What is Tornado Cash? Tornado Cash is a decentralized, non-custodial crypto mixer designed to enhan
What is Tornado Cash?
Tornado Cash is a decentralized, non-custodial crypto mixer designed to enhance transaction privacy on public blockchains. It uses smart contracts and zero-knowledge (ZK) proofs to conceal the onchain link between the sender and receiver of a transaction.
Launched by Roman Storm and Roman Semenov on Ethereum in 2019, Tornado Cash allows users to send and receive cryptocurrency anonymously, without exposing their wallet history. Unlike centralized mixers, Tornado Cash operates entirely onchain through immutable smart contracts, meaning no central party controls the funds.
When a user deposits crypto, such as Ether (ETH), Tornado Cash generates a cryptographic note, which the user can later use to withdraw the same amount to a different address. The protocol was launched to boost privacy in Ethereum-based transactions. Over time, the developers have expanded its functionality to support multiple Ethereum Virtual Machine (EVM)-compatible chains, including BNB Smart Chain (BSC), Optimism, Polygon, Arbitrum and Avalanche.
Tornado Cash supports several ERC-20 tokens and native ETH across Ethereum and other EVM-compatible blockchains. At its peak usage, Tornado Cash supported several ERC-20 tokens, including:
- On Ethereum: Ether (ETH), Dai (DAI), USDC (USDC), Tether’s USDt (USDT), Wrapped Bitcoin (WBTC).
- On other EVM chains (via smart contract deployment): BNB (BNB), Polygon (POL), Avalanche (AVAX) and ETH on Arbitrum and Optimism.
Did you know? Tornado Cash launched in 2019 as an experiment in financial privacy using just a few smart contracts. By 2022, it had processed billions in crypto transactions without ever holding user funds directly.
How Tornado Cash works
Unlike traditional financial systems that prioritize users’ privacy, blockchain public ledgers are accessible to everyone on blockchain explorers. Tornado Cash counters this by enabling anonymous transactions through smart contracts and zero-knowledge proofs, specifically zk-SNARKs.
Crypto mixers typically pool and shuffle users’ funds, deduct a fee, and redistribute them. Tornado Cash, however, uses a pool-based system where deposits are commingled in a smart contract, and withdrawals to new addresses are delinked using zk-SNARKs, ensuring anonymity without random shuffling.
Here’s how it works:
- At its core, Tornado Cash has smart contracts that break the onchain link between a sender and receiver.
- When a user deposits a cryptocurrency into a Tornado Cash pool, the smart contract issues a cryptographic note that the user can later use to withdraw the same amount to a different wallet address without revealing the link between the two.
As Tornado Cash is a decentralized protocol, the underlying smart contracts cannot be changed or destroyed by anyone, including the Tornado Cash decentralized autonomous organization (DAO).
The system uses ZK-proofs, which allow a user to prove that they have the right to withdraw a specific amount without revealing what deposit was theirs. This mechanism ensures that deposits and withdrawals are mathematically linked but anonymous.
Tornado Cash is non-custodial, meaning it does not hold user funds at any point. The code runs independently and cannot be altered or controlled by the developers. The funds can remain in the pool for as long as the user likes.
Before sanctions, Tornado Cash was primarily accessed via its web interface by connecting a crypto wallet. Advanced users could also interact with the protocol’s smart contracts directly using a command-line interface.
How Tornado Cash got into trouble
Tornado Cash landed in legal trouble primarily because it was allegedly used to launder billions of dollars in illicit funds, including crypto stolen in high-profile hacks. The Treasury Department’s Office of Foreign Assets Control (OFAC) sanctioned Tornado Cash on Aug. 8, 2022, under Executive Order 13694.
There were several reasons behind Tornado Cash facing issues with regulators:
- Facilitation of money laundering: Tornado Cash was accused of facilitating money laundering, with the OFAC claiming it processed over $7 billion in virtual currency since 2019, approximately 30% of which was linked to illicit activity, per Chainalysis.
- Support for North Korean cybercrime: The platform was linked to laundering more than $455 million stolen by the Lazarus Group, a North Korean state-sponsored hacking group.
- Threat to national security: The OFAC accused Tornado Cash of materially assisting cyber-enabled activities originating outside the US, posing a significant threat to US national security, foreign policy and economic stability.
- Lack of effective controls: The Treasury highlighted Tornado Cash’s failure to implement adequate Anti-Money Laundering (AML) measures, allowing…
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