exposed, and Tornado Cash was an option to mitigate that for a while.
Would you want all your purchases to be visible? Even though your actual name isn’t necessarily associated with your crypto wallet’s public address, what that address has transacted with is. That also goes for using a mixer too. On Etherscan, you would be able to see if a wallet address has interacted with Tornado Cash. For some, this could be a red flag that someone is hiding something nefarious or just a user simply wanting privacy.
Tornado Cash chose to build on the Ethereum blockchain and is ERC-20 compatible. That was a critical attribute that made it popular. In addition, it allowed the protocol to interact with various digital assets, leading to an immense user pool. It also had a very user-friendly interface.
If you are familiar with Zcash, this is where much of the open-source code came from to set the foundation for smart contracts on Tornado Cash. The TRON native token was an integral part.
It allowed the protocol to become decentralized, bringing governance to the DAO.
What set TORN apart from other mixers is that it used zero-knowledge proofs. zkSNARKs, to be exact. (zkSNARK) stands for Zero-Knowledge Succinct Non-Interactive Argument of Knowledge. In a nutshell, this technology allows the sender to limit the information shared during the transaction process.
The sender only needs to include enough information in the smart contract to prove if a (yes or no) statement is, in fact, accurate or not to the receiver. One can say they have a particular field of information without giving away specifics of the data. Any other trivial info included would not aid in or inhibit the information from being true or false. So why share it?
In November 2019, Vitalik Buterin stated, “this is why I support tornado cash. We should all have multiple addresses and outside of where we want to identify ourselves, we should strive for at least one address per application we interact with”. For example, Vitalik has used Tornado Cash to send donations to Ukraine. He openly said he used Tornado Cash with an emphasis that it was to protect the ones receiving the funds rather than himself. Anonymity is a robust and powerful use case.
On the other hand, Justin Sun, the CEO of Tron, had his address blocked by AAVE because the arbitrary sender directed 0.1 ETH via Tornado Cash to his address.
Unfortunately, he is not the only high-profile individual to have this happen to them. Many other celebrities’ accounts have also had the same happen with receiving unwanted crypto through the protocol. Crazy to think that randomly receiving funds will red flag you, but there is no escaping it at that level.
Regulatory Blows/Bad Actors
It was the last straw when The Office of Foreign Asset Control (OFAC), an arm of the U.S. Treasury, recently put sanctions on Tornado Cash. In effect, it has banned all U.S. citizens and businesses from interacting in any capacity, including Ethereum addresses associated with using the protocol.
Days after the sanctions, Aleksei Pertsev, one of the developers of Tornado Cash, has been detained by The Fiscal Information and Investigative Service (FIOD), a financial authority in the Netherlands. All this seems plausible after mumbles of N. Korea using the protocol to launder millions of dollars. But, at the same time, it has left a lot of crypto enthusiasts and developers reeling.
Their website has vanished along with their Discord being gone. The DAO is closed, and their multi-sig wallet is no more. So, it seems the project is pretty toast. Though this doesn’t mean it is the end of the road for privacy in general.
Privacy is essential to many of us where we all have different thresholds/requirements for what gets shared but ultimately want that control in our hands.
Regardless, taking care of privacy concerns can solve a significant problem that affects us all. Data is powerful, and there is undoubtedly value in privacy tools protecting it. When things cool down, there will be new ways to explore this sector.
As open-source technology grows along with DeFi, we may see more examples of this in the spotlight. There is an argument that the code which made up Tornado Cash is a public good. We can view the technology that allows us to send emails the same way. So, is code free speech? What about decentralization? Now that’s quite a debate to be had.