Hello,
First some background : unlike wiring funds from a bank account, when
you send money using Bitcoin or Ethereum, the recipient can through your
sending address being revealed, knows how much you do own and earn and
spent. I'm meaning complete past and future financial history.
Tornado Cash as a privacy pool works though severing the links between a
sender and a receiver thus making the funds untraceable. According to
Chainalysis, ~40% of the funds transiting through Tornado Cash are
directly linked to money laundering. While a large poriton this is still
not the majority. A comparison can be done with the banning of
eDonkey2000 decades ago along the use of Bittorrent , in the name it was
used only for illegal file sharing or
https://en.wikipedia.org/wiki/MGM_Studios,_Inc._v._Grokster,_Ltd..
Unlike web services, Tornado Cash uses smart contracts which are
executed by miners when processing the transactions of the blockchain.
In the case of Tornado Cash, such programs are made immutable which
means even Tornado Cash as entity has no way to update or control the
code and thus cannot control the funds.
So, when sanctioning Tornado Cash, ofac forbid any US person or peoples
interacting with US based persons to use or allow to use to the
contracts since they can't be removed. And by banning any interactions
with the contracts, us persons are not legally allowed to withdraw the
funds they deposited or received on the contracts just before the ban.
Which means such money is legally trapped.
Such move nerveless, had huge repercussions : first as the founders live
in the us, they are de facto not legally allowed to talk about the
protocol which is why the official Twitter account went silent
https://twitter.com/tornadocash. And which also means exchanges are
threatening to delist the Torn token of the dao because of the lacks of
updates from the Twitter account. As appointed mods lived in the us,
they had to abandon control over the dao, thus greatly restricting
actions on the non privacy related parts of the protocol :
https://cointelegraph.com/news/tornado-cash-community-fund-multi-signature-wallet-disbands-amid-sanctions.
And then, still on the side of speech, Discord.com account was deleted
which allowed a scammer to replace it for robbing user's funds and
snapshot.org which allows to attach text to on-chain vote for the dao
also banned access to the ens. GitHub deleted the source code along the
accounts of the biggest code contributors to the project
https://twitter.com/semenov_roman_/status/1556717890308653059.
And continuing on this, domain names like https://tornado.cash were
sized along the https//torn.community discussion forum which was open to
all users. This prevents small users to use the front-end/protocol while
still allowing bad actors with the know how for handling bytes manually
to use the underlying smart contracts.
The idea of cryptocurrency as being decentralized took a hit : rpc
endpoints like Infura are blocking any interactions and those who
refused got their Amazon ec3 or Microsoft vms sized, which means you not
only need your own node but need your own OpenEthereum fatdb enabled
using 12Tib cutting edge slc based ssd at your own home in order to
fetch the on-chain data required for computing the zsNark proof which
used to be possible through a mobile phone. Some mining pools are
refusing to include the transactions in blocks
https://forkast.news/headlines/ethermine-stops-tornado-cash-transactions/.
The issue is expected to become even worst with the switch to staking
because as part of the upgrade, which means transactions might ends up
completely censored at the Ethereum level.
Not to say, but as a precedent, with Bitcoin refusing hard forks and
it's mining being heavily centralized, there will one day be more than
50% of the hasrate coming from regulated pools refusing to mine on
blocks implementing the next halving in order to have more than 21
millions Bitcoins for helping fund growth. And hence there will be lot
of more than 21 millions Bitcoins. Although the average bitcoiner
technically disagree of such variant of the 51% attack but without
giving proper argumentation.
