Tornado Cash: The Holy Grail of On-Chain Privacy

Preface

Know Your Customer (KYC)
Monero (Cointelegraph)

Project Overview

How Tornado Cash Works (CoinGecko)

Market Opportunity

  • Private transfer of assets between addresses;
  • Generate transaction reports with the note for the legitimacy of asset source transfers (including deposit address, amount, and the date and withdrawal address, amount, and date); and
  • When conducting cryptocurrency-to-fiat currency transactions, the KYC process during the transaction is avoided by trading the deposit note (not the cryptocurrency itself) to maximize the protection of personal privacy.

Competitive Analysis

Privacy-Preserving Public Chain

  • Monero uses Stealth Address and Ring Confidential Transactions (RingCT) technology to balance anonymity and transfer efficiency.
  • Zcash is the first cryptocurrency to use zk-SNARK (Zero-Knowledge Succinct Non-Interactive Argument of Knowledge). Tornado Cash employs this same technology as a security guarantee for privacy transactions.
Monero vs Zcash (CryptoBriefing)
  • Oasis Labs’ Ekiden attempted this, but due to the product’s temporary immaturity and lack of sufficient developer support, we think it will be difficult to make a strong impact for at least some time.
  • Secret Network is also designing privacy calculations within general-purpose smart contracts, however, only on-chain exchanges have been released and there is a lack of liquidity within the house. At the same time, Secret Network needs to be developed using Rust, however, the Rust developer community is currently very small and mainly concentrated in the Polkadot ecosystem.

Ethereum Virtual Machine (EVM) Privacy Solution

The Ethereum Virtual Machine (Lynda)
  • Typhoon Cash is a project endorsed by Jeffrey Huang, set up on Ethereum, reusing most of the code base of Tornado Cash. It has a total locked value of only tens of thousands of dollars — the last deposit occurred 3 months ago;
  • Typhoon Network is set up on the Binance Smart Chain (BSC), reuses most of the code of Tornado Cash. It has a total locked value of just under $40,000; and
  • Cyclone is developed on the basis of Tornado Cash, deployed on Ethereum, Binance Smart Chain, and IoTeX. Further, it requires additional on-chain base currencies (such as ETH, BNB, and IOTX) and governance tokens CYC to complete deposits. It also requires users to pay anonymous pool fees and relay fees using CYC.

Token Economics

Initial Distribution of $TORN (Tornado Cash, Dec 2020)

Governance

Tornado.Cash Governance Proposal (Tornado Cash Medium)
Tornado.Cash Contracts are Immutable and Unstoppable (Tornado Cash Medium)
Community Proposals

Security

  1. To prevent problems such as server dropouts, website inaccessible in some area, and some users not wanting to expose their access records to Internet Service Providers (ISPs), Tornado Cash deploys an IPFS version of its front-end, and also provides a full set of front-end source code on GitHub for users to deploy on their own;
  2. When using the relay service, users will make requests directly to the relay node, and thus may expose their IP addresses. Therefore, Tornado Cash recommends all users initiate requests to the relay node via VPN to protect their IP from being leaked. In addition, it also provides a version of Tornado Cash based on the Tor Project, and there are also relay providers that offer a Tor version of the relay service. Further, all network requests are forwarded through multiple forwards to ensure absolute security; and
  3. To avoid time correlation of access transactions, it also officially recommended that withdrawals be made 24 hours after the deposit is made or after 12 or more other deposits have entered.
Anonymity (Tech Academy)

Compliance Risk

Conclusion

To the Moon (Tech Academy)

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