Ethermine, the largest Ethereum mining pool, has reportedly stopped processing Tornado Cash-related transactions.
According to on-chain data by crypto analyst Takens Theorem on Twitter, Ethermine has not generated a block that contains Tornado Cash transactions since a few weeks ago.
The most recent block that included Tornado Cash transactions mined by Ethermine was Block 15306892, created on August 9. It contained ten 10 ETH transactions that went through the Tornado Cash protocol.
If censorship resistance isn’t a goal, these networks can be a *whole lot* simpler and more efficient. https://t.co/PbhFKl4Z74
— Matthew Green (@matthew_d_green) August 19, 2022
Instead of Ethermine, Tornado Cash transactions have been carried out on other mining platforms, including P2Pool, 2Miners, and Hiveon.
Experts said that it might be a result of the sanction imposed on Tornado Cash by the U.S. Treasury Department’s Office of Foreign Asset Control (OFAC). This sanction prevents any U.S. individual or organization from using the virtual currency mixer in their transactions.
The ban was issued as the crypto mixing protocol had been used to “launder greater than $7 billion price of digital foreign money since its creation in 2019.”
There had been several cases in the past showing that the mixing service was utilized by hacking syndicates, including world-famous Lazarus, to transfer funds secretly. The OFAC then blacklisted addresses in the Tornado Cash protocol.
Tornado Cash is a protocol that allows crypto users to transfer assets without disclosing their addresses. The protocol tampers the link between a sender and a recipient on the Ethereum blockchain.
Previously, finance tech company Circle froze USDC assets in its platform that went through Tornado Cash protocol following the ban. It resulted in users being unable to access their assets. It was also reported that brokers had pulled out their funds.
Reactions to Ethermine
Several figures in the crypto community have expressed their disagreement with Ethermine’s move, including Ethereum founder Vitalik Buterin.
According to Buterin, excluding Tornado Cash transactions in Ethereum Blockchain was “an attack on Ethereum and a burning of its shares through social consensus."
Meanwhile, Gnosis’ Martin Koppelman said that Ethermine’s action would make others follow suit.
I disagree. It does matter. It normalizes that behavior and it thus puts pressure on others to do it as well. In a world where >90% would do it, the step is much smaller to then start ignoring the other <10% blocks.
— Martin Köppelmann 🇺🇦 (@koeppelmann) August 20, 2022
So - IT MATTERS!
Igor Mandrigin, the CTO of Gateway.fm, said, “It’s not technically impossible not to propose blocks with TC, to ignore them from the transaction pool.”
Nonetheless, Mandrigin added that it was better to have fewer U.S. verifiers in the system.
The move also stirred debate because the mining pool is not a U.S. company and therefore does not need to follow the country’s regulations. However, its users might be U.S. citizens, and their dabblings in transactions linked to Tornado Cash might have legal implications.
Implications
Crypto experts said that Ethermine’s action put free and decentralized internet “at stake” since Ethereum Blockchain was built on the principle that it would not select which transaction to process to ensure inclusiveness.
If other miners followed Ethermine’s action, the crypto mixing protocol might no longer service transactions done by crypto miners.
There is also a possibility that other privacy-enhancing protocols will experience the same impact as demonstrated by FTX’s current regulation. The cryptocurrency exchange platform recently banned all users who used Tornado Cash and other similar tools to conduct transactions within its platform after the ban.
Meanwhile, DeFi projects have been struggling to decide the next course of action. DYdX and Aave were compliant with OFAC’s sanction until it switched back to allowing Tornado Cash transactions recently.