Category: Privacy

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Cryptocurrency Law Privacy Social media Tornado Cash

#FreeAlexPertsev Protest March Kicks Off After Tornado Cash Dev’s Arrest

A week after the arrest of Tornado Cash developer Alexey Pertsev, public dissent has reached a crescendo. Crypto and privacy advocates are planning protest marches and a petition advocating for his release is now circulating on social media under the #FreeAlexPertsev banner.

Writers of Open-Source Code Treated as Scapegoats

Following Pertsev’s arrest in Dam Square, Amsterdam, 50 advocates organised a demonstration alongside Pertsev’s wife, Xenia Malik. The public is also getting on board with protesters arguing Pertsev should not be held responsible for writing open-source code, regardless of its users.

The protest is raising several questions in relation to whether these projects’ developers deserve such harsh punishments. Crypto mixers in themselves are not illegal, merely serving to allow users transaction anonymity. The problem comes when this technology is used to launder illicit funds.

A petition was organised on Change.org last week by Finnish product manager Daria Mironova, who hopes to further raise awareness of the circumstances of the arrest. In the petition, Mironova explains that open-source software can be “audited, fixed and improved by anyone”, yet a developer cannot control how this code is used, even with the best intentions.

If we don’t react now, in the future we might see many cases where innocent developers go to prison when someone misuses their code.

Daria Mironova, Finnish product manager

As it stands, no official charges have been filed against Pertsev; however, he has been interrogated about his involvement in the protocol’s development. By the end of last week, 1,015 signatures had been added to the petition. When that figure reaches 40,000, Mironova plans to take this proof of public dissent to the authorities.

How It All Started

On August 12, Dutch authorities announced they had arrested Perstev in Amsterdam for his supposed involvement in facilitating money laundering and concealing criminal financial flows through his work on the crypto mixing service. It was alleged that Tornado Cash enabled criminals to launder stolen assets by concealing their identities.

Yet it wasn’t all negative, as the platform also hid the identities of Ukrainian citizens receiving donated crypto from the public. However, the Dutch authorities maintain that those behind the company made a significant profit from these transactions.

Categories
Crime Ethereum Privacy Tornado Cash

Suspected Tornado Cash Developer Arrested by Dutch Authorities

Dutch authorities have announced their arrest last week of a Tornado Cash developer in Amsterdam for his alleged involvement in concealing criminal financial flows and facilitating money laundering through his work on the crypto mixing service. 

Tornado Cash, which is built on the Ethereum blockchain, allows users to conceal the sending and receiving addresses of transactions, thus concealing their identity. It has reportedly been widely used by criminals to launder stolen assets, but has also been used for legitimate purposes such as concealing the identities of Ukrainian citizens receiving donated crypto.

Dutch Investigators Say More Arrests May Follow

The Tornado Cash developer’s arrest was announced by the Dutch Fiscal Information and Investigation Service (FIOD) on August 12, two days after it took place. The FIOD said it couldn’t rule out further arrests in connection with the case.

FIOD’s interest in Tornado Cash began in June of this year when its Financial Advanced Cyber Team (FACT) launched a criminal investigation of the service. FACT claims that Tornado Cash has been widely used by hackers to launder vast quantities of stolen crypto assets including “funds stolen through hacks by a group believed to be associated with North Korea”.

FACT found evidence of high-value criminal cash flows through the mixer since it was launched in 2019:

Investigations showed that at least one billion dollars’ worth of cryptocurrencies of criminal origin passed through the mixer. It is suspected that persons behind this organisation have made large-scale profits from these transactions. 

Dutch Fiscal Information and Investigation Service (FIOD)

Crypto Community Reacts With Dismay

This arrest comes after the US Treasury’s sanctioning of Tornado Cash last week for what it described as the crypto mixer’s repeated failures to impose effective controls to curtail illegal use of the service. Tornado Cash had previously attempted to weed out criminal users of the service by blocking sanctioned addresses, but the US authorities considered these efforts inadequate.

The crypto community has generally reacted negatively to this arrest, suggesting it represents an infringement of the developer’s right to freedom of speech and an attack on crypto users’ privacy:

Other Twitter users have also pointed out the disparity between the treatment of the Tornado Cash developers and the creators of some high-profile crypto failures and rug pulls:

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Crypto News Keep Network NuCypher Privacy

NuCypher (NU) Token Soars 87% Amid Threshold Network Merger

The Keep Network and NuCypher are being hard merged into one project called the Threshold Network. KEEP tokens and NU tokens will cease to exist and holders will instead be issued T Tokens in an agreed ratio.

The hard merge will enable both crypto projects to take advantage of each other’s capabilities and will also allow them to drive synergies:

NuCypher and Keep are ETH-based layer-2 solutions that deal in privacy infrastructure projects. The new combined blockchain will issue new tokens called Threshold Network Tokens (Ts) to KEEP and NU holders at an agreed ratio:

What are KEEP and NuCypher?

The Keep Network is a global decentralised network of computers that securely stores private information in an encrypted format and builds off-chain containers called “keeps”, where data is stored securely and privately. To achieve this, the network splits data into different Keeps which are then allocated to validators, where the use of Random Beacon encrypts and stores the data securely. The network is powered by KEEP tokens, which have a fixed supply of 1 billion.

NuCypher is a similar project model to the Keep Network, but it focuses on providing security and privacy layers to dApps built on Ethereum and other blockchain platforms. NuCypher provides its users with end-to-end encrypted data sharing on public blockchains and decentralised storage solutions. NU tokens power the NuCypher platform with a limited supply of 3.89 billion. NuCypher pumped 760 percent in a week following the news of a protocol merger.

How Will the Merger Work?

The initial supply of the new Token Threshold will be limited to 10 billion, with each of the projects getting 45 percent of the total supply at the agreed ratio, which means that for each I KEEP, 4.78 T tokens will be issued, and for every 1 NU token, 3.26 T tokens will be issued. The remaining 10 percent of the T token supply will be set aside for the Keanu Decentralised Autonomous Organisation (DAO).

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Basic Attention Token Crypto News Privacy Solana Tokens

Brave Browser Update Expands Web3 Access to Solana

Privacy-focused browser Brave has partnered with Solana to facilitate Web3 for crypto newbies while also providing a robust suite of Web3 tools for advanced users.

Added Support for dApps

In what Brave describes as its first steps toward full integration with the Solana ecosystem, it will also offer support for Solana’s decentralised applications (dApps), allowing them to run natively within the browser.

Integration to be Completed by July

Addressing the Breakpoint conference in Lisbon, Portugal earlier this week, Brave CEO and co-founder Brendan Eich said the browser’s default support for Solana would help provide fast and affordable Web3 access and thus “pave the way for the next billion crypto users”, adding that he expected the integration process to be completed by the end of June.

The partnership brings the Solana blockchain to Brave’s 42 million monthly active users and 1.3 million verified creators. In return, Solana will implement Themis, a privacy-by-design advertising protocol considered a key milestone in the BAT 2.0 roadmap.

The BAT token powers Brave’s advertising ecosystem by allowing advertisers to purchase ad space. Last year, Brave launched its Brave Wallet, incorporating a rewards program that allows users to recoup 20 percent of their swap fees.

Over the past week, the Solana (SOL) token became the fourth-largest cryptocurrency by market capitalisation, overtaking Cardano and stablecoin provider Tether.

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Crypto News Monero Privacy

Monero (XMR) Rallies Amid Plans of Hard Fork in July

Privacy-focused protocol Monero is set to undergo a hard fork in July which would improve network security and fee changes, according to an announcement on GitHub. A testnet is set to be deployed next month.

Monero says the proposed hard fork would see version 15 of the privacy-focused coin launched with several upgrades for improved security. Since the announcement, its native coin XMR has rallied 11 percent. No separate coin will be issued after the hard fork at a block height of 2,668,888 expected in July. (Hard forks refer to a change to a blockchain protocol that would render the one previous to it invalid.)

The Monero protocol masks the wallet addresses of users, making it difficult to trace and track transaction behaviour.

What Happens After V15?

The hard fork set for July will usher in software iteration V15, with two previous versions going live in 2020 that introduced marginal upgrades. V15 will see an increase in Monero’s ring size from 11 to 16, along with fixes to its multi-signature mechanism.

Multisignature refers to a transaction that needs multiple signatures before it can be submitted to the network and executed, with ring size referring to the total number of signers in a ring signature. A ring signature is a form of digital signature in which a group of possible signers is merged to produce a single and distinctive signature that can authorise a transaction.

V15 will also introduce a “bulletproof+”, an upgrade to the bulletproof technology deployed on Monero in 2018 that ensures the information stored within a confidential transaction does not contain any false data.

News of the hard fork is welcome, considering the trouble Monero faced earlier in the year. The protocol’s biggest mining pool, MineXMR, approached 51 percent of the hashrate, which raised some serious alarms.

Categories
DeFi Illegal Privacy Scams Tornado Cash

ETH Privacy Tool Tornado Cash Starts Blocking Sanctioned Addresses

Tornado Cash is apparently using Chainalysis oracles to block access from US Office of Foreign Assets Control (OFAC) addresses. The blockade only applies to the Tornado front-end, not the underlying smart contract:

As a fully decentralised protocol for private transactions of Ethereum, Tornado Cash last year announced it would be integrating with Arbitrum, the layer-2 solution that leverages optimistic rollups for Ethereum dApps.

Maintaining financial privacy is essential to preserving our freedom, [though] it should not come at the cost of non-compliance.

Tornado Cash

Tornado Cash works by “breaking the on-chain link between source and destination addresses”. Deposits go into a smart contract, where they are mixed around with others, and can then be withdrawn by a new address, making it more private.

The Chainalysis oracle is a smart contract that works on Ethereum and several other networks, including Avalanche, BNB Smart Chain, and sidechain and layer-two networks such as Polygon and Optimism. Simply put, Tornado Cash is a piece of code that scans crypto addresses and determines whether they are subject to sanctions from the US or other governments, and if so, the wallet is blocked.  

Tornado Cash Facilitates Hackers

Earlier this month, Inverse Finance, a decentralised lending protocol built on Ethereum, lost over US$15 million in a DeFi hack. Hackers were able to take out massive loans and get away with it through Tornado Cash.

Categories
Crypto News Crypto Wallets Privacy

EU Set to Vote on Prohibiting Transactions to Unhosted Wallets

The global crypto community is up in arms over proposed new European Union rules that would sanction the invasion of personal privacy and treat new technologies less fairly than cash or traditional bank transfers.

The EU Parliament seeks to extend checks to cover privately managed unhosted wallets that store crypto, despite fears that such rules could prove unenforceable:

Examples of an unhosted, or non-custodial, wallet include MetaMask, WalletConnect, or hardware wallets such as Ledger and Trezor. 

“Money going to unhosted wallets may end up in the wrong place, for example with terrorist groups,” according to Paul Tang, one of the members of the European Parliament on the Economic Affairs Committee that will vote on the matter later this week.

Data Collection an Impossible Task

Tang, a Dutch socialist, tweeted earlier this week that wallet owners would need to be identified in the same manner as bank customers are. The draft regulation would require crypto service providers not only to collect personal data related to transfers made to and from unhosted wallets (as they are already obliged to do) but also to “verify the accuracy of information with respect to the originator or beneficiary behind the unhosted wallet”. Such verification would prove problematic, if not impossible, say those service providers.

‘Travel Rule’ Another Data Harvesting Scheme in Disguise

The likes of Coinbase are already objecting to the EU’s so-called travel rule, which proposes to extend anti-money-laundering identity checks to payments made in digital currencies, even if they fall under an existing threshold of 1,000 euros (US$1,098).

“The travel rule … is really a massive and indiscriminate personal data collection and transfer scheme,” said Mikołaj Barczentewicz, associate professor at the University of Surrey in the UK and Fellow of Stanford Law School (US).

Proponents of the new rules, Barczentewicz added, are “saying that it is necessary for all crypto service providers to report sensitive data of their clients, even when there is not even the slightest suspicion of a criminal connection”.

Even if the 1,000 euro threshold were maintained, he said, such a privacy restriction would “very likely not be as effective as less rights-restricting alternatives” because those with nefarious aims could simply circumvent them.

What we seem to be dealing with here is an attempt to do ‘something about crypto and crime’ without a serious, evidence-based reflection on how best to do it.

Mikołaj Barczentewicz, associate professor, University of Surrey (UK), and Fellow of Stanford Law School (US)

In more encouraging news earlier this month, the EU Parliament voted against a proof-of-work ban, allowing BTC holders at least to breathe a collective sigh of relief.

Categories
Blockchain Crypto News Ethereum Privacy

Stanford University Raises $32 Million for Privacy Focused Blockchain

Espresso is the new scalability optimised and privacy-focused layer-1 blockchain being developed in the US by Stanford University’s cryptography research group.

Espresso Systems is led by a dream team, combining some of the world’s leading experts in zero-knowledge proofs and cryptography from Dan Boneh’s Applied Cryptography PhD course at the California-based Stanford, one of the world’s leading teaching and research institutions.

Co-founders Ben Fisch, Benedikt Bunz and Charles Lu (who have worked together on other high-profile Web3 projects, including privacy-focused blockchain project Monero) join Jill Gunter (Slow Ventures) to bring Espresso to market.

The project not only has the best brains in the business but also has plenty of venture capital funding. Espresso Systems announced on March 8 that it had raised US$32 million in a Series A round.

Leveraging zero-knowledge (ZK-rollups) combined with “proof-of-stake” consensus, Espresso aims to optimise for both privacy and scalability, without compromising decentralisation, and build the infrastructure to support the future of Web3.

Core Feature is CAPE Transactions

One of Espresso’s core features is Configurable Asset Privacy for Ethereum (CAPE), a smart-contract application that enables customised privacy levels over the visibility of information on the blockchain. CAPE “wraps” wallet addresses, asset types, transaction amounts, and credentials so they can be hidden from public view. Issuers on CAPE get to determine what data gets shared and with whom.

Stanford is not the only prestigious university with a blockchain-focused research team. Cambridge in the UK recently announced it would launch its own crypto institutional research group, The Cambridge Digital Assets Programme (CDAP).

Categories
Crypto News Markets Monero Privacy Regulation Zcash

Privacy Coins XMR, ZCASH Surge Amid Political and Regulatory Uncertainty

The past 24 hours has been kind to privacy coins, with many seeing gains of over 20 percent amid concerns about the regulatory environment in the US, a crackdown by exchanges on accounts linked to Russia, and ongoing economic sanctions.

Monero, the largest privacy coin by market cap, shot up 22 percent in under three hours according to CoinGecko, peaking at almost US$206 before consolidating around the US$185-190 range.

Likewise, Zcash is up over 30 percent since March 8, having climbed from US$106 and is currently trading at close to US$145, according to CoinGecko. This rally from Zcash follows a significant bounce in November 2021 after the announcement of plans to transition to a proof-of-stake blockchain.

Smaller Privacy Coins Also Up

The surge in privacy coins hasn’t been limited to the large caps; most smaller plays are also up significantly in the past day: Oasis has gained 10.4 percent, Secret is up 14.5 percent and Horizen 17 percent.

Even low-cap and relatively unknown privacy protocols are surging: Pirate Chain is up 18 percent, Tornado Cash 32.7 percent and Verge by 25 percent, all in the past 24 hours.

What Caused the Surge?

Opinion is divided on what exactly has sparked this sudden surge in privacy coins, and there are likely several factors at play.

The release of the crypto executive order by President Biden, with its focus on consumer protection and illicit activity along with the suspension by Coinbase of over 25,000 addresses linked to Russian criminals, are thought to be important factors.

There is also some speculation that Russian oligarchs may be buying up privacy coins to help them get around economic sanctions while maintaining their anonymity:

To put the surge in privacy coins in context, according to CoinMarketCap the overall crypto market cap is up around 4 percent over the past 48 hours.

Categories
DeFi Ethereum Privacy Tornado Cash

Tornado Cash Token (TORN) Surges 94% Following Bullish Protocol Updates

The native token for the Tornado Cash protocol (TORN), an Ethereum-based privacy protocol, has surged 94 percent following the launch of its latest network updates.

Tornado Cash is a fully decentralised privacy protocol which enables anonymous transactions on the Ethereum network. The protocol achieves anonymity primarily by breaking the on-chain link between source and destination addresses when transactions are made.

Price Increase Follows Launch Of Relayers

The latest price action for TORN follows the adoption and implementation of the protocol’s 10th on-chain governance proposal, which saw the addition of relayers to the network:

The community voted overwhelmingly in favour of the proposal, which was accepted on February 19. Following the launch of relayers on March 2, the price of TORN spiked from around US$37 to around the $US67 mark.

What Are Relayers?

Tornado Cash relayers are community members who process withdrawal transactions and allow users to send transactions to accounts with no ETH balance – they are considered an important part of the protocol and improve users’ privacy. 

Relayers are compensated for their network services with a small portion of users’ deposits. Anyone can become a relayer, provided they meet the minimum balance requirement of 300 TORN and accept the terms and conditions.

TORN Gaining Momentum

The addition of relayers to the Tornado Cash protocol is a further boost following its integration of ETH layer 2 solution Arbitrum in December 2021, which saw a dramatic decrease in gas fees and improvements in transaction times:

The protocol was also recently assessed by DeFi safety, which found it to be highly secure – awarding Tornado Cash an overall score of 85 percent.