Tornado Cash Event Grows: It Affects Altcoins! - TechnoPixel (2024)

TechnoPixel—2 years ago

On August 8, the US Treasury Department decided to impose sanctions on Tornado Cash, which makes it difficult to track cryptocurrencies. Several Twitter users today announced that DeFi lending giant Aave has also blocked addresses linked to Tornado Cash. The event spans from Tornado Cash to various DeFi altcoin projects including USDC, Uniswap, Aave and Balancer.

All addresses linked to Tornado Cash are blocked

Wallet addresses of prominent users, including Tron founder Justin Sun and Cobo CEO Shixing Mao, have been blocked by Aave. According to PeckShieldAlert, 0.1 ETH was sent from Tornado Cash 0.1 ETH contract to over 600 addresses. These include crypto phenomena and centralized exchanges. The closure of accounts sent with the news of 0.1 ETH raises doubts about “decentralization in DeFi”. In addition, platforms like Discord and Github have also removed Tornado Cash-related services.

PeckShieldAlert reported in the tweet below that 0.1 ETH was sent to over 600 addresses. For this reason, one of the names whose account was blocked was Justin Sun.

Meanwhile, one of the Tornado Cash developers was arrested in the Netherlands yesterday. In addition, many companies and organizations have banned Tornado Cash after the U.S. Department of the Treasury’s Office of Foreign Assets Control added it to its National Specially Designated list.

Impact of Tornado Cash on stablecoins

Tornado Cash ban threatens stablecoins like USDC, DAI, FRAX. Stablecoins are the backbone of the DeFi market. Blacklisting Circle-related Tornado Cash wallet addresses based on US OFAC’s sanctions orders. Also, DAI and FRAX are backed by USDC to hold stablecoins in USD. People believe these are now at risk, as OFAC could forcibly take control by approving any smart contract, DAO, protocol or company to make it illegal. As a result, the voice of the crypto community began to rise on social media.

How is Twitter reacting to the Tornado Cash restriction?

On August 8, the sanctions decision from the official website of the US Treasury Department shocked the crypto community. These included Stefan George, co-founder and CTO of Gnosis. Stefan George recalls US attempts to ban one of the core elements of PGP encryption. In the 1990s, the US Customs Service launched a criminal investigation against Phil Zimmermann. This was because part of its code was considered to be subject to arms smuggling export controls of ammunition. Stefan George shared a separate thread on Twitter about this.

One of the people who made a historical comparison to punishment was DeFi researcher Chris Blec. Blec compared the sanctions against Tornado Cash to punishing gun manufacturers for the illegal activities of their customers:

Explain that arresting Tornado developers for writing code that can be used by criminals does not result in gun manufacturers being arrested for producing weapons that can be used by criminals.

DeFi market caught fire after Tornado Cash

Some services that have already sanctioned Tornado Cash are under the scrutiny of privacy advocates. With print time, Tornado clients are now prohibited from using the Aave Finance (AAVE) and dYdX (DYDX) frontends. Tornado Cash’s main Discord server is also down, while the accounts of the project and its developers have been suspended by GitHub. Besides that, Circle somehow froze some USDC coins associated with Tornado. Crypto investor Ryan Sean Adams criticizes services that block Tornado Cash addresses, advising them to “build some backbones”:

It’s time for DeFi to build some backbone and fight instead of just blocking ETH addresses. Blacklisting citizens for no reason by unelected bureaucrats is unconstitutional, illegal and incompatible with any free society. If we don’t stop this here, it will only get worse.

However, some crypto experts recommend using the DeFi codebase with custom-built frontends, as all major Ethereum-centric protocols are open source:

Reactions from web3

Bitcoin veteran Adam Back produced garments printed “Tornado Cash” to react with his t-shirts.

Another user turned the TornadoCash codebase into a piece of digital art:

Finally, veteran Blockchain security researcher and ConsenSys Diligence co-founder Gonçalo Sá published a Tornado Cash factory that partially reimburses distribution costs for every Web3 enthusiast using the latest version of the codebase:

As Kriptokoin.com, we have quoted the US Treasury Department’s sanction decision for TornadoCash in this article. After this deposit, all platforms start transactions about TornadoCash or people connected to the mixer. The TORN price is in free fall after the sanction.

TagsAave (AAVE)CirclesdYdX (DYDX)Tornado Cash (TORN)usd coin (USDC) Tornado Cash