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Tornado Cash restriction might be disastrous for other privacy systems

Tornado Cash restric

The U.S. ban on Tornado Cash may have an

influence on Web3technologies

 in particular that offer privacy on the blockchain.

The recent US government sanctions on Tornado Cash have raised concerns that they may lead to a "slippery slope" for Web3 privacy and ultimately make the medium "meaningless."

Manta Network's co-founder, Shumo Chu, voiced concern to the reporter that the severe penalties imposed on Tornado Cash would have a ripple effect on all Web3 protocols, even those that provide anonymity.

Chu is one of the co-founders of the layer-1 privacy protocol Manta Network, which is built on Polkadot and allows for private transactions in decentralised finance (DeFi). Coin transactions are anonymous thanks to the Tornado Cash (TORN) privacy technology for Ethereum (ETH). Similar to Zcash (ZEC) and Monero (XMR), these protocols conceal the sender and receiver information of cryptographic transactions.

The protocol was effectively banned by the US Treasury Department earlier this month, and on August 5 it added 44 ETH and USD Coin (USDC) addresses associated to it to the list of Specially Designated Nationals.

Chu voiced worry that other privacy protocols that are comparable to his could come under the same kind of control, rendering the entire Web3 domain "essentially meaningless."

Chu pointed out that Lazarus, a North Korean cyber gang, has a history of utilising Tornado to launder the money it has stolen, therefore the ban's imposition was ostensibly imposed in the name of national security. In his decision to forbid the protocol, Chu, however, questioned the ability of the government to comprehend how decentralised systems based on open-source code can be located and run anywhere.

Dutch authorities apprehended a Tornado Cash developer last week on suspicion of taking part in money laundering. The Ethereum engineer Virgil Griffiths was one of the cryptography developers who was detained in the past, according to Chu, but banning a protocol is "a new paradigm" that suggests the government is trying to control math and coding in general. Developer of privacy protocols Chu points out that there is a fallacy about privacy that "ordinary people use it too," debunking this assertion.

He went on to say that because the system is permissionless, "there will be people gaming the system," thus it is important to encourage positive use cases as well. He holds the same views as Jesse Powell, CEO of Kraken, who said on Bloomberg TV on August 16 that "people have a right to financial privacy" and that the penalties against Tornado were "unconstitutional."

Chu believes that privacy protocols should have modest entry requirements so that regular people can utilise them on a daily basis. But if privacy laws are scrupulously upheld, his objective might be in risk.


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