Ethereum: Tornado Cash offers a new service for the anonymity of its users

Graph showing the decline in activity on Tornado Cash after the implementation of OFAC sanctions.

Tornado Cash the return – The Tornado Cash protocol offers an anonymization service on Ethereum through a mixer. Unfortunately, OFAC recently took it into its sights. Obviously, this was not without consequences for the protocol and its developers.


The Torment of Tornado Cash

Tornado Cash is a protocol hosted on the Ethereum blockchain. This allows to anonymize its funds by mixing them with those of other users. Therefore, the link between the transmitter of funds and its receiver is broken.

Last August, the US Office of Foreign Assets Control has accused the platform of enabling the laundering of more than $7 billion in cryptocurrencies. This amount includes $455 million stolen and then laundered by the North Korean hacker group Lazarus.

After this accusation, OFAC implemented sanctions against US entities that deal with the Protocol. Thus, in turn, many companies and crypto infrastructures have undertaken to block transactions emanating from the protocol.

So much so that these sanctions went as far as impact the Ethereum validation process. Thus, 70% of validators applied these penalties at the peak.

However, these sanctions have had a mixed impact. Indeed, the volume recorded by Tornado Cash has been reduced by approximately a factor of 10.

Graph showing the decline in activity on Tornado Cash after the implementation of OFAC sanctions.
Decrease in activity on Tornado Cash after the implementation of OFAC sanctions.

However, as pointed out by one Chainalysis studythis fall in volume was mainly caused by the flight of legitimate users.

“As a global service, Tornado Cash likely had a greater number of users who could face consequences for violating US sanctions or be disqualified from using other services if their wallets showed exposure to Tornado Cash after its designation. »

The Tornado Cash mixer reinvents itself

Almost 8 months after the start of the turmoil, the Tornado Cash teams are back on the scene.

Thus, on March 4, Ameen.eth announced on Twitter the launch of Privacy Pool v0 on layer 2 of Optimism.

Tweet from Ameen.eth announcing Privacy Pools v0
Ameen.eth announces Privacy Pools v0 – Source: Twitter.

According to the Tornado Cash teams, the main defect of Tornado Cash resided in the impossibility for a normal user to prove that he was not associated with illicit activities.

Thus, every Tornado Cash user was considered a criminal, until proven otherwise. Therefore, Tornado Cash thought about a solution based on Vitalik Buterin’s thinking “What if users could prove they weren’t part of a subset of the repositories? ».

How Privacy Pools v0 works

In essence, Privacy Pools v0 work similarly to Tornado Cash, in that they are designed to break the link between your original deposit address and your new withdrawal address.

However, Privacy Pools v0 adds a new layer of privacy set configuration.

“The Privacy Shield Protocol allows privacy shield sets to be configured that allow honest users to exclude hackers and bad actors from their transactions. This makes it difficult for money launderers to take advantage of the system. You can choose to exclude anyone you don’t trust from your privacy sets, ensuring the security and privacy of your transactions. »

Therefore, users are able to prove two things:

  • Evidence of inclusion in a subset of good repositories;
  • Evidence of exclusion of a subset of bad repositories.

In addition, this new mode of operation could also make it possible to frustrate malicious users.

“Over time, when communities build lists of repositories, the anonymity of hackers is reduced to include only bad repositories, which naturally prevents any possibility of money laundering. »

It remains to be seen whether these developments will allow a relaxation of the sanctions issued by OFAC.

At the end of January, Vitalik Buterin, the co-founder of Ethereum had opened the debate around Stealth Addresses. These make it possible to increase user privacy while solving the problem of address reuse.

Last Verdict

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