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Source: TokenInsight
Original title: From Tornado Cash Sanctions to Ethereum - "Say No" to Transaction Review at the Public Chain Level
html In early August, the U.S. Department of the Treasury's OFAC (Office of Foreign Assets Control) banned Tornado Cash on its sanctions list, accusing the open app of facilitating billions of dollars in money laundering. As a controversial service, it’s no surprise that Tornado Cash is being targeted by governments. But how to sanction decentralized applications (i.e. code that runs automatically on the blockchain)? Which individuals or entities will these sanctions affect? Will more DApps be sanctioned in the future? Let’s find out together.Table of Contents
- Tornado Cash - The Largest Digital Asset Mixer
- Sanctions on Decentralized Applications
- Ripple Effect - Can Ethereum be Censored?
- is written at the end
Tornado Cash - the largest digital asset mixer
Tornado Cash is a digital asset mixer running on Ethereum that can be used to obfuscate the source, destination and counterparty of on-chain transactions.
in our previous article "Tornado Cash - How to make your on-chain transactions untraceable?" ”, we explain the mechanism of Tornado Cash in detail, while also pointing out that Tornado Cash provides a controversial service. On the one hand, it protects user privacy because the data on the blockchain is publicly available, but on the other hand, it does facilitate money laundering.
According to SlowMist statistics, in the first half of 2022, 74.6% of stolen funds on the Ethereum network were transferred to Tornado Cash. It's no surprise that Tornado Cash was targeted by the government, but the way the sanctions were implemented was surprising.
Sanctions on decentralized applications
The Office of Foreign Assets Control (OFAC) under the U.S. Department of the Treasury administers and enforces economic sanctions against individuals and entities, such as terrorists and drug smugglers. On August 8, OFAC added Tornado Cash to its restricted entity list. More specifically, OFAC’s sanctions make it illegal for anyone to interact with 38 Tornado Cash smart contracts or handle assets originating from those smart contract addresses.
directly affects
companies or centralized network services can be asked to shut down, but decentralized applications running on Ethereum cannot be asked to shut down . Because it's just some code that runs automatically on the Ethereum blockchain.
Due to sanctions, centralized services related to Tornado Cash are now blocked, including:
- Its front-end webpage is no longer accessible. The source code on
- Github has been removed.
- Centralized RPC service providers and node infrastructure providers Infura and Alchemy have blacklisted Tornado Cash. MetaMask wallet uses Infura as its default RPC endpoint to connect to the Ethereum network. This means that MetaMask cannot access Tornado Cash related smart contracts if using default settings.
- Centralized stablecoin issuer Circle blacklisted related wallet addresses.
- Some DeFi protocols such as Aave, Uniswap and Balancer disable access to the frontends of these protocols by wallet addresses associated with sanctions. (Because the front-end website is a centralized network service).
Despite sanctions and the cessation of services by centralized service providers, the Tornado Cash smart contract still exists and is accessible on the Ethereum blockchain. Users can still interact directly with the contract, but this requires some technical skills.
Additionally, decentralized service options exist for the frontend and RPC. Its front-end web pages can still be accessed through IPFS. MetaMask can be used to access Tornado Cash by resetting RPC to a decentralized provider. We have provided a link to a tutorial where you can find how to set these up in the link below the image.
WARNING: Interacting with these smart contracts may violate U.S. law. The information provided below serves only as an exploration of the technical possibilities.
Source: Reddit
Although it is impossible to completely shut down a decentralized application, sanctions will have a deterrent effect on the application's maintenance managers .
While Tornado Cash will still be available for use, any changes or updates to the agreement will be considered illegal activity. Since the protocol is governed by the DAO and its governance token $TORN, participating in the governance process and voting will also be illegal. Its community forum has also been shut down, so further development of the protocol is unlikely.
Ripple Effect - Can Ethereum be censored?
Code that runs automatically on Ethereum will not stop running due to sanctions, but sanctions can effectively prevent individuals and entities from interacting with these codes. In the same way, Ethereum as a decentralized smart contract platform will not be censored, but miners (or validators in Ethereum 2.0) are individuals and entities who may be pressured not to verify certain transactions , causing these transactions to fail to be uploaded to the chain.
Source: Cryptoslate
Ethermin, one of the largest mining pools on Ethereum, was found to have stopped producing blocks related to Tornado Cash transactions. There are currently many other miners in PoW Ethereum, so transactions related to Tornado Cash can still be processed by other miners. However, this issue shows that if a sufficient proportion of miners follow suit, then although people can access the Tornado Cash smart contract, transactions at the blockchain level are censored by miners without verification and will cause any transactions related to Tornado Cash to be blocked. Unable to be confirmed.
In Ethereum 2.0, miners will be replaced by validators who are responsible for validating new transactions and generating new blocks for the blockchain. While anyone can choose to become a validator by staking 32 $ETH, $ETH holders will typically use a staking service provider such as Binance Stake, Coinbase Stake, or P2P Stake. These large staking service providers are well-known corporate entities and they may be forced to stop validating certain transactions.
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Tornado Cash helps protect privacy, but it does encourage money laundering. It is understandable that governments take steps to stop these money laundering activities. In the future, it will be difficult for Tornado Cash to turn around, and the entire coin mixer industry will also face a large-scale reshuffle. Can this go a long way to stemming the rise in hacker activity? Let's wait and see.
Compared with Tornado Cash itself, the transaction censorship behavior at the Ethereum level is more worrying. I believe many people, including me, have thought that apart from sanctioning companies directly involved in the development of blockchain projects, it would be difficult for governments to impose sanctions on a DApp or its users. But facts have proven that as long as any part of the decentralized service is a regulated individual or entity, it cannot escape the control of the legal system.
Can we really "say no" to transaction review at the public chain level? In the short term, in order to prevent a transaction on Ethereum from being affected by anyone or any entity, we need more decentralized validators distributed around the world, but this is only a temporary "escape" from a certain transaction. legal sanctions in some countries. In the long term, when all countries and regions have established a complete legal system for the blockchain industry, no matter how decentralized the blockchain network is, it will be subject to transaction review without exception.
Editor: Lynn
