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IPFS News Link • Blockchain

The Biggest Crypto News In The Second Week Of August: Treasury Sanctions Tornado Cash, And More

• by Donovan Choy

I want to send you ETH privately

I connect my wallet to Tornado Cash, and the platform standardizes all deposit transaction amounts for anonymity (e.g. 1, 10, or 100 ETH)

I decide to deposit 10 ETH which goes into Tornado's shared pool

Upon deposit, Tornado gives me a key with a secret hash (called a "private note") for later withdrawal

I send you my private note

You wait a day, then withdraw the 10 ETH with the private note to your wallet address

A "relayer" charges you a small fee to send the 10 ETH to your wallet, then initiates the withdrawal pays the gas fee on your behalf

You receive 10 ETH from me, and there is no on-chain link between both our wallets. Our transaction is completely private.

Tornado Cash is really useful if you value your privacy… or if you're trying to conduct illegal (but not necessarily immoral) transactions.

For the latter reason, the US Treasury is slapping sanctions on Tornado Cash this week. 

Actually, that's not technically true. "Tornado Cash" is merely a bunch of open-source smart contracts running on a public blockchain. So the logic of sanctioning a smart contract is akin to sanctioning, say, a pool of water.

Our language obscures where the prohibitive burden of the sanction is falling on - it is individuals that are being forbidden from interacting with Tornado Cash, namely privacy-seeking Americans. If you mess with that smart contract, if you dip your toes in that water, you violate our political sanctions and go to jail, says the US Treasury.

In response, a swathe of platforms are quickly insulating themselves politically: