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What is Tornado Cash, and How Does It Work?

Decentralized and non-custodial, Tornado Cash is an Ethereum-based solution for privacy and anonymity. Severing the on-chain link between those who send and receive coins enhances transaction anonymity. 

This guide will provide our readers with more insight into Tornado Cash. We will start with a general introduction and move deeper into how Tornado Cash works. We will also add a list of pros and cons to this system for the reader’s benefit.

Understanding Tornado Cash

Decentralized protocols such as Tornado Cash (TORN) use Ethereum as a platform to facilitate anonymous token transfers. This token mixing platform derives its success from the Zcash privacy coin system.

For transactions, Tornado Cash employs the ERC-20 protocol on Ethereum. When the deposit or withdrawal operation ends, the   

As a result, you can request someone to send coins to Tornado Cash and receive funds in your wallet. Considering we are talking about a public blockchain like Ethereum, this mechanism ensures the protection of your financial privacy.

A Look Behind the Scenes

Assume you’re a blockchain expert tasked with locating a thief who recently stole your cryptocurrency. You may discover that the hacker utilized Tornado Cash after checking Etherscan for the address of the stolen assets. 

In particular, a hacker may deposit all the stolen funds on Tornado Cash.  There is, however, no way to know where your tokens have gone from this point on. 

An inexperienced hacker may re-direct the exact stolen amount to a new wallet immediately after depositing it on Tornado. If this happened, you’d be able to locate the suspicious transaction in a relatively straightforward manner.

However, a more experienced hacker can find a way to circumvent this problem. For example, hackers may divide the stolen amount into dozens of smaller transactions.  

A hacker may spread the withdrawals over a long period with randomly small transactions. 

Tornado Cash’s design is rather basic, yet it’s capable of obscuring the trails of its users. Without regulatory investigations, there is no way to link the corresponding deposits and withdrawals. 

As an Ethereum blockchain application, Tornado is widely available and simple for both new and experienced users.

Who Created Tornado Cash?

Roman Semenov and Roman Storm are the brains behind this token mixing business. Though he has a formal background in Metallurgical Engineering, Storm joined the blockchain industry in 2011.

Blockchainlabs.nz, Amazon, PepperSec, and various DeFi initiatives, including 0x and Aave, are among his prior employers. 

His work included evaluating Solidity code, constructing smart contracts, and creating ERC-20 tokens for these firms. He also worked on the development of smart contracts. 

Roman Semenov’s academic background is also interesting, focusing on field theory and quantum statistics. In addition, he was a co-founder PepperSec and Viking Studio. Furthermore, his duties included optimizing sales funnels and e-commerce conversions at RedHelper. 

The Tornado Cash blockchain project relies on open-source Zcash technology. However, Tornado Cash’s anonymity mixer service is more popular than Zcash.

A System with a Proprietary Token

Like most smart contract technologies, Tornado Cash relies on a native token to manage and provide services. This project depends on the TORN token, which the team claims allowed them to give up control of the protocol. 

Over five years, most TORN tokens (55 percent) will enter the market through its community and treasury. Developers and investors hold a 30% stake in TORN’s whole supply. The remaining 15% goes to airdrop events (5%) and mining operations (10%).

TORN tokens have a relatively broad set of applications. For example, holders can get benefits from anonymity mining. Tornado Cash features Anonymity Sets, as you may have observed if you played around with the platform. Users can add tokens to these sets and obtain rewards, triggering the anonymity mining operation.

Tornado Cash Pros

Tornado Cash is a crypto ‘mixer,’ a service that pools cryptocurrencies and distributes them to new addresses. Its ERC-20 compatibility is undoubtedly one of the main pros of this system. 

We can identify the system’s token on sites like CoinMarketCap, which is generally a way to obtain higher market traction. 

The anonymity mining feature rewards users for supporting the project’s privacy functionalities by giving them liquidity. This aspect appears to have the potential to reach a long-term improvement in the way Tornado Cash anonymizes transactions.

Finally, for investors concerned with privacy, Tornado Cash offers a relatively simple set of tools on the market. User-friendliness is a fundamental feature in the industry if you wish to have an extensive market reach.

Tornado Cash Cons

Mixers aren’t a game-changer since they have been around for a while.  Remember that it will leave a permanent imprint on your address even if you use one. 

If you use a mixer on your wallet, everyone will know that by simply looking at Etherscan. Ask yourself whether this is a risk that you are ready to run. 

A tightening of crypto legislation might lead to authorities sending inquiries to you on the matter. Regulators may question why you’ve previously utilized a mixing service. Those who choose to engage in illegal activity will need to face the consequences of their actions. 

The possibility of a hacker abusing this system is a factor to consider among its cons. Tornado Cash and similar alternatives will likely be at the core of the regulator’s assessments if lawmakers decide to tighten crypto policies. 

As a last point of contention, experienced Tornado Cash users usually complain about the lack of anonymity capabilities.

Key Takeaways

Tornado Cash might be a blessing to certain people who value their privacy. However, the anonymity provided by the service might at times be less than ideal for other users. 

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Tornado Cash is a service that aids people in protecting their privacy and anonymity. While doing so, it wishes to grant independence from the meddling of external authorities. Almost all of the positive and negative aspects of this decentralized cryptographic system are evident in this last statement.

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