Tornado Cash Sanction — A Blatant Attack on Privacy and Growth
As a private data management framework for Web 3.0 that proposes and implements a privacy layer interacting with the multichain ecosystem, we cannot afford to remain silent at this junction.
It is worth iterating that the sole purpose of Ruby Protocol is to make privacy accessible to everyone. It is the Decentralized Privacy-Centric Protocol for Web3. We aim to create a fine-grained private data access-control gateway across different entities and organizations in the decentralized and traditional financial world.
However, the recent news made us wonder if building a tool is wrong, if creating something technologically superior becomes a crime, and what it means for us and societies.
On Monday, the US Treasury imposed its first-ever sanction against an on-chain decentralized finance protocol, the decentralized cryptocurrency mixing service Tornado Cash.
Although the reasons behind this decision seem legitimate at first glance, they cannot stand closer scrutiny.
Tornado Cash’s official site claims that users have deposited more than 3.2 million ETH (roughly $3.5 billion) in the service since it was launched in August of 2019. Of that $3.5 billion, more than $1 billion — that is almost a third of all the funds that are gone through Tornado Cash — was “laundered” through the protocol, “the vast majority from thefts and hacks,” according to Arda Akartuna, a cybersecurity threat analyst at blockchain tracking firm Elliptic.
A spokesperson for Chainalysis, another blockchain tracking firm, said that the company estimates that $1.2 billion of “illicit funds” have gone through Tornado Cash.
However, we beg you to consider the following facts before jumping to any conclusion.
- Tornado Cash wasn’t created by criminals. Its founder Roman Semenov runs a cybersecurity firm called PepperSec.
- Tornado Cash uses smart contracts on the Ethereum blockchain, which cannot be changed and which the developers have no control over.
- Tornado cash is a privacy protocol. The design of Tornado Cash means that it’s uncensorable, permissionless, and completely trustless.
- A tool can be abused but the tool has its merits and should remain available for public use.
The reality of Money Laundering
Criticisms around crypto and blockchain have many faces. One of the most untenable arguments is that only criminals use it. The reality is far from the truth.
The role played by cryptocurrencies in money laundering has been greatly exaggerated by opponents of the emerging asset class, according to a new report from the Society for Worldwide Interbank Financial Telecommunication (SWIFT).
United Nations research indicates that anything from $800 billion to $2 trillion is laundered via fiat channels each year. But cryptocurrencies are used in just a small fraction of such activity. Concurrently, the cryptocurrency industry has also been criticized for being a tool for money laundering, despite statistics stating otherwise. It is estimated that only 1.1% of all cryptocurrency transactions are illicit.
Following the logic of the US Treasury, the next steps should be
- Publicly denounce fiat currency as a rat poison that criminals use to destroy global financial systems.
- List into sanction list the major banks including HSBC, BCCI, Wachovia, Standard Chartered, Danske Bank, Nauru, Goldman Sachs, Bank of New York Mellon, and many others around the world.
- Prevent all American citizens and other cooperating countries from using them.
- And if other methods and technologies are found useful for fiat money laundering, add them to the list too. The sanction list should grow indefinitely to protect the financial system.
The irony is palpable.
Why It’s Wrong to Ban Ban Ban
History is littered with timid souls who fear and condemn powerful tools and right ideas. From Nicolaus Copernicus facing death by being burned to the sizable shares of the population rejecting evolution and clinging to their obsolete beliefs. Imagine the unnecessary suffering there would be If we listen and follow in their footsteps.
Governments like to know they have the answers and know what is best for their citizens. But they don’t and here’s why it’s a bad idea to simply ban anything you don’t understand or control.
- Technology will always be one step ahead. It is born to pave the way for the next paradigm shift. To ban a technology is equivalent to saying this tool is so good that we fear anyone that knows using it could render us a bit less powerful. In some sense, a ban is a badge of honor and recognition.
- Technological innovations live on the verge, created and used by the people on the verge, whatever the nature of that verge is.
- There’s a positive power to the technology that we don‘t know how to harness. Study it. Experiment with it. Make a better version out of it.
- To ban it is to kill the development. No one gains anything out of it except for those who enjoy some form of monopolistic power, which individuals do not.
What Tornado Cash Really Represents
In our opinion, Tornado Cash is the perfect representation of technological free speech and the significant growth resulting from it.
We, the tech community, have a right to free speech because the entirety of society depends on its ability to adapt to the changing horizon of the future. It is a free market in some sense. It’s a free market argument about technology, tools, and related ideas.
It is a shame that we view free speech only verbally. Free speech comes in many forms. Building an on-chain decentralized finance protocol and cryptocurrency mixing service is certainly one of them because the project was built upon a set of beliefs and values that speak to thousands of users. We argue that to ban Tornado Cash is the same as banning a world you don’t like to hear.
The audacity of this move shows ignorance.
If free speech should be written into law to break the rising tide of cancel culture.
Then technological free speech should be protected to break the shackles imposed on privacy, ideas, and growth.
References:
- https://www.swift.com/sites/default/files/files/swift_bae_report_Follow-The%20Money.pdf
- https://www.vice.com/en/article/k7bqb9/tornado-cash-is-crypto-hackers-favorite-way-to-cash-out-but-experts-say-it-can-be-traced
- https://decrypt.co/107030/crypto-leaders-decry-tyranny-of-tornado-cash-ban
- https://www.unodc.org/unodc/en/money-laundering/globalization.html
- https://www.forbes.com/sites/tatianakoffman/2020/09/27/the-hidden-truth-behind-money-laundering-banks-and-cryptocurrency
About Us
Ruby Protocol is a cross-chain, privacy-first infrastructure, powered by Polkadot. Our layer-1 protocol utilizes Functional Encryption (FE) cryptography, which allows users to adopt a modular approach to data privacy and ownership. This novel solution will allow users to encrypt sensitive information on-chain, which can only be decrypted by holders of an approved private key.
Ruby’s FE Substrate-pallet will serve as the building blocks for privacy-first smart contract DApps building on the native Ruby Chain, while also acting as a privacy layer for Parachains and Web3 DApps across the Polkadot ecosystem.
