How to fast track assets after Tornado Cash mixing?

According to statistics monitored by Chengdu LianAn [Chain Bing-Blockchain Security Situational Awareness Platform], in the first quarter of 2022, the loss caused by attack security incidents was as high as about 1.2 billion US dollars, an increase from 130 million US dollars in the same period last year. About 9 times, the theft of cryptocurrency hackers is even more unsettled.

In many hacker theft incidents, we can always see the name “Tornado Cash” : ☛ The $80 million stolen by Beanstalk Farms has been laundered through Tornado Cash; , using the Ethereum privacy trading platform Tornado cash to launder 1,100 $ETH; ☛ In the incident of the theft of over 270 million US dollars in KuCoin exchange, hackers used Tornado Cash to launder ETH; ☛ The blockchain bridge Ronin Network was hacked in March Of the more than $600 million stolen, hackers transferred tens of millions of dollars worth of ether through Tornado Cash;




Where is Tornado Cash, which has played a major money laundering role in multiple hacker thefts? Why Hackers Love Tornado Cash Can the virtual currency laundered through Tornado Cash be traceable? How to track?




Before answering these questions, let’s look at downmixing services and money laundering.


ONE , what is mixed currency?

Concealed (laundered) private (money) transactions spawned currency mixing technology


The transaction information of virtual currency is publicly available on the chain. As long as one knows the virtual currency address of a person, all his operations on the chain are clearly visible and traceable. In this case, in order to solve the problem of privacy And the problem of anonymity, currency mixing technology was born.

Coin Shuffle is a decentralized privacy feature that allows users to quickly and efficiently mix funds with other users, creating random mappings between existing user accounts and new accounts after shuffling , thus achieving complete anonymity.



The function of currency mixing is to integrate several unrelated people and unrelated transactions into one transaction. At this time, from the outside, it is not known which input transaction should correspond to which output transaction. To obfuscate the role of transactions, so as to achieve true anonymous transactions. To give a simple example, suppose there are many people who put money into the donation box to show love, and it is stipulated that only one dollar coins of the same year can be put in, then when people put money in, we can know when and how much money was donated by whom. , but when opening the donation box for accounting, there is no way to know which coin was put in by which well-meaning person.



What are the ways to implement currency mixing?


There are two types of mixers: centralized mixers and decentralized mixers .

Centralized mixer: All transactions are processed in the database of the mixer website. The mixer will match different wallet addresses and different amounts and send random amounts of virtual currency to the addresses until the total amount requested by the sender is reached at the specified address.






Decentralized mixers : Decentralized mixers use protocols like CoinJoin to obfuscate transactions using fully coordinated or peer-to-peer (P2P) methods. Essentially, the protocol allows a large group of users to aggregate a certain amount of virtual currency, which is then redistributed so that everyone receives a certain amount of virtual currency. However, no one knows who received what, or where it came from.


THREE, what types of currency mixing services are there?

There are two types of virtual currency mixing services, custodial and non-custodial.


Custody Mixing Service

When a user submits “dirty” currency to a trusted third party and returns “clean” currency after a timeout, the process is called escrow mixing. However, it may happen that the money mixing service provider runs away;


Non-custodial currency mixing service

Replacing trusted mixers with publicly verifiable and transparent smart contracts or secure multi-party computation is a common element in non-custodial mixers. The operation process of non-custodial currency mixing is as follows:

Users first deposit the same amount of ETH or other tokens from address A into the mixer contract; then, after a user-defined time interval, they can withdraw their deposited coins to address B through a withdrawal transaction.



Why Hackers Love Tornado Cash

What is Tornado Cash?

Tornado Cash is a decentralized, non-custodial privacy solution for Ethereum and other smart contract enabled blockchains based on ZK-SNARK (also known as Zero-Knowledge Succinct Non-Interactive Argument of Knowledge) technology. It can improve transaction privacy by breaking the on-chain connection between source addresses (depositors) and destination addresses (withdrawers).




Tornado Cash uses smart contracts to accept token deposits from an address and withdraw funds from a brand new address. Older versions of the protocol work on Ethereum, BNB Chain, Polygon, Gnosis Chain, Avalanche, Optimism, and Arbitrum. Currently, it only supports a fixed-amount pool of six tokens: ETH, DAI, cDAI, USDC, USDT, and wBTC.


80% of hackers use Tornado Cash in the laundering process?

If users of Tornado Cash want to transfer or mix an asset anonymously, they first need to transfer the asset to the smart contract of Tornado Cash. Tornado Cash gives the user a randomly generated key as a credential , which can prove that you have executed deposit, but did not disclose the original address; when withdrawing, you only need to submit the random key given by the previous system to Tornado Cash , and after the user submits a new address , the smart contract will transfer the assets to the new address and complete the “mixing” of the assets. ”, so that the transaction cannot be traced back. This is why most hackers choose Tornado Cash.



According to relevant data, since the launch of Tornado Cash, there are currently 156,000 ETH and $165 million in the mixed currency pool, which is the largest private asset pool on the blockchain. The old protocol has had more than 12,000 unique addresses made about 48,000 deposits to the protocol, received more than $5.9 billion in deposits, and more than 17,000 unique addresses have withdrawn from the protocol, paying a total of more than 200 to relay services. $10,000 in relay fees.

How to track FIVE, Tornado Cash mixed currency assets?



The use of currency mixing technology enhances the anonymity and privacy of on-chain transactions, but it is also abused for money laundering and other crimes. The mixing technology increases the difficulty of tracking criminal assets on the chain. In order to help fight against virtual currency crimes, Chengdu Lian An has started research on mixed currency technology and mixed currency asset tracking early on, and applied the research results to our virtual currency on-chain tracking service.

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