Tornado Cash dev says ‘sequel’ to crypto mixer aims to be regulator-friendly

A former Twister Money developer claims to be constructing a brand new crypto mixing service that goals to unravel a “essential flaw” of the sanctioned crypto mixer — which he hopes will persuade U.S. regulators to rethink its place on privateness mixers.

The code of a brand new Ethereum-based mixer, “Privateness Swimming pools,” was launched on GitHub on Mar. 5 by its creator, Ameen Soleimani.

In a 22-part Twitter thread, Soleimani defined that the “essential flaw” with Tornado Cash is that customers can not show that they’re not related to North Korea’s Lazarus Group or any prison enterprise for that matter.

1/ We mounted @tornadocash

v0 of https://t.co/Nt4b2Tgx1D is dwell on @optimismFND

take a look at out the demo, however please word:
– that is experimental code
– it has not been audited
– the trusted setup is untrusted

learn the total story anon https://t.co/9nAU3RrgpN

— ameen.eth (@ameensol) March 4, 2023

With Privateness Swimming pools, nonetheless, Soleimani explained that depositors and withdrawers might decide out of an anonymity set that accommodates an deal with related to stolen or laundered funds.

This function of Privateness Swimming pools is executed with zero-knowledge (ZK) proofs, that means that the privacy of the user is preserved:

“Now, customers have the choice to assist regulators isolate illicit funds, with out revealing their total transaction historical past […] With privateness swimming pools, simply because somebody deposits into the identical sensible contract as you, it doesn’t suggest they’ll additionally power you into sharing an anonymity set with them. It is your alternative.”

Soleimani offered an indication of how Privateness Swimming pools is used:

13/ Our demo is dwell – https://t.co/Nt4b2Tgx1D

Now, customers have the choice to assist regulators isolate illicit funds, with out revealing their total transaction historical past.

Let’s watch a quick video of it in motion: pic.twitter.com/An9lWx6jfr

— ameen.eth (@ameensol) March 4, 2023

The developer hopes the answer will empower “the group to defend towards hackers abusing the anonymity units of sincere customers with out requiring blanket regulation or sacrificing on crypto beliefs.”

Whereas Privateness Swimming pools is already dwell on Optimism, Soleimani famous that the primary model of the privateness protocol remains to be in its “experimental” stage as a result of the code isn’t full and has not been audited, however he’s “fairly near having this prepared.”

To see the protocol progress additional, Soleimani needs on-chain forensics platforms like Chainlaysis and TRM Labs to conduct tracebacks on deposits in order that customers of the privateness instrument don’t should manually create their very own subset exclusion lists.

In making the case for on-chain privateness protocols, Soleimani cited what he described as an “glorious” report by the Federal Reserve Financial institution of St. Louis in Missouri which examined the trade-offs between on-chain privateness and regulation:

“Their report proposes to realize efficient regulation by having Twister Money customers present receipts to an middleman, thus revealing their total transaction historical past to the middleman, however nonetheless having the ability to have privateness with respect to different public blockchain customers.”

The developer hopes this will help “begin a dialog” with U.S. regulators on how on-chain privateness may be preserved while limiting prison exercise by way of the usage of ZK proofs.

Associated: On-chain privacy is key to the wider mass adoption of crypto

Soleimani’s try to create a crypto-friendly on-chain privateness resolution comes after the U.S. Workplace of Overseas Asset Management (OFAC) sanctioned ETH and USDC addresses linked to Tornado Cash on Aug. 8 in response to a number of alleged thefts by North Korea’s Lazarus Group, who had been claimed to have routinely used the privateness mixer to protect its anonymity.

Shortly after the sanction on Aug. 10, Alexey Pertsev, the creator of Twister Money was arrested by authorities in the Netherlands and is at present dealing with a collection of cash laundering costs. He stays behind bars and his subsequent listening to will happen in late April.