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Comment by paulpauper | Hacker News Reader

What will happen to the tainted money? This figure is about 400M$. I expect a secondary market for TCtETH (Tornado cash tainted ETH)

This is why crypto was never fungible or useful for privacy purposes. Gold and other precious medals can be melted. Crypto can never be seamlessly mixed. No matter how hard you try, transactions and trails can be reconstructed. The only way to mix is to generate a huge amount of noise.

This was inevitable. For the past 2 years or so years hackers would process their loot with Tornado. There is no way the govt. would stand for this. It's similar to how the Wanna Cry hack , in 2017, made KYC much more common because the hackers used exchanges to convert stolen BTC into monero. All it takes is a handful of people to abuse a service for it to be tainted/ruined for everyone else.

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> No matter how hard you try, transactions and trails can be reconstructed.

Except the opposite is true. Tornado cash protocol is working well enough in its privacy features that the US government feels the need to threaten any business touching it directly or indirectly.

Imagine you made this argument for E2EE. The US government can sanction and ban the use of Matrix and all other E2EE chat protocols making it very difficult for users to engage with them - but this does not mean the cryptographic protocols are failing to provide privacy and security.

ZCash, Monero, and MimbleWimble implementations such as Grin are seamlessly mixed; it's not a problem with all cryptocoins, just some. I think it's a much bigger problem for Ethereum than for Bitcoin, too, because Bitcoin doesn't have accounts, just unspent transaction outputs.

The non-blinded nature of some blockchains has always been a theoretical risk to the fungibility of their cryptocurrencies, and there have been isolated cases of blacklisting. Today that threat has suddenly materialized in a very significant way. Very likely that will create pressure toward cryptocurrencies with strong anonymity.

> Crypto can never be seamlessly mixed. No matter how hard you try, transactions and trails can be reconstructed.

Yes, you can. Particularly with zero knowledge proofs and zero knowledge rollups.

I should have said "most". This shows how hard it is even when using various methods such as cross chains:

https://www.wired.com/story/bitcoin-seizure-record-doj-crypt...

Yep, which is actually specifically what tornado.cash was. It was a zk based mixer.

As you say: You absolutely CAN seamlessly mix crypto, but it will show a point in it's history where it says "this is where the crypto was seamlessly mixed"

That's only because tornado cash was a single contract and was mixing ERC20s that were not issued under a zk protocol. If you control the whole banana via a rollup or layer 1, absolutely, you can achieve complete privacy.

> The only way to mix is to generate a huge amount of noise.

That simply isn’t true.

Crypto can ve seamlessly mixed. That's exactly what Tornado does.

Yes, it breaks the link from the original addresses to the new one, but it shows as coming from Tornado Cash. That's why this sanction is such a big deal. There was a paper that showed that Tornado cash privacy can be possibly compromised by studying transaction attributes https://link.springer.com/chapter/10.1007/978-981-16-9229-1_...

> "Crypto can never be seamlessly mixed"

> "The only way to mix is to generate a huge amount of noise"

These are directly contradictory statements...

> generate a huge amount of noise.

Monero?

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