Can Tornado Cash survive despite the mounting legal pressure?
Tornado Cash remains operational, and continues to receive transactions almost on a daily basis. The project’s founder, Alexey Pertsev, is still in custody, but the larger issue is how long will the Tornado Cash technology remain available.
Tornado Cash has been marked as the go-to mixer for some of the most recent exploits. Tornado Cash is key for hiding the origins of Ethereum (ETH), and has made funds unreachable after the mixing. Even the latest flash loan was immediately sent to Tornado Cash.
Also Read: Tornado Cash dev Alexey Pertsev denied bail in money laundering case
Tornado Cash can be accessed directly, or as a feature of Samourai Wallet. The Samourai Wallet is already banned from interacting with some centralized exchanges, but the front end of Tornado Cash is still available, though with attempted restrictions.
The latest verdict against one of the project’s founders extends the regulatory crackdown against crypto mixing technologies. For now, Tornado Cash continues to exist as a collection of its main code package, as well as the smart contracts of the TORN token.
#PeckShieldAlert #Minterest exploiter – labeled address has transferred 435 $ETH (worth ~$1.4M) to #TornadoCash pic.twitter.com/dAM0IO0OjB
— PeckShieldAlert (@PeckShieldAlert) July 16, 2024
Tornado Cash aims to survive as a community protocol
The actual usage of Tornado Cash has not been under the control of its developers. This is the main defense for Pertsev, who claims all the fund mixing is the intention of third parties. But the court views Tornado Cash as the entity that actually laundered the funds, despite not having the direct intention and not controlling the coins.
Tornado Cash is reflecting the growth of decentralized finance, as well as the overall value in crypto space. A connection exists between the bull market and a revival of exploits, and the first half of 2024 saw plenty of protocol or personal wallet hacks.
Tornado Cash now stores $570M in reported value, with more than 100% year-on-year growth. Closing Tornado Cash will not eliminate exploits, but it may make it harder for hackers to cover their tracks. However, the attacks against mixers are also considered as limiting to the original idea of confidential, decentralized money.
Also Read: TradFi players turn to crypto for money laundering – Chainalysis
The Tornado Cash as a DeFi protocol and the TORN token are not in great shape in 2024. TORN stagnated at $2.40, with almost no activity on its single Uniswap pair. The Tornado Cash protocol was also forked into three similar DeFi projects with mixed success. Those include ShadeCash, Typhoon Cash, and Tonic Cash.
Additional attacks against Tornado Cash coincide with the ban of US persons from using Wasabi wallet. On the side of centralized markets and protocols, there have also been user bans for attempting to interact through coins of unknown origin.
Tornado Cash currently survives as a community project and could be branched. However, CloudFlare is also on alert, and may block the mixer package. Despite this, the repository has been available again since late 2022. But the threat of censoring the code remains viable, as some have reported they cannot access and run versions of Tornado Cash.
Steps to limit the usage of Tornado Cash have been taken in the past few years, but 2024 seems to be the year of harder attacks that may destroy even more of the crypto space confidentiality.
For the current web3, the significance of the tornado surge is far greater than that of Bitcoin and Ethereum, because it represents the original intention of the blockchain of true decentralization, privacy, and the sanctity of personal wealth.$torn #TornadoCash pic.twitter.com/LkvTAHG8DP
— baozi liu (@liu_baozi) July 16, 2024
Tornado Cash searches revive in 2024
Despite the regulatory crackdown, searches for Tornado Cash revived in 2024. The peak in search results coincided with the market high water mark in March.
Interest in the leading coin mixing protocol also comes from outside the US, where regulations are more lax. China and Southeast Asia are among leading regions for searches.
Despite this, attackers are seeking alternatives for hiding funds from exploits. Mixers are still an integral step, but escrow markets and peer-to-peer commerce have been used to hide funds from exploits.
The recent growth of value locked in crypto lending and DEX is also used as a tool to cover the origin of funds. Some protocols can act in a permissionless manner, even the biggest protocols like Uniswap and Curve Finance.
So far, Tornado Cash has proven itself as one of the most resilient tools. Coin mixing may not be a perfect technology, but it is the most accessible one. In comparison, using DeFi, liquidity pools, lending, or staking, may be more involved.
Cryptopolitan reporting by Hristina Vasileva
