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Tornado Cash

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Discover Tornado Cash's fundamentals and latest news.

This content was generated by Whalee (BETA), an AI crypto assitant that analyses cryptocurrencies. Informations can be incomplete and/or erroneous. Please always double check and DYOR.

What is Tornado Cash?

Tornado Cash (TORN) is a decentralized, non-custodial cryptocurrency mixer that operates on Ethereum Virtual Machine-compatible networks. It uses zero-knowledge proofs to obscure the trail of cryptocurrency transactions, providing privacy for users. The protocol is governed by a decentralized autonomous organization (DAO) and employs a voting system using the $TORN token for protocol updates. Despite its legitimate privacy goals, Tornado Cash has been accused of facilitating money laundering and has faced significant legal challenges, including sanctions from the U.S. Treasury’s Office of Foreign Assets Control (OFAC) and criminal charges against its developers.

How is Tornado Cash used?

Tornado Cash (TORN) is a decentralized, non-custodial privacy solution built on Ethereum. It allows users to transact privately by breaking the on-chain link between source and destination addresses. Here's how it works:

  1. Depositing Funds: Users deposit Ether (ETH) or ERC-20 tokens into Tornado Cash smart contracts. The protocol generates a random key and deposits the tokens, ensuring that the user's identity remains private.

  2. Withdrawal Process: To withdraw funds, users must submit proof of having the valid key. They can use a crypto wallet like MetaMask or the Relayer service, which avoids recording the transaction publicly on the blockchain. This ensures that the withdrawal address remains anonymous.

  3. Anonymity Points and Governance: Users who interact with Tornado Cash accrue Anonymity Points, which can be converted into TORN tokens. These tokens are used for governance, allowing holders to vote on proposals and changes within the protocol.

  1. Governance and Token Distribution: There are 10 million TORN tokens, with 55% reserved for the DAO governance treasury, 30% for founding developers and early supporters, and 10% for anonymity mining. The remaining 5% was airdropped to early adopters.

  2. Use Cases: Tornado Cash is used for various purposes, including:

    • Privacy Protection: Users can obscure their transactions on-chain, making it difficult to trace the source and destination of funds.
    • Laundering Stolen Funds: Unfortunately, hackers and malicious actors also use Tornado Cash to legitimize their source of funds by removing connections to hacked wallets or malicious crypto activity.

Overall, Tornado Cash provides a level of anonymity on Ethereum, but its use can be both legitimate and illicit.

How do I store Tornado Cash?

To store Tornado Cash (TORN) tokens, you can use a variety of digital wallets that support Ethereum-based tokens. Here are some steps to follow:

  1. Choose a Wallet: Select a reputable digital wallet that supports Ethereum (ERC20) tokens. Popular options include MetaMask, Trust Wallet, Ledger Live, and Exodus.

  2. Create or Access Your Wallet: If you already have a wallet, log in. If not, create a new wallet by following the wallet provider's instructions. Make sure to securely store your wallet's private keys and recovery phrases.

  3. Add TORN Token: Add the Tornado Cash (TORN) token to your wallet. You can do this by searching for TORN in the wallet's token list or by manually adding the token's contract address.

  1. Receive TORN Tokens: Once you have added the token, you can receive TORN tokens by sending them to your wallet address. You can purchase TORN tokens from a cryptocurrency exchange or receive them as part of a transaction.

  2. Secure Your Wallet: Ensure your wallet is secure by enabling two-factor authentication, using strong passwords, and keeping your wallet software up to date.

By following these steps, you can safely store your Tornado Cash (TORN) tokens in a digital wallet.

How to buy Tornado Cash?

To buy Tornado Cash (TORN) tokens, you can follow these steps:

Buying Tornado Cash (TORN) via a Crypto Wallet
  1. Choose a Wallet: Select a reliable and reputable crypto wallet that supports Tornado Cash (TORN).
  2. Download the App: Download the wallet application to your device from the Google Play Store, App Store, or as a browser extension.
  3. Create a Wallet: Create a new wallet address or import an existing one. Make sure you write down the seed phrase and keep it in a secure place.
  4. Buy Tornado Cash (TORN): Purchase the cryptocurrency using a supported payment method. Check the fees, as they may be higher than what exchanges charge.
  5. Swap for Tornado Cash (TORN): If your wallet doesn’t support direct fiat-to-TORN purchases, you can first buy a more popular cryptocurrency like USDT and then exchange it for Tornado Cash (TORN) through your crypto wallet or on a decentralized exchange.
Buying Tornado Cash (TORN) on a Centralized Exchange
  1. Choose a CEX: Select a reliable and trustworthy crypto exchange that supports Tornado Cash (TORN) purchases. Consider the ease of use, fee structure, and supported payment methods when choosing a crypto exchange.
  2. Create an Account: Enter the required information and set a secure password. Enable 2FA using Google Authenticator and other security settings to add an extra layer of security to your account.
  3. Verify Your Identity: Complete KYC verification, which may vary based on your nationality and region.
  4. Add a Payment Method: Follow the instructions provided by the exchange to add a credit/debit card, bank account, or other supported payment method.
  5. Buy Tornado Cash (TORN): You are now ready to buy Tornado Cash (TORN) using fiat currency if supported. You could also do a crypto-to-crypto exchange by first purchasing a popular cryptocurrency such as USDT and then exchanging it for Tornado Cash (TORN).
Buying Tornado Cash (TORN) on a Decentralized Exchange (DEX)
  1. Choose a DEX: Select a decentralized exchange that supports Tornado Cash (TORN). Open the DEX app and connect your wallet. Make sure your wallet is compatible with the network.
  2. Buy Base Currency: Buy the base currency from a secure centralized exchange such as KuCoin.
  3. Send the Base Currency to Your Wallet: Transfer the base currency to your web3 wallet.
  4. Swap Your Base Currency for Tornado Cash (TORN): You are now ready to swap your base currencies for Tornado Cash (TORN).
Buying Tornado Cash (TORN) on SimpleSwap
  1. Choose the Fiat Currency: Select the fiat currency you want to buy TORN for.
  2. Enter the Amount: Enter the amount you would like to swap.
  3. Select Tornado Cash: Select Tornado Cash in the “You get” section to see the estimated amount of TORN you will receive.
  4. Enter the Recipient’s Address: Enter the recipient’s Tornado Cash address.
  5. Create the Exchange: Complete the exchange by sending the indicated amount of fiat currency to the provided address.

Remember to always check fees and ensure you understand the associated risks before making any investment decisions.

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History of Tornado Cash

Tornado Cash, also stylized as TornadoCash, is a decentralized cryptocurrency tumbler that runs on Ethereum Virtual Machine-compatible networks. It was initially released on December 17, 2019, and its stable release, version 3, was launched on December 16, 2021.

Blacklisting and Legal Issues

On August 8, 2022, the Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury blacklisted Tornado Cash, making it illegal for U.S. citizens, residents, and companies to use the service. This was due to allegations of laundering over $7 billion in virtual currencies, including $455 million believed to have been stolen by the Lazarus Group, a hacking group associated with the North Korean government.

Developer Arrests and Charges

Following the blacklisting, the domain used by the project was taken down, and GitHub removed the Tornado Cash repository and suspended the developers' accounts. Alexey Pertsev, one of the developers, was arrested in Amsterdam on suspicion of involvement in concealing criminal financial flows and facilitating money laundering through the service. On May 14, 2023, Pertsev was sentenced to 5 years and 4 months in prison for his role in Tornado Cash development.

Additionally, on August 23, 2023, two more Tornado developers, Roman Storm and Roman Semenov, were charged with assisting in money laundering in the amount of $1 billion. Roman Storm was arrested in Washington State.

Governance and Token

Tornado Cash uses a governance model where community members can vote on proposals with the TORN token. TORN is an ERC-20 token with a fixed supply of 10 million tokens. The token distribution includes 55% reserved for the DAO governance treasury, 30% for founding developers and early supporters, and 10% for anonymity mining on Tornado Cash’s ETH pools.

Hacking Incident

On May 21, 2023, a hacker used a malicious proposal to gain full control of Tornado Cash's DAO. The hacker put forth a proposal for the DAO to vote on with hidden code that would issue fraudulent voting tokens to them. The vote was passed, giving the hacker enough voting tokens to control any future proposals. The hacker eventually relinquished control, but not before converting a portion of the stolen governance tokens to Ether valued at around $900,000 and laundering them through the service.

Current Status

As of September 2023, Tornado Cash continues to operate despite the legal issues and sanctions. It remains the largest crypto mixer running on the Ethereum blockchain, with around $230 million of crypto in its contracts, primarily in ETH.

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How Tornado Cash works

Tornado Cash (TORN) is a decentralized, non-custodial cryptocurrency mixer that operates on the Ethereum blockchain. It allows users to anonymize their Ethereum transactions by breaking the on-chain link between source and destination addresses. Here is a detailed explanation of how it works:

Deposit and Withdrawal Process
  1. Deposit: Users deposit their assets (ETH or other supported tokens) into one of Tornado Cash’s smart contracts, known as pools. These pools are immutable and cannot be modified or shut down by anyone, including the original developers.

  2. Mixing: The deposited assets are mixed with other assets in the pool, making it difficult to trace the origin of the funds. This mixing process ensures that the link between the deposit and withdrawal addresses is severed.

  3. Withdrawal: Users can then withdraw their assets from a different address, maintaining their privacy. The withdrawal process involves splitting the deposit note into a "secret" and a "lock," which are used to verify the user’s ownership without revealing their identity.

Governance and TORN Token
  1. TORN Token: The TORN token is an ERC-20 token used for governance purposes. It allows holders to vote on proposals that shape the direction of the Tornado Cash protocol.

  2. Governance: The governance model is decentralized, meaning that community members can propose and vote on changes to the protocol. This ensures that the project remains autonomous and decentralized.

Anonymity and Security
  1. Zero-Knowledge Proofs: Tornado Cash uses zk-SNARK technology, which enables zero-knowledge proofs. This allows users to demonstrate possession of information without revealing it, further enhancing privacy.

  2. Open-Source: The code behind Tornado Cash is fully open-sourced, ensuring transparency and community involvement in its development.

Additional Features
  1. Anonymity Mining: Users can earn TORN tokens by participating in the anonymity mining system, which rewards users for supporting the project’s privacy features.

  2. Relayer Services: Users can opt to use relayer services for gas payments, which can further enhance privacy by hiding the user’s wallet address.

Challenges and Controversies
  1. Sanctions: In August 2022, the U.S. Department of the Treasury sanctioned Tornado Cash, making it illegal for U.S. citizens, residents, and companies to use. This led to the shutdown of the project’s web domain and GitHub accounts, and the arrest of one of the developers.

  2. Malicious Use: Tornado Cash has been used by hackers and malicious actors to launder stolen funds, which has raised concerns about its potential misuse.

Despite these challenges, Tornado Cash remains a significant player in the cryptocurrency space, offering a unique solution for users seeking privacy and anonymity in their transactions.

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Tornado Cash's strengths

The token Tornado Cash (TORN) has several strengths:

  1. Governance and Voting:
    TORN is a governance token that allows holders to propose and vote on protocol upgrades and fixes. This decentralized governance model ensures that the community has a say in the project's direction, fostering a sense of ownership and participation.

  2. Fixed Supply:
    The total supply of TORN tokens is capped at 10 million, which helps maintain a stable token economy and prevents inflation. This fixed supply also adds predictability to the token's value.

  3. Anonymity Mining:

Tornado Cash features an innovative anonymity mining system that rewards users who support the project's privacy features by providing liquidity. This system incentivizes users to contribute to the platform's privacy features, enhancing its overall effectiveness.

  1. Decentralized and Non-Custodial:
    Tornado Cash is built on the Ethereum blockchain and operates as a decentralized, non-custodial privacy solution. This ensures that users have full control over their assets and transactions, maintaining their privacy and security.

  2. Strong Token Distribution:
    The token distribution is well-structured, with 55% reserved for the DAO governance treasury, 30% for founding developers and early supporters, and 10% for anonymity mining. This distribution ensures that the token is well-distributed among stakeholders and contributors.

  3. Integration with Ethereum:

As an ERC-20 token, TORN is easily accessible and compatible with the Ethereum ecosystem, making it simple for users to interact with the platform and utilize its privacy features.

These strengths contribute to Tornado Cash's robustness and potential for long-term success in the cryptocurrency market.

Tornado Cash's risks

Tornado Cash (TORN) faces several financial risks due to its designation as a sanctioned entity by the U.S. Office of Foreign Assets Control (OFAC). These risks include:

  1. Money Laundering and Illicit Activities: Tornado Cash has been used to launder billions of dollars in criminal proceeds, including funds stolen by the North Korean-linked hacking group, Lazarus Group. This association with illicit activities poses significant financial risks to investors and users.

  2. Sanctions Compliance: As a sanctioned entity, U.S. persons, including financial institutions and exchanges, are prohibited from dealing with Tornado Cash. This restriction can severely limit the liquidity and usability of TORN, making it difficult for investors to buy, sell, or trade the token.

  3. Legal and Regulatory Uncertainty: The decentralized nature of Tornado Cash, operating on open-source software, raises questions about how to effectively enforce sanctions and ensure compliance. This legal uncertainty can lead to further risks and challenges for investors and users.

  1. Volatility and Market Fluctuations: The sanctions imposed on Tornado Cash have led to significant price drops, with the token's value plummeting by as much as 49.5% in a single week. This volatility can result in substantial losses for investors.

  2. Security Risks: Tornado Cash's experimental nature and decentralized structure make it vulnerable to security risks, which can compromise user funds and further erode investor confidence.

  3. Alternative Mixing Services: The sanctions on Tornado Cash may lead to the emergence of alternative mixing services, potentially fragmenting the market and reducing TORN's value.

These financial risks highlight the challenges and uncertainties surrounding Tornado Cash, making it crucial for investors to carefully evaluate their risk tolerance and investment decisions.

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Tornado Cash's ecosystem

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Tornado Cash’s team

  • Roman Storm: Co-founder of Tornado Cash, interested in blockchain technology since 2011, and involved in decentralized finance (DeFi) projects like Compound and 0x.
  • Roman Semenov: Co-founder of Tornado Cash, expert in quantum statistics and field theory, and previously co-founded RedHelper and PepperSec.

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