Slowdown in July
Ethereum mixer Tornado Cash has received nearly $2 billion in 2024 despite sanctions. However, things have slowed down in July, with the protocol attracting only $65.1 million worth of deposits, according to data from Flipside.
First Half of 2024: Significant Deposits
In the first six months of 2024, over $1.9 billion was deposited into Tornado Cash. Although things have slowed down in July, the protocol still managed to attract a significant amount of deposits. According to crypto analytics service Flipside, the total value locked (TVL) metric is not as reliable for Tornado Cash. This is because users typically deposit funds and then withdraw anonymized funds, rather than keeping them in the protocol for a long time like with most decentralized finance (DeFi) services.
Tornado Cash’s TVL Growth
Despite the limitations of the TVL metric, data from DeFiLlama shows significant growth for Tornado Cash. At the start of the year, the protocol had under 160,000 ETH. Now, it has nearly 168,600 ETH. In U.S. dollars, this represents growth from $374.4 million to $572.82 million, considering the increase in asset value.
Privacy and Anonymity
Tornado Cash is a coin mixer designed to preserve the privacy of crypto users. It uses zero-knowledge proof cryptography to anonymize user deposits, allowing them to withdraw funds to a new address that cannot be traced back to the original deposit. This makes it a popular tool for those seeking privacy in their crypto transactions.
Inflows from Major Hacks
Tornado Cash has seen inflows from wallets associated with major hacks. For instance, the hacker behind the Poloniex hack sent $3.3 million worth of Ethereum (ETH) to the mixer in early May. Transactions linked to hacks, including some allegedly connected to North Korea, led the U.S. Treasury Department to sanction Tornado Cash in August 2022.
Legal Prosecution and Community Reaction
Following the sanctions, Tornado Cash developers faced lengthy legal prosecution. The crypto community viewed this as an overreach. This prosecution is ongoing, with a recent ruling delaying the money laundering trial of Tornado Cash co-founder Roman Storm, despite objections from the prosecution.
Coinbase’s Legal Challenge
Coinbase’s chief legal officer, Paul Grewal, criticized the U.S. Treasury’s actions. He argued that the Treasury is “bending old laws past their breaking point” by blaming developers and TORN holders for Tornado Cash’s misuse. Grewal pointed out that immutable, open-source software code is not property. Therefore, the Treasury can only regulate property in which a foreign national has an interest.
Support from Vitalik Buterin
Ethereum co-founder Vitalik Buterin expressed support for privacy-centric crypto tools. He called the 64-month prison sentence for Tornado Cash developer Alexey Pertsev “really unfortunate.” Buterin encouraged people to develop next-gen solutions for privacy. He believes building software is a legitimate way to fight for privacy.
Tornado Cash’s Role in Crypto Privacy
Tornado Cash plays a crucial role in maintaining privacy in the crypto world. It allows users to make transactions without revealing their identities. Despite the legal and regulatory challenges, the protocol continues to attract significant deposits.
Sanctions Impact
The sanctions have impacted Tornado Cash, but the protocol still sees substantial inflows. The U.S. Treasury’s actions have sparked debate within the crypto community about the regulation of privacy tools. Many believe that sanctioning a tool used for privacy sets a dangerous precedent.
Future of Privacy-Centric Crypto Tools
The future of privacy-centric crypto tools like Tornado Cash remains uncertain. Legal challenges and regulatory scrutiny will likely continue. However, the demand for privacy in crypto transactions suggests that tools like Tornado Cash will remain relevant.
Tornado Cash’s Activity in 2024
Analyzing Tornado Cash’s activity in 2024 reveals that the protocol remains active despite the challenges. Significant deposits indicate that users continue to trust the protocol for their privacy needs. This activity highlights the ongoing demand for privacy-centric solutions in the crypto space.
Conclusion
Ethereum mixer Tornado Cash has attracted nearly $2 billion in 2024 despite facing sanctions and legal challenges. The protocol’s ability to maintain significant inflows, even with regulatory scrutiny, underscores the importance of privacy in the crypto world. As the debate over privacy and regulation continues, tools like Tornado Cash will play a pivotal role in shaping the future of crypto transactions.
