Tornado Cash – Due to the US ban, the main Ethereum DeFi protocols have started to restrict the number of transactions that may be made using wallet addresses that have dealt with Tornado Cash.
Users of the trading “mixer” platform Tornado Cash can fund their accounts with ETH or other ERC-20 tokens that are accepted. In order to increase anonymity, the initiative will mix this ETH before sending it back to the user, effectively deleting virtually all evidence of the funds’ previous transactions. This project is open source and entirely decentralized, however it is prohibited by law simply because it is misused.
Many organizations in the DeFi and blockchain sector banned TC when the US issued a “blocking” order, including Circle (the issuer of USDC stablecoins), RPC providers including Infura and Alchemy, dYdX exchange, and Oasis.app wallet. Many established technology platforms, including those that host websites, GitHub, Discord, and the project DAO community’s website, have also stopped offering their services for Tornado Cash.
Even the USDC in Tornado Cash’s wallet was frozen by Circle, igniting debate over centralization. To reduce the possibility of cash freezing, Maker’s stablecoin project DAI is thinking of eliminating USDC from the list of collateral assets.
When Dutch police detained a Tornado Cash developer on the afternoon of August 12, the incident’s gravity rose. The DeFi community is further perplexed by this revelation because it is unclear whether other developers or users who have dealt with TC may face legal repercussions.
Aave, Uniswap, and Balancer, three of the most important DeFi protocols, have reportedly begun to block wallets that had interacted with Tornado Cash’s smart contract by the morning of August 13. Users will notice specifically that their address is not permitted to connect to the project because it is linked to blocked activity while accessing these platforms. In contrast to blocking from smart contracts, this is merely a measure to restrict access on the protocols’ front end interface.
Many joked that there was now a way to prevent other addresses from selling tokens on Ethereum by sending ETH there via Tornado Cash as the project’s smart contract was still operational despite the website being offline.
The Tornado Cash event has raised serious concerns about the compatibility of DeFi projects’ decentralized nature with a nation’s duty to uphold the law. The crypto community on Twitter, however, feels that the US has been too aggressive in its prohibition, and some users even changed the ava to the Tornado Cash logo to show their support for the initiative.
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