Protecting Privacy on Ethereum with Tornado.Cash
PowerKee’s “Bastion of Privacy” #6 — Protecting Privacy on Ethereum
It has been a remarkable year for cryptocurrencies, including privacy coins. Monero is up 255% over the last year, and Dash and Zcash are up 149% and 136%, respectively. With regulatory scrutiny firmly on the menu for 2021, privacy considerations should be at the top of the crypto users’ agenda.
A few weeks ago, we talked about how Bitcoin and Ethereum can provide transaction privacy through mixers, like CoinJoin for Bitcoin and Tornado.Cash for Ethereum. In this week’s “Bastion of Privacy” release, we will take a closer look at the Tornado.Cash governance token, TORN, which was recently airdropped to anyone who used the service before December 6th. We also provide an update on the progress of PowerKee.
PowerKee is committed to making privacy easy for all cryptocurrency users. That’s why the team has been building out documentation that will describe how the protocol works. The documentation will clearly explain how to use the PowerKee wallet and how to handle the private keys for the wallet. It will also detail how the PowerKee block explorer works. The documentation will be understandable to cryptocurrency veterans and newcomers alike. The audit of the economy was done. Currently working on the C++ code audit and report of the code analyzers. Auditing the C++ code and code analyzers will take another 60 hours. Sneak peaks of the wallet, explorer and UI/UX will follow very soon. We are excited to come closer to our live product.
Introducing TORN, governance token for Tornado.Cash
Tornado.Cash is a mixer based on zero-knowledge proofs that facilitates private transactions on Ethereum. It does so by breaking the on-chain link between sender and receiver addresses. Essentially, when ETH is withdrawn to a new address, there’s no way to form a connection between the deposit and the withdrawal.
Tornado.Cash has grown substantially in 2020. Last week, for example, it exceeded $200 million in total deposits. We expect the protocol to continue to benefit from the trend towards privacy, especially considering the regulatory backdrop and events like the Ledger data breach.
(Source: Dune Analytics)
Tornado.Cash is fully autonomous and decentralised. Its smart contracts are immutable and non-upgradeable. There are no admins and no one, including the Tornado.Cash initial developers, can change the protocol or shut it down.
This, however, also means that the protocol is static. As such, Tornado.Cash decided to introduce a governance token, TORN, to evolve the product and facilitate community governance. TORN was launched on December 18th and is an ERC20-compatible token with a fixed supply of 10,000,000 TORN.
5% of the total supply was distributed to early users and adopters via an airdrop of non-transferable TORN vouchers (vTORN). vTORN is non-transferable, pending a governance vote, and will be redeemable for TORN within one year. The team used the logarithmic multiplier to make sure that all users are fairly rewarded. If you used Tornado.Cash before December 6th, you should be eligible for the airdrop. There was some community pushback against this distribution mechanism given that Tornado.Cash has been frequently used by hackers to move funds from exploited protocols.
The Tornado.Cash DAO treasury will receive 55% of the total supply, or 5,500,000 TORN, vested linearly over five years with a 3-month cliff. Another 30% will go to the founders and early supporters.
The final 10% will be unlocked via Anonymity Mining. Unlike traditional liquidity mining, Tornado’s two-stage shielded liquidity mining system will preserve liquidity providers’ privacy. The system is somewhat complex and involves private Anonymity Points (AP) that can be converted into TORN tokens via the custom-built Tornado.Cash AMM.
Last but not least, Tornado.Cash has outlined the initial parameters for governance. Any user with a minimum of 1,000 TORN tokens will be able to create a governance proposal. To do so, tokens first have to be locked in the governance contract and will remain there until the end of the proposal execution period. Initially, given the limited numbers of TORN in circulation, a minimum of 25,000 TORN will be required for a vote to pass. Of course, all of these parameters could be changed through the governance mechanism.
Tornado.Cash on Track for Further Growth
Tornado.Cash is one of the best privacy-preserving options for Ethereum transactions. With the launch of the governance token, the protocol ensures that its users will drive the evolution of the product in the future. We believe that privacy is likely to be high on crypto users’ agenda in 2021, and this move should position Tornado.Cash for future growth.
PowerKee is a cryptocurrency network that makes privacy easy. Users can transact cheaply and instantly while maintaining anonymity. The PowerKee protocol uses a mixture of zero-knowledge proofs and coin mixing to provide strong privacy assurances to its users.