People who follow crypto closely know about Tornado cash, a crypto-mixer that has been doing rounds in the news for quite some time now but for all the wrong reasons.

Tornado cash was banned by the US Department of Treasure recently, stating that it was used to launder around $7 billion worth of cryptocurrency since its inception in the year 2019.

Operating on the Ethereum blockchain Crypto-mixer are known to facilitate anonymous transactions without making them traceable. Even though its purpose is to protect users’ privacy, they have been linked to some of the major hacks the crypto industry has encountered in recent years.

Let us delve deep and understand how crypto-mixers work and why the US Department of Treasures sanctioned it.

How Crypto-Mixers Work?
Crypto-mixers, as the name suggests, mix different cryptocurrencies to make it difficult to trace crypto wallets.

Since cryptocurrency transactions are done on the blockchain, where the movement of the fund is visible to everyone, Crypto mixers jumble up the source of the fund with other funds, making it difficult to track the transaction.

Two types of mixers exist – one is centralized, and the other is decentralized. As the name suggests, a centralized mixer is a third-party service that takes their service fees. When a bitcoin is sent to them, they mix it with bitcoins of other deposits, thereby sending an equal amount of bitcoins at the end of transactions.

However, decentralized mixers are without intermediaries and use open-source protocols like CoinJoin.

Tornado cash is a decentralized mixer. The developers destroy their admin keys so they can’t alter the transaction. The whole purpose is to provide privacy to its user’s transactions.

Even Vitalik Buterin, Co-Founder and Inventor of Ethereum, used Torando Cash to send money to Ukraine.

Reason for Sanctions against Tornado Cash
US Department of Treasure has alleged that Lazarus Group from North Korea has used Torandao cash to launder millions of stolen crypto funds.

Lazarus Group is an ill-famous group from North Korea that has been behind many heists the crypto world has seen recently.

At the end of March 2022, Axie Infinity Ronin was hacked with an estimate of $522 in Ethereum and USDC, making it one of the biggest heists in the history of crypto.

Lazarus Group was behind it, and Tornado Cash was one of the wallets used.

Is sanction legitimate?
Tornado Cash keeps the user’s privacy as the utmost priority. However, its association with the hacker group has placed a huge question mark on its protocol.

Even though some experts have raised their concern about the sanction stating the right to privacy, the US government has also clarified that the “ultimate goal of sanctions is not to punish, but to bring about a positive behavior change.”

If the government seeks to ban Tornado, it will have to shut down the whole blockchain. Additionally, shutting down one Tornado would not mean others would not creep up.

Concluding
Tornado cash’s involvement in the Lazarus group’s unlawful activity cannot be ignored. But can the sanctions help?

In a recent development, Tether announced that it will not freeze the Tornado cash addresses immediately and will await further legitimate requests from the authorities.

The Crypto industry is moving towards a season of strict rules and regulations from the authorities.

Proper regulation is required, which will help prevent such unfortunate events from happening.

Source links — Crypto – Mixers – Tornado Cash Saga