What is the Tornado Cash Mixer and Why It Is Blocked

A decentralized protocol known as Tornado Cash made it feasible to conduct anonymous transactions on the Ethereum network as well as a number of other blockchains. Analyst firms claim that this protocol has become increasingly popular as a means of laundering cryptocurrency that are related with criminal activity. Because of this, Tornado Cash became subject to penalties imposed by the United States in August 2022, and Alexey Pertsev, one of the co-founders of the business, was arrested in the Netherlands.

The Tornado Cash repositories that were hosted on GitHub have been withdrawn, and the users’ crypto assets, which collectively number more than $430 million, have been frozen.

Who was behind Tornado Cash?

The developers Roman Storm, Roman Semenov, and Alexey Pertsev are responsible for the development of the decentralized Tornado Cash service. They claim to have experience working on blockchain projects in addition to being the co-founders of the cybersecurity company PepperSec.

On the Ethereum blockchain, the introduction of the Tornado Cash protocol took place in August of 2019. There is no information available on investments made in the project by external parties. In addition, token sales were not held in order to generate revenue for the business.

Through the use of a multisig wallet, the developers were able to keep control of the protocol throughout the first phase. However, in May of 2020, after the publication of the second version of the protocol, the team burned access keys to smart contracts in order to enhance the amount of decentralization. This was done in order to increase the level of decentralization. Over one thousand and one hundred different users, including Vitalik Buterin and Gavin Andresen, participated in the so-called trusted installation procedure.

Because the code for the Tornado Cash user interface was kept in IPFS, the risk of data deletion was significantly decreased. This was true even in the event that data deletion was prohibited by law. The user interface will continue to function properly provided that it is stored by at least one user.

A History of the Project’s Development

Throughout the course of its existence, the Tornado Cash protocol has been responsible for the processing of assets worth more than $3.5 billion and has amassed fees of more than $17.7 million. During that time, there were more than 57 thousand different users accessing it.

During the year 2021, smart contracts for Tornado Cash were implemented on several additional major blockchains, including BNB Chain, Polygon, Avalanche, Gnosis, Arbitrum, and Optimism. In spite of this, the Ethereum network continued to accumulate the maximum possible volume of deposits.

Tornado Cash made an announcement in December 2021 regarding the launch of a major Nova update. This update operated on the Gnosis network and, in contrast to the protocol that was initially in place, enabled users to deposit and withdraw arbitrary amounts of ETH while still maintaining their privacy and providing “shielded” funds transfers in pools.

What was the use of the TORN token?

Tornado Cash has its own coin for governance that conforms to the ERC-20 standard and is issued on the Ethereum network.

The airdrop of 500,000 TORN took place in February 2021 and was directed toward early adopters. In total, almost 7,500 different addresses signed up to take part in the distribution. Early adopters received an average of 38 TORN for their efforts. The value of each token was greater than $7,700 when public trading in the cryptocurrency began on exchanges when it first became available.

The TORN governance token served three purposes, which are as follows:

• Staking
• Participation in the decentralized organization Tornado Cash DAO as a commitment for repeaters

In order to participate in the Tornado Cash Decentralized Auction Market, you were required to hold a minimum of one thousand TORN. To cast a vote, all that was required was 1 TORN. Each token represents one vote in the election.

Some possible suggestions are as follows:

introducing new pools, modifying existing compensation structures, and redistributing monies from the DAO Treasury.

Each proposition is up for a vote for a period of five days, and in order to pass, it needs to acquire a minimum of twenty-five thousand votes in the form of tokens.

What part does Tornado Cash play in the process of laundering illegally obtained cryptocurrency?

The individuals that started cryptocurrency mixers assert that their products play an essential part in ensuring the customers’ and investors’ confidentiality. However, officials in charge of law enforcement argue that these services are almost often used to clean the money that has been earned by organized crime.

Arrest of the co-founder of Tornado Cash and potential FSB ties

Alexei Pertsev, a software developer and one of the people responsible for creating the mixer, was taken into custody in Amsterdam on August 12, 2022. It is believed that he has been laundering money earned through illegal means using Tornado Cash.

The attendees of a rally in Amsterdam on the 20th of August urged that Pertsev be allowed to go free. The rally took place. The people who planned the protest activity believe that the arrest of Pertsev sets a dangerous precedent for holding open source software developers accountable in the event that their products are used inappropriately.

At the end of August 2022, the research and development business Kharon published a study suggesting that there is a possibility that Pertsev is affiliated with the Russian special services. According to the findings of the investigation conducted, the future developer of Tornado Cash worked in the year 2017 for the company Digital Security, which supplies the FSB with both material and technological support. This information is false, according to Ksenia Malik, who is Pertsev’s wife.