In the first six months of 2024, more than $1.9 billion has been deposited onto Ethereum mixer Tornado Cash (TORN). Although things have slowed down in July—the protocol has seemingly attracted only $65.1 million worth of deposits, according to data provided by crypto analytics service Flipside.
Given Tornado Cash’s nature as a mixer, the total value locked (TVL) metric used for judging an ecosystem’s activity level is not as reliable. Total value locked refers the the value of assets that have been deposited into a decentralized application. That's why TVL isn't typically used to measure activity on Tornado Cash. The expected use case is to deposit funds and then withdraw anonymized funds—rather than keep them in the protocol for a long time like with most decentralized finance services.
Still, DeFiLlama data for Tornado Cash’s TVL shows sizeable growth, with the protocol starting the year at under 160,000 ETH and currently standing at nearly 168,600 ETH. In U.S. dollars, this is a growth from $374.4 million to the current value of $572.82 million — when taking asset value growth into account.
What is Tornado Cash?
Tornado Cash is a coin mixer that was created to preserve the privacy of crypto users. Using zero-knowledge proof cryptography, the protocol anonymizes user deposits and allows their withdrawal to a new address that cannot be traced to the old one.
The Ethereum mixer has seen inflows from wallets associated with major hacks, including the hacker behind the Poloniex hack sending $3.3 million worth of Ethereum (ETH) to the mixer back in early May. Due to transactions linked to hacks—including some allegedly linked to North Korea—the U.S. Treasury Department sanctioned Tornado Cash in early August 2022.
This was then followed by the lengthy legal prosecution against Tornado Cash developers which was seen as a major overreach by much of the crypto community. This prosecution is still ongoing, with a last week ruling delaying the money laundering trial of Tornado Cash co-founder Roman Storm, over the objections of the prosecution.
Coinbase's chief legal officer Paul Grewal said in April that the U.S. Treasury is "bending old laws past their breaking point" by placing blame for Tornado Cash’s misuse on developers and TORN holders.
Immutable, open-source software code isn’t property, which creates a real issue for Treasury, as it’s authorized to regulate only 'property' in which a foreign national has an interest, he said at the time.
Ethereum co-founder Vitalik Buterin said in late May that Tornado Cash developer Alexey Pertsev being sentenced to 64-months in prison was “really unfortunate,” and continued to back privacy-centric crypto tools, encouraging people to develop “next-gen” solutions.
"I think a lot of people have been going under the assumption [...] that just building software is something that’s okay," he said during a fireside chat at DappCon in Berlin, "and is a totally legal and legit way to fight for privacy."
Edited by Stacy Elliott.
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