The Fight for a “Transparent” Blockchain

Blocking of the main blockchain transaction anonymization service Tornado Cash

Blockchain Mixer is a service for collecting and mixing tokens of different users in order to further anonymize transactions in the blockchain.

The mixing process itself is the collection of tokens from several parties, splitting them into parts, mixing and sending back to the user the equivalent of its amount from different addresses that have nothing mutual with the initial deposit of funds. The whole process takes place according to the algorithm specified by the mixer.

MIXER PROBLEMS BEGAN LONG BEFORE THE PROBLEMS WITH TORNADO CASH

In May, the U.S. government sanctioned Blender, another coin-mixing service, for allegedly helping North Korea launder some of the funds stolen from Axie Infinity, and by August it had made its way to Tornado Cash.

More than $7 billion worth of digital assets have been laundered with Tornado Cash since 2019, according to US officials. The mixing service was used by the Lazarus Group, a North Korean-run hacking collective, to launder hundreds of millions of dollars in funds stolen from Axie Infinity, Harmony and Nomad earlier this year. Ethereum developers spoke in defense of Tornado Cash, arguing that the ban was used by Tornado Cash, both for good purposes and not.

Blocking followed in stages, on the second day the GitHub of the developer Tornado Cash was already blocked. On the same day, Circle (USDC) locked up about 75,000 tokens on Tornado Cash wallets. As a result, the TORN token (the native token of Tornado Cash) fell by 30%.

Immediately after that, Tornado Cash blocked the Infura and Alchemy platforms. Experts argue that such actions (blocking) are an example of the correct promotion of cryptocurrency, and also that AML services must be on the alert for accurate work.

This was followed by news that Circle, together with Coinbase, would adhere to the Tornado Cash block, adding that Circle began, together with the Coinbase exchange, to block Ethereum addresses associated with the transaction mixing service.

Users also became rather skeptical about Tornado Cash, withdrawing $62 million from the protocol, which is equivalent to 15% of the amount of balances on its addresses. In the first three hours, the outflow amounted to $14.7 million.

4 days after the blocking, the arrest of the creator of Tornado Cash in Amsterdam followed.

**THESE ADVANCED TECHNOLOGIES, SUCH AS DECENTRALIZED ORGANIZATIONS THAT CAN FACILITATE MONEY LAUNDERING, ARE RECEIVING ADDITIONAL ATTENTION FROM THE FIOD.
**— law enforcement officials said, not ruling out further arrests.

Because of the arrest, users created the DAO, where the vote for control of the treasury funds took place. This vote based on a proposal on the Tornado Cash DAO management page and ended with 100% approval from all 12 participants. These 12 participants contributed 51,000 TORN tokens to complete the vote.

But the attackers don’t sleep, and they didn’t want to sleep. Taking advantage of the moment, an incident occurred during which Tornado Cash sent to 440 addresses the amount of 0.1ETH. One of these wallets turned out to be the address of the founder of TRON, some of them were of the founders of Binance and FTX.

Further, the entire Internet was divided into two parts:
• a group thatsupports mixers, in particular Tornado Cash;
• a group that isopposed to mixers.

Cobie, Twitter opinion maker and co-host of the “UpOnly” podcast, put it short: “Welcome to the code war.”
Bitcoin maximalists have also joined the debate, with Stephan Livera, host of a popular podcast, calling the events aroundTornado “disturbing news.”

Imagine if road workers were arrested because criminals use the roads. Or house curtain installers. Seeking privacy should not be considered a crime.

According to Coin Center Executive Director Jerry Brito and Research Director Peter Van Valkenburgh, OFAC has exceeded its legal authority by adding certain Tornado Cash smart contract addresses to the list of organizations and individuals with whom it is forbidden to do business in the USA (SDN).

The authorities suspect him of involvement in money laundering and concealment of criminal financial flows through the service.

According to the initiative group, Pertsev’s arrest creates a dangerous precedent for bringing open source software developers to responsibility in case of misuse of these products.

The question arises — is it legal to consider mixers as illegal activities? Maybe the devil is not as scary as hell, and not every mixer can boast of his anonymity.