US regulators sanctioned the Tornado Cash cryptocurrency mixer on the grounds that it was a money laundering tool.
However, on-chain data shows the opposite. According to the data, its main uses are others and only 10% of its funds come from hacker attacks.
The company Chainalysis published a report, detailing the origin of the different Tornado Cash funds. As the report shows, the service is not intended for criminals to launder money.
According to Chainalysis, since its launch in August 2019, the service has mixed around $7.6 billion in ETH. Of this total, almost 50% came from DeFi platforms and 17.6% from centralized exchanges (CEX). That is, only 17.7% are from Treasury-sanctioned addresses and 10.5% from stolen funds.
Funds marked as “sanctions” are not necessarily related to criminal activity. These addresses are for exchanges in which a sanctioned person or entity is involved.
Tornado Cash is a protocol that allows people to hide the origin or destination of their cryptocurrencies on the ETH network. For that, it received a sanction from the US Treasury. Regulators indicate that the tool facilitates the actions of cybercriminals linked to hacks and other crimes.
The Tornado Cash code mixes one user’s cryptocurrencies with another user’s pool. This is possible through a smart contract using a method called “zero-knowledge proof” or zk-SNARK. Thus, it is difficult for an outside observer to trace the origin of the funds.
In addition to mixing Ethereum (ETH), it is also possible to use the protocol to avoid Wrapped Bitcoin (WBTC) tracking. In addition, it is also possible to use the service for Dai (DAI), Tether (USDT), USD Coin (USDC), cDai (CDAI) and PKG token (PKG).