What is Tornado Cash?

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Tornado cash is a decentralized platform which enables users to transfer assets like ETH, some stablecoins like USDC, DAI, USDT, etc, in a non-traceable manner. With Tornado Cash you are able to transfer the asset by a specific amount to a contract, and having the proof of your right to withdraw that amount (It’s a given hash), you can withdraw it with any other address. So basically you can see which Addresses deposited into Tornado cash, Also the addresses that withdrawn from Tornado Cash, but the connection will be lost here.

Why US Government banned Tornado Cash?

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Isn’t it obvious. We already are struggling everyday with accusations of dirty money and money laundering even in simple trades and NFT market. Every crypto user that has been around for even the shortest time have heard these accusations and it seems that we learned our ways to deal with it. In fact, This is as old as the crypto currency life since 2009 and probably will never cease to be for many years to come.

On the other side, These are not just words spreading in the air, rather lately turning into solid juristic bodies and regulatory movements that are starting to change crypto currencies history and future. The discussion of regulating crypto currencies have been around for some years and it is becoming more and more real as the adoption grows among more regular users. And still, money laundering is one of the main focus points of regulatories in every financial system.

With that being said, US government stressing on strong money laundering capabilities and history of Tornado Cash is the main reason behind this sanction (Or at least the main reason that we can see immediately)

Why would one use Tornado Cash if it’s not for money laundering?

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Well, Why would someone with money laundering purpose use it? It’s obvious, because they need privacy. They want to hide their identity or origin to be able to reach their goal.

But The problem is that it is not only criminals and money launderers that need privacy! Sorry for stating such an obvious right!

There are many more reasons that keeping your privacy safe can save you from bad consequences. Like what?

• Helping protestors of a totalitarian regime
• helping citizens of a country which is at war Like Ukraine or Palestine
• Helping some refugees that don’t have access to their bank account and more
• And let’s not forget that it is a right to keep your privacy for no reason at all. Privacy is a right in itself.

While it has been harder and harder everyday to keep your privacy in traditional banking finance, some crypto protocols like Tornado Cash, Using the very essence of crypto technology are providing services that can be used either for good or bad intentions.

Were do you stand in this debate? I would be happy to know your opinion anon!

What is going on in Tornado?

Now that you catch up to the debate, it’s time to take a look at real On-Chain data for Tornado cash.

How was the performance in August, before and after sanction announcement?

How about Past month (Starting from July till now) to get to know the scale and importance of Tornado?

Are people still using the services?

Who are the top Addresses?

Which category using the Tornado the most?

we will be answering these questions and some others to have a better understanding of how big of a deal this incident is.

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Starting from Overall number of transactions divided by contracts interacted, we can see that Tornado router contract has more than 3100 receiving transactions just in august. Using Tornado, you can either send your funds directly through the assets contracts, or sending through the router to do the work more private.

ETH transfers are far more popular than other tokens like DAI, USDT, WBTC , etc.

Sanction Effect

To see whether or not the announcement had any effect on Tornado performance, I provided some information on a daily basis in august.

• You can see that both in terms of Volume USD Transferred and the number of transactions, There is huge decrease on august 10th.

Although the announcement was published publicly on August 8th, but it took a while till the effects demonstrate themselves. beside from the fact that some addresses were intentionally using the service to disrupt the reputation of some other addresses on august 9th by sending 0.1 eth to them (Pink circle in right below chart)

Size of the circles represent the volume and number of transaction in left and right chart in order.

Although numbers decreased drastically, but people didn’t stopped using the services. There are user who don’t give a …. about US sanctions anyway :)

• Resulting from charts below we can say that high volume transfers are more popular through ETH, as 71 users are responsible for transferring more than 10 million dollars worth of ETH, while 56 people only transferred ~600k dollars worth of other assets.

Top Addresses

For top addresses, I showcased 4 charts with 4 different criteria based on:

• The number of ETH transfer transactions
• The volume of ETH Transferred
• The number of Tokens transfer transactions
• The USD volume of Tokens transferred

I also showed the opposite respective information for each address to bold the difference between number and volume.

In next step, to further categorize the users, I put them into 5 groups based on their USD volume Transfers and show the distribution of the users among groups based on their number of transactions and volume transferred.

• Based on the number of transactions, group with volume between 1000$ and 10000$ has the most usage. and group below 1000$ is the second one. This is true in both ETH and Tokens transfers.
• But the competition turn upside down in terms of volume transferred, as the few people more than 1 Million are dominating by far.
• This suggests that although regular user are taking advantage of Tornado services, but the benefits for Whales (or criminals/hackers?) are far more.

Which side will you stand anon?

There is no doubt that services like Tornado can be used for criminal activities, but what about traditional finance itself?

can we ever compare the two, while there are many more criminal activities and money laundering efforts running each and everyday in government banks?

But I can not ignore the fact there is contradiction is pro-crypto side. The contradiction between transparency and privacy. while we have been yelling about the pros of transparency in decentralized ledgers, and stablished our argument against governments based on their untransparent doings, why all of a sudden we want these private ledgers and services?

Anyhow, Governments and regulatories are coming for crypto and we are at the gates of a whole new are. a fierce battle that will alter the world we live in a way that our future experiences might be dramatically different from that of our fathers. Let’s hope for the best my friends.