Tornado Cash: Ethereum's Naughty Mixer Bags Nearly $2 Billion Despite Sanctions

Privacy protocol continues to thrive amid legal challenges and sanctions.

Tornado Cash, an Ethereum-based privacy mixer, has amassed over $1.9 billion in deposits in the first half of 2024, according to Flipside data. While July saw a slowdown with only $65.1 million in deposits, the platform remains resilient. Using zero-knowledge proof cryptography, Tornado Cash anonymizes transactions, making it popular for privacy-seekers. Despite U.S. sanctions and legal challenges, the protocol's total value locked (TVL) has grown from 160,000 ETH to nearly 168,600 ETH, increasing from $374.4 million to $572.82 million.

Tornado Cash enables users to deposit funds and withdraw them to new addresses untraceable to the original deposit. This feature has attracted significant inflows from wallets linked to major hacks, including a $3.3 million transfer from the Poloniex hack in early May. The U.S. Treasury Department sanctioned Tornado Cash in August 2022 due to transactions associated with North Korea.

Despite these sanctions, Tornado Cash has maintained usage. The legal prosecution against its developers is ongoing, with a recent ruling delaying the money laundering trial of co-founder Roman Storm. The crypto community, including Coinbase's chief legal officer Paul Grewal, has criticized the prosecution, arguing that the Treasury is misapplying old laws by holding developers responsible for the protocol’s misuse.

Ethereum co-founder Vitalik Buterin expressed concern over the legal actions against Tornado Cash developers, emphasizing the importance of privacy-centric crypto tools. At DappCon in Berlin, he encouraged the development of "next-gen" privacy solutions, underscoring the need for legal clarity and support for privacy in the crypto space.

photo source / Blockonome