According to blockchain forensics company Chainalysis, Tornado Cash, a decentralized finance (DeFi) project built on the Ethereum blockchain, has demonstrated resilience in the face of restrictions. The project has thrived despite the Office of Foreign Assets Control (OFAC) of the U.S. Treasury blacklisting the address of a crypto firm contract in November 2020, with its user base remaining active and its trading volume stable.
With the help of zero-knowledge proofs, users of the open-source, decentralized, and non-custodial Tornado Cash platform can deposit their cryptocurrency assets and withdraw them in a new, anonymous form. Decentralized finance is valuable for providing financial services outside of the established financial system and beyond, as shown by the project’s success in carrying on despite being prohibited.
In spite of the OFAC action, deposits and withdrawals on the platform continued, according to Chainalysis’ analysis of Tornado Cash’s user base. Additionally, Tornado Cash’s trading volume on decentralized exchanges (DEXs) that list the token has remained consistent, suggesting that investors and traders continue to find the project to be appealing.
The difficulties regulators might encounter when attempting to halt decentralized projects are highlighted by this case. It is very challenging for regulators to “pull the plug” on a decentralized project like Tornado Cash, which runs on a decentralized blockchain network because there is no central point of control.
Tornado Cash In DeFi:
The resilience of Tornado Cash in the face of sanctions underlines the growing significance of decentralised finance as well as its capacity to operate outside the purview of conventional regulators and the traditional financial system. Decentralized finance is clearly here to stay, and it will be interesting to see how regulators react to this.
The resilience of Tornado Cash in the face of sanctions underlines the growing significance of decentralised finance as well as its capacity to operate outside the purview of conventional regulators and the traditional financial system. Decentralized finance is clearly here to stay, and it will be interesting to see how regulators react to this. Tornado Cash’s “front-end website was taken down” as a result of the sanctions imposed, but Chainanalysis noted that “its smart contracts can run indefinitely, meaning anyone can still technically use it at any time.”
