The US Department of Treasure has banned the use of the Tornado Cash crypto mixer stating that it has been used to launder more than $7 billion worth of cryptocurrency since its creation in 2019. The banning of mixers has resulted in wide outrage against the US government. Privacy advocates call it a tool for ‘anonymity’, while the US government claims that it is only used for money laundering and illicit activities. Today, we explain the technology behind these mixers and how these mixers are used for money laundering purposes.
Coin mixers
Tornado Cash (Tornado) is a cryptocurrency mixer that works on the Ethereum blockchain. It facilitates anonymous transactions by making it extremely difficult to trace crypto wallets. The mixer receives hundreds and thousands of transactions that are mixed before transferring them to an individual wallet.
For instance, say if you’d like to transfer some Bitcoin to another wallet. By using mixers, these funds will be sent to hundreds and thousands of wallets in fractions, before actually getting into the recipient’s wallet. It makes it almost impossible to retrieve the final address of the crypto wallet.
Tornado Cash allows users to connect their crypto wallets like MetaMask or Walletconnect and choose a network to deposit or withdraw their cryptos. For deposits, the token options are ETH, DAI, cDAI, USDC, USDT, and WBTC.
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Coin mixers are typically non-custodial, meaning that they do not take control of your wallet. These services are neutral, meaning that they don’t use any intermediary or third party for facilitating transactions. This makes them a favourite tool for cybercriminals who are looking to launder stolen crypto, as in the case of Larazus Gr ..
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