What is Tornado Cash and how does it work?

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As a researcher with experience in blockchain technology and privacy concerns, I find the development of Tornado Cash to be an intriguing response to the growing need for online privacy and security in cryptocurrency transactions. The idea of creating an open source, decentralized tumbler program that breaks the direct link between sender and receiver is a significant step towards addressing the privacy gap in digital currencies.

The common wisdom holds that “the internet doesn’t guarantee anonymity,” and with the heightened significance of safeguarding personal information in today’s digital age, privacy online has become more crucial than ever.

Bitcoin and the Blockchain technology, initially designed for confidential financial exchanges, do not ensure complete anonymity for their users. This is due to their publicly accessible transaction records and rigorous government regulations.

As a researcher exploring privacy concerns in the realm of cryptocurrencies, I propose an innovative solution: the creation of an open-source tumbling program. This program enables users to make deposits and withdrawals from a shared fund, ensuring complete anonymity for both parties involved in the transaction. By routing transactions through this pooled fund, we can effectively obscure the origin and destination of each transfer, thereby bridging the privacy gap.

The Tornado.cash program was designed as an open-source, decentralized solution operating on the Ethereum Virtual Machine (EVM) network. Its unique feature enables users to obscure the direct connection between senders and receivers.

Upon its establishment in 2019, I, as an analyst, observed that Tornado Cash faced significant backlash due to allegations of facilitating money laundering activities. Consequently, in August 2022, the United States Department of The Treasury took action against this service by adding it to their sanctions list, thereby making its utilization illegal for American residents.

Since its start in 2019, the US government asserted that over $7 billion USD has been washed through this program.

As a analyst, I will delve into the intricacies of Tornado.Cash in this piece, explaining its functionalities and shedding light on the circumstances that resulted in its designation by the US government as a sanctioned entity.

What is Tornado Cash?

The U.S. Department of the Treasury identifies Tornado.cash as a “mixer service for virtual currencies” that operates on the Ethereum blockchain.

“Tornado.cash allows for transactions to be conducted anonymously without revealing the original source, destination, or involved parties, making no effort to trace the origins of these transactions,” is one way to paraphrase the given statement in a clear and natural manner.

To gain a clear comprehension of how Tornado.cash operates, let’s break down its complexities into simpler terms.

As a researcher studying the intricacies of cryptocurrency transactions, I can tell you that Tornado Cash represents an innovative solution in the realm of decentralized and open-source money laundering services. This platform primarily functions through smart contracts deployed across various blockchains. The unique method employed by Tornado Cash to link deposits with withdrawals is called “zero-knowledge proof.” By utilizing this technique, one party can validate the authenticity of a transaction without disclosing any additional information beyond what’s necessary. Essentially, it ensures privacy while maintaining transactional integrity.

Tornado Cash App: Understanding How it Works

US Sanctions

The U.S. Department of the Treasury has asserted that the cryptocurrency mixing service Tornado Cash has been employed for money laundering and other illicit activities. They accuse this platform of facilitating transactions worth over $7 billion in virtual funds. On August 8, 2022, the U.S. authorities prohibited the use of Tornado Cash and all related financial services.

“Despite promises to the contrary in the public sphere, Tornado Cash has repeatedly fallen short in implementing sufficient safeguards to prevent it from being used as a tool for laundering funds for harmful cyber actors on a consistent basis, without even rudimentary measures to mitigate its risks,” Brian E Nelson, Under Secretary for the Treasury for Terrorism and Financial Intelligence, stated.

Security measures while using  Tornado Cash

Tornado Cash allows users to take certain steps to guarantee full anonymity during their usage.

Timing of Withdrawals

One effective method to make it harder for transactions to be traced is by carefully scheduling your withdrawals. After making new deposits, consider executing another withdrawal. By doing so, it becomes more challenging to connect the individual transactions.

Use Different Addresses

As a researcher studying transaction security, I would recommend using distinct wallet addresses for deposits and withdrawals. By doing so, we can minimize the likelihood of leaving identifiable trails in the blockchain.

Make Multiple Deposits

When making a significant deposit, consider breaking it up into several smaller transactions instead. Adopting this approach enhances your privacy by adding an extra layer of anonymity.

Use Strong Sets

To avoid standing out, users should select pools with larger deposits for their transactions. This makes it harder for individual transactions to be distinguished within the group.

Conclusion 

As a researcher studying the cryptocurrency landscape, I’ve come across the ongoing controversy surrounding Tornado.Cash, despite the US sanctions imposed on it. Recently, two senators have raised concerns to the Department of Justice about the strict regulations against unlicensed, non-custodial money transmitting services like Tornado.Cash. They argue that such stringent measures could potentially label innocent computer developers as criminals. Regardless, Tornado.Cash has gained popularity as a crypto tumbler that guarantees privacy, making it an attractive option for users seeking true anonymity.

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2024-05-14 11:17