A More Compliant Version of Tornado Cash: Enhancing Privacy and Legitimacy
Vitalik Buterin and Jacob Illum of Chainalysis have developed a new protocol that is a compliant version of the popular decentralised cryptocurrency mixer, Tornado Cash. This protocol caters to the legal requirements of the United States and other countries, offering maximum privacy while ensuring the funds being transferred are not associated with illegal activities.
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Tornado Cash: Revolutionizing Privacy Mixing in Cryptocurrencies
Tornado Cash is a decentralised protocol that allows users to achieve a high level of privacy by mixing their cryptocurrencies into pools, making it difficult to trace them in blockchain registries.
This application is available on various chains, including Ethereum, Binance Smart Chain, Polygon, Optimism, Arbitrum, Gnosis, and Avalanche.
However, Tornado Cash has faced challenges due to its association with money laundering and illicit funds, making it a target for US federal agencies. The Office of Foreign Asset Control (OFAC) sanctioned the protocol in 2022 for aiding cybercriminals in laundering millions of dollars.
Moreover, hackers utilized Tornado Cash to launder a significant amount of money, making it untraceable on the blockchain. As a result, the US authorities arrested all three founders of the protocol, despite it being an open-source code.
This severity led blockchain infrastructure providers like Infura and Alchemy to limit access to Tornado Cash, requiring personalised RPCs for access.
The Power of Zero-Knowledge Cryptographic Proofs
Zero-knowledge cryptographic proofs (zk-proofs) are revolutionizing the blockchain sphere, addressing various issues and legal concerns surrounding protocols like Tornado Cash.
This technology has also helped solve scalability problems on the Ethereum blockchain by introducing layer 2 rollups, improving the efficiency of the decentralised network.
To combat high gas costs, ZK rollups and optimistic rollups have emerged as solutions, moving transaction processing outside of the Ethereum mainnet and reducing waiting times and gas costs.
Prominent infrastructures like Arbitrum and Optimism utilize fraud-proofing and knowledge proofs to enhance transaction verification and improve the user experience.
These advancements in technology have garnered excitement within the DeFi community and among blockchain experts as they prove to be valuable in various areas of the web.
Hot Take
The compliance-focused version of Tornado Cash developed by Vitalik Buterin and Jacob Illum demonstrates the industry’s commitment to addressing legal concerns while preserving privacy. Zero-knowledge cryptographic proofs play a vital role in revolutionizing blockchain technology, resolving scalability issues, and enhancing user experiences. With the emergence of ZK rollups and optimistic rollups, the Ethereum network becomes more efficient and cost-effective. These advancements are not only exciting for the DeFi community but also have potential applications across different web domains.
Leo Nomist emerges as a maestro harmonizing the roles of crypto analyst, tenacious researcher, and editorial virtuoso, creating an unparalleled symphony of insight. Amidst the intricate world of digital currencies, Leo’s perspectives resonate like finely tuned chords, capturing the attention of curious minds from diverse horizons. His talent for deciphering complex threads of crypto intricacies blends seamlessly with his editorial finesse, translating intricacy into a captivating composition of understanding.