Tornado Cash Hack

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Time will tell what will fill the hole left by Tornado Cash, according to Chainalysis’s principal scientist

Tornado Cash Hack
Tornado Cash Hack / Image Credit: CRYPKYP
1663839323 22 Sep / 09:35

According to the head scientist at Chainalysis, more time is required before we can determine the impact of the penalties on the cryptocurrency mixer Tornado Cash.

Cointelegraph interviewed Chainalysis' head scientist Jacob Illum and national manager for Australia and New Zealand Todd Lenfield about the implications of the Tornado Cash ban during a demonstration of their freshly launched blockchain analysis software Storyline.

Illum stated that while there is still some use of the crypto mixer, more time is required to "watch what's occurring" and how the "world responds to that designation," adding that people are attempting to determine what to do now that the crypto mixer is virtually gone:

People are uncertain about how to deal with Tornado Cash, so deposits into comparable services have decreased, at least momentarily. People assess the situation by asking, “What does this imply for me?”

But where others see hurdles, others see opportunity. Illum highlighted that several “junior mixers” had emerged to capitalize on the hole left by Tornado Cash.

SlowMist reported in August that 74.6% of stolen assets on the Ethereum network were moved to Tornado Cash in the first half of 2022, totaling over 300,000 Ether (ETH), or around $380 million.

In April, the 30-day moving average of the total daily value received by crypto mixers reached a new all-time high of $51.8 million, according to Chainalysis data.

“If the liquid is not present, you eliminate a great deal of [a mixer’s] capacity,” Lenfield explained:

“The search for locations where there is liquidity when it is extremely evident after events such as the OFAC sanctioning of Tornado Cash, is a space to keep an eye on,” says the author.

The United States Treasury Department sanctioned Tornado currency on August 8, indicating that U.S. people or companies interacting with the substance might face criminal or civil consequences. Over 40 bitcoin addresses allegedly associated with Tornado Cash were added to the Office of Foreign Asset Control’s list of Specially Designated Nationals (OFAC).

When asked about the level of knowledge of law enforcement agencies in addressing crypto-related crime, Illum stated that blockchain-related training is currently one of the largest gaps in law enforcement.

“As [blockchain] use increases, more individuals are exposed to cryptocurrencies, which means that more agents and law enforcement professionals must also be exposed to cryptocurrencies.”

Lenfield observed that authorities are beginning to develop bitcoin-related skills, noting the Australian Federal Police’s (AFP) recent formation of a cryptocurrency surveillance section.

“It is active in their minds; they are making objectives and pursuing them. But, as with any element, there is a learning curve to get them there, but those agencies have complete visibility and development in this domain.”

In early September, the Chainalysis Crypto Incident Response team assisted law enforcement in recovering $30 million in cryptocurrency stolen in the Ronin Bridge attack by the Lazarus Group, which has ties to North Korea and utilized Tornado Cash to launder stolen assets.

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