TORNADO CASH SWEPT AWAY WITH THE POWER OF TORNADO
Crypto mixer is going down. Is USDC dying? KBW2022 second day.
Coo! It’s me, Crypto Owl! Today is National Book Lovers day - so do you love to read books? Or maybe you’re more of a fan of newsletters (wink wink)?
If that’s the case - tell your friends about this Crypto Owl Newsletter! 🦉💜
Let’s take a look at the important news that Tuesday brought us.
On Today’s Menu:
🍳🥓 SCRAMBLED EGG WITH BACON: What’s Going on With Tornado Cash?
🥗SALMON BOWL: Korean Blockchain Week 2022 - the second day.
🍵 MATCHA TEA: North Korea plays a more important role in the crypto world than you think: see why, and how
WITH THE POWER OF THE TORNADO, TREASURY DEPARTMENT SWEPT AWAY TORNADO CASH
By ‘Tornado” I mean the U.S. Department of Treasury’s Office of Foreign Assets Control, or in short, the Treasury Department, which suspects bad actors who were doing bad things using Tornado Cash and applied sanctions in the US.
But, one thing at a time.
Tornado Cash is a popular and widely used decentralized cryptocurrency service (or, in various sources, you can find it called virtual crypto mixer) that allows users to private their transactions. Tornado Cash was created in 2019, and is based on the Ethereum blockchain, so… the Ethereum fan base must not be super happy.
Indiscrimination and anonymity, or basically increased privacy, were things that users appreciate most about the crypto mixer. However, such features worked really well for bad actors as well.
So, even though it was adored among the number of people (actually Twitter right now is full of unhappy Tornado Cash users’ posts), it seems like the favorable crypto mixer was used to launder money. A LOT OF MONEY. Whoopsie daisy.
What did Treasury Department find out?
Tornado Cash has been used to launder money since its creation - so, for 3 years now;
More than $7 billion worth of crypto has been concealed;
Of those $7 billion, $455 million alone was laundered by a North Korean hacking group called Lazarus Group (see more activities of this group here);
$96 million was laundered through this crypto mixer during the Harmony Bridge heist (from June 24, 2022);
Tornado Cash was also used to launder at least $7.8 million during the latest, Nomad Heist (from August 2, 2022).
Crazy? Damn, crazy is a soft word for this situation.
It’s the second time the Treasury Department sanctioned a crypto mixer - the first time it was Blender (based on Bitcoin), as Treasury Department found links between this mixer and North Korea. This time is the first such case on the Ethereum blockchain. Could this mean, that there are more such crypto mixers? And could this also mean the beginning of the end of crypto anonymity...?
What else?
Here you can find wallets addresses that are on the sanctions list:
Interesting fact: Vitalik Buterin admitted that he was one of the people, who used Tornado Cash to donate to Ukraine in the matter of war. Why? Because he’s Russian, and Russians cannot be on the “enemy’s” side, so Vitalik used the mixer to stay anonymous.
So, Americans from now on, cannot donate to Ukraine even if they would want to. Let me explain.
Blockchain analytics firm Elliptic chief scientist Tom Robinson said that “there is a need for solutions that can help you cover your tracks, even when you’re not doing anything illicit”. I guess that’s true. But how should this work for an ordinary American casually using this crypto mixer? Because, right now, thanks to sanctions, Americans can’t use Tornado Cash. And if anyone would try to interact with mixer’s USDC and Ethereum smart contract addresses on this list that you’ve already seen - could face violations (fines from $50k to $10 million and imprisonment from 10 to 30 years!). So, as I said, even helping Ukrainians are not allowed anymore.
Another interesting fact: the firm behind the stablecoin USDC - Circle - frozen around $75k in USDC (81 USDC addresses) that was on Tornado Cash. if you think better - this $75k is a ridiculously small amount - I mean, billions of dollars were laundered, right? However, this frozen amount of USDC is damaging to stablecoin itself. Because it shows that there is no decentralization.
The crypto community thinks so, too:
Infura (default Ethereum node) and Alchemy (blockchain API) also now blocking access to Tornado Cash.
On top of that, the Tornado Cash page is not impossible to reach. Github disabled all the accounts tied to Tornado Cash, including the crypto mixer’s co-founder Roman Semenov.
At least, it seems like we still have one good thing: Tornado Cash is sanctioned, but the smart contract it is built on, is still living.
So, all of this is super suspicious and do not send positive vibes. The bottom line is that Tornado Cash could be used by bad actors. But it is a very valuable product for people with good intentions as well. And this example with Vitalik just proves it.
And… I wanted to make you smile in the end, so:
Instead of Tornado….
SECOND DAY OF THE KOREAN BLOCKCHAIN WEEK 2022
A new day brought new speakers and new takeaways from me straightly to you.
Honk Kong-based venture firm Animoca Brands co-founder Yat Siu talked about the Web3 economy. He noted that:
The main aspect of blockchains and their growing technology to drive a more decentralized society are on-chain digital property rights;
We are all digital dependents: “The most powerful companies in the world today are <...> tech companies <...>. They're powerful because they control our data,” Siu said;
Asia is the best place for Web3 to grow because there’s a lot of “space”. Asia has a rich history, is able to provide digital property, and people here spend the most time on the internet, however, it is only 67% wide internet adoption on the continent, so there is a lot of room to grow;
Everyrealm CEO Janine Yorio talked about metaverse, and specifically mentioned Steven Spielberg’s movie Ready Player One. Yorio said that this movie has mistaken all of us because metaverse there was depicted unrealistically - as you can access it only wearing a VR headset. Actually, most of the metaverses are now being developed on desktops; and according to Yorio, within the next 12 to 36 months, we should witness really exciting things in metaverse creation: “a lot of the triple-A gaming studios…are actually going to start building and delivering the kind of metaverse” that we’re all waiting for;
Axie Infinity (Sky Mavis) co-founder Jeffrey Zirlin announced the great news. The most popular play-to-earn game has plans to double down in South Korea, as the country is one of the most important places in the world to grow the gaming market. It already has a massive amount of players, but it still has great perspectives to grow, according to Zirlin. He added, “Koreans are some of the best gamers in the world”; And that’s great!
MORE CRYPTO NEWS AROUND THE WEB
MATCHA TEA
❗STAY TUNED FOR TOMORROW’S VIDEO: WE’RE GOING TO TALK ABOUT THE TORNADO CASH INCIDENT IN DETAIL ❗
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Disclaimer: This newsletter is strictly educational. None of this information is intended to be financial advice. Always do your research and act responsibly with your profits.
Hi Crypto Owl - this is Kevin from Finblox; you contacted us several days ago. I have tried to reach you back unsuccessfully. Please email me at kevin@finbloxapp.com regarding the collaboration you requested. Thanks!