A former Tornado Cash developer claims to be building a new cryptocurrency mixing service that aims to fix a “critical bug” of the sanctioned cryptocurrency mixer. with which he hopes to convince US regulators to reconsider their stance on privacy mixers.
The code for a new Ethereum-based mixer, “Privacy Pools”, was released on GitHub on March 5 by its creator, Ameen Soleimani..
In a 22-part Twitter thread, Soleimani explained that Tornado Cash’s “critical flaw” is that users cannot prove that they are not associated with North Korea’s Lazarus Group or any criminal enterprise..
1/ We fixed @tornadocash
v0 of https://t.co/Nt4b2Tgx1D is live on @optimismFND
test out the demo, but please note:
– this is experimental code
– it has not been audited
– the trusted setup is untrustedread the full story anon https://t.co/9nAU3RrgpN
— ameen.eth (@ameensol) March 4, 2023
1/ We have fixed @tornadocash
v0 of https://t.co/Nt4b2Tgx1D is live on @optimismFND
try the demo, but keep in mind:
– this is experimental code
– has not been audited
– trusted settings are not trustedread the full story anonymously: https://t.co/9nAU3RrgpN
— ameen.eth (@ameensol) March 4, 2023
With Privacy Pools, however, Soleimani says depositors and withdrawals can opt out of an anonymity pool that contains an address associated with stolen or laundered funds..
This Privacy Pools feature is executed with zero-knowledge (ZK) proofswhich means that the privacy of the user is preserved:
“Users now have the option to help regulators isolate illicit funds, without disclosing their entire transaction history. […] With privacy pools, just because someone deposits into the same smart contract as you, doesn’t mean they can also force you to share an anonymity pool with them. It’s your choice.”
Soleimani demonstrated how privacy pools are used:
13/ Our demo is live – https://t.co/Nt4b2Tgx1D
Now, users have the option to help regulators isolate illicit funds, without revealing their entire transaction history.
Let’s watch a brief video of it in action: pic.twitter.com/An9lWx6jfr
— ameen.eth (@ameensol) March 4, 2023
13/ Our demo is live – https://t.co/Nt4b2Tgx1D. Users now have the option to help regulators isolate illicit funds, without disclosing their entire transaction history. Let’s see a short video of it in action: pic.twitter.com/An9lWx6jfr
The developer hopes the fix will allow “the community to fend off hackers who abuse the anonymity sets of honest users.” without requiring blanket regulation or sacrificing the ideals of cryptocurrency.”
While Privacy Pools are already live on Optimism, Soleimani noted that the first version of the privacy protocol is still in its “experimental” stage because the code is not complete and has not been audited, but it is “pretty close to being ready.”.
To keep the protocol moving forward, Soleimani wants on-chain forensic platforms like Chainlaysis and TRM Labs to track deposits. so that users of the privacy tool do not have to manually create their own subset exclusion lists.
To defend on-chain privacy protocols, Soleimani cited what he described as an “excellent” report from the Federal Reserve Bank of St. Louis, Missouri, which examined the trade-offs between on-chain privacy and regulation.:
“Their report proposes to achieve effective regulation by having Tornado Cash users provide receipts to an intermediary, thereby disclosing their entire transaction history to the intermediary, but still being able to have privacy from other public blockchain users.”
The developer hopes this can help “start a conversation” with US regulators about how privacy can be preserved on-chain while restricting criminal activity. by using ZK tests.
Soleimani’s attempt to create a cryptocurrency-friendly on-chain privacy solution comes after the US Office of Foreign Assets Control (OFAC) sanctioned ETH and USDC addresses linked to Tornado Cash on Aug. 8. in response to several alleged thefts by North Korea’s Lazarus Group, which was claimed to have routinely used the privacy scrambler to preserve its anonymity.
Shortly after the sanction, on August 10, Alexey Pertsev, creator of Tornado Cash, was detained by the Dutch authorities and is currently facing a series of money laundering charges.. He remains behind bars and his next hearing will take place at the end of April.
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