Sanctions on Tornado Cash are Creating a New Concern for Wallets
In mid-august 2022, the United States government announced that they would be sanctioning the infamous Tornado Cash Ethereum Mixer immediately. The decision was not taken lightly among people within the cryptocurrency community who had mixed reactions to the announcement.
Some believed that the sanctions were a desperate attempt to control cryptocurrencies and an abuse of power, while others saw an unsurprising decision that was necessary for the mass adoption of cryptocurrency to continue. However, funds from the notorious mixer are being used to attack notable wallets shutting them off from the front ends of nearly every Dapp on the Ethereum network.
What is a cryptocurrency mixer?
Tornado Cash is a decentralized app known as a mixer. It begins with a liquidity pool full of Ether which is used to hide the transaction history of any exchange between a wallet and the Dapp.
When Ether is sent through Tornado Cash, it mixes the funds up with other bits and pieces of Ether to jumble the transaction history of the exchange. Thus, the Ether that a wallet receives through the Dapp will not be the same as the Ether that was originally sent.
Why did the US sanction Tornado Cash?
Tornado Cash has widely been seen as a tool best suited for criminals that want to hide their transaction history on the blockchain which was used following nearly every hack on the Ethereum network.
The United States decided to sanction this Dapp because they believed that it was being used to aid state-sponsored terrorism and other organized crime around the world. The U.S Department of the Treasury stated “Criminals have increased their use of anonymity-enhancing technologies, including mixers, to help hide the movement or origin of funds.”
Security vs Privacy
The reaction within the crypto community has been mixed. Many argue that this is an attack on the privacy of crypto users and that their privacy is being taken away by the government. They claim that, by forcing all transactions to remain public, they will be targeted by hackers more frequently. While this might not seem like a major concern to the average user, wallets that intend to operate validator nodes following the merge are worried that the value of their staked Ether will be constantly targeted.
On the other hand, many see this as a necessity, believing that Tornado Cash only benefited illegal activity. They also argue that, if mixers like Tornado Cash are allowed to continue, the possibility of crime will be too high for a safe mass adoption of cryptocurrency to become realistic.
Wallets are receiving mixed Eth from Tornado Cash
Whichever way you look at it, there is still one major concern - people are getting their wallets blocked/sanctioned from random Ether being sent to wallets with Tornado Cash. Because there is no option to deny funds being sent to a wallet, many are being victimized by the random “donations” (sometimes called ‘dusting’) which are causing their wallets to be denied from the frontend websites of many popular Dapps such as AAVE.
Whether these funds are being sent through Tornado Cash as a joke, protest, or attack is unknown; but notable figures such as Vitalek Buterin are being targeted. A significant pushback may begin depending on the quantity of these attacks and the severe impact they can have on the network’s value.
Unfortunately, there is no way to prevent another user from depositing Ethereum into a wallet. This leaves every user on the Ethereum network vulnerable. While it's unlikely that every wallet in existence will be hit by this attack, the possibility of having a wallet immediately banned from the network’s most utilized Dapps is a major concern.
