About 6 months after being blacklisted by the US Treasury, the Tornado Cash mixer is still functional and active. Although it has become more difficult to access, here is proof that it is nearly impossible to shut down a decentralized application. Let’s analyze the Tornado Cash situation today.
Tornado Cash still in use
In a report released on January 9, 2023, Chainalysis goes back to the impact of the sanctions implemented in 2022 against the cryptocurrency sector. The on-chain data analytics firm specifically cites the most significant fine, namely that of Cash tornado.
As a reminder, on August 8, 2022, the Tornado Cash mixing service was the first decentralized protocol – and the only one to date – be sanctioned by the Office of Foreign Assets Control (OFAC), the financial watchdog agency of the US Treasury. At issue: facilitation of money laundering.
Six months later, what were the impacts of these sanctions? According to Chainalysis, they’ve had some effect since then usage volumes decreased by 68% in the first 30 days, “but they haven’t quite stopped.” In fact, if we look at on-chain data, here’s what we see:
Evolution of volumes on Tornado Cash (before/after OFAC sanction)
The observation is the same for the number of users. As the decentralized mixer proceeded quietly averaging the 600 addresses per week, US Treasury sanctions halted the momentum. However, between 50 and 100 addresses continue to use the protocol every week.
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Useless Sanctions Against DeFi?
As evidenced by the data on the chain, Tornado Cash is hit but not shot down. Only the protocol website has been removed from OFAC. Obviously, now accessing the service is much more complexbut it is still possible.
Indeed, as a decentralized protocol, Tornado Cash is based on smart contracts that remain functional. In other words, as Chainalysis explains: “No one person or organization can ‘unplug’ Tornado Cash as easily as they would with a centralized service.”
Also, Chainalysis draws a parallel with Hydra, a centralized darknet marketplace. After the German police seized the servers and dismantled the organization, activities stopped and cryptocurrency transaction volumes were logically reduced to zero.
In summary, the drop in the number of Tornado Cash users is due to two reasons. First of all, difficulty accessing the service, now reserved for blockchain veterans. Next, the risk of their address being blacklisted of some other Ethereum applications.
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Sources: Chainalysis Report, Dune
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