As a seasoned researcher with a background in blockchain technology and digital currencies, I have closely monitored the evolution of Tornado Cash and its controversial role within the crypto ecosystem. The recent surge in activity at this decentralized “crypto-mixing” protocol has piqued my interest once again.
In 2024, there’s been a revival of interest in Tornado.cash, the cryptocurrency scrambling method, which saw a decrease in usage due to the US administration’s restrictions two years prior.
In August 2022, the OFAC’s sanctions caused a significant decrease in monthly deposits to Tornado Cash, resulting in over 90% less activity.
Tornado Cash Sees $1.9 Billion Deposits in H1 2024
New findings from Flipside Crypto, a blockchain analytics firm, reveal that the protocol amassed over $1.9 billion in deposits during the initial six months of 2024, representing a noteworthy 50% rise compared to the accumulated deposits recorded throughout the previous year.
Over the past two months, a notorious hacker responsible for stealing over $100 million from Poloniex exchange last year, has moved $76 million through Tornado Cash. (Tornado Cash is a cryptocurrency mixing service that provides enhanced privacy for transactions by breaking the link between sender and receiver addresses.)
Just like the HECO Bridge and Orbit Chain hackers transferred $166 million and $47.7 million respectively into the mixer this year, highlighting Tornado Cash’s complex decentralized structure that makes it difficult for U.S. regulators to control its usage effectively.
In the world of decentralized cryptocurrencies, where privacy is a fundamental tenet, Tornado Cash operates by blending funds from multiple transactions together before disseminating them anew. This shrouds the origins of the transactions, making it easier to use for those looking to safeguard their financial privacy. However, this feature unfortunately lends itself to illicit activities such as money laundering due to its ability to conceal the original sources of funds.
Resurgence of Mixing Services
A recent study byChainalysis, a leading blockchain analysis firm, indicated an uptick in market action and the return of blending platforms in the year 2024.
According to the report, WasabiWallet, JoinMarket, and Tornado Cash have experienced the most significant expansion among individual mixing services when considering their overall growth.
In August 2022, the Office of Foreign Assets Control (OFAC) imposed sanctions on Tornado Cash following their discovery that the notorious North Korean hacking collective, Lazarus, had utilized this protocol to wash around $455 million worth of ill-gotten gains.
Anyone interacting with Tornado Cash will be added to a list of prohibited entities by the OFAC sanctions, rendering their crypto wallets ineligible for use at law-abiding cryptocurrency exchanges.
The imposition of sanctions has brought about substantial legal and regulatory hurdles for Tornado Cash’s founders: Alexey Pertsev, Roman Storm, and Roman Semenov. In the year 2023, Alexey Pertsev was given a prison sentence of five years and four months in the Netherlands after being found guilty of money laundering offenses.
Roman Storm, who was taken into custody in the US in August for similar accusations and pleaded not guilty, secured a $2 million bond for his release. On March 31, he submitted a request to dismiss all pending charges. Roman Semenov, one of the other co-founders, is still wanted by authorities.
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2024-07-19 12:41