Anonymity is one of the features needed in the cryptocurrency space. By default, all Ethereum transaction history and balances are public, as it is possible to see all transactions on block explorers such as Etherscan. That is, when someone knows a certain address, it is easy to view the payments, trace the source of funds, calculate the holdings, and analyze the on-chain activity.
This led to several attempts to create private transactions on Ethereum which brought forth certain workarounds toward obscuring value flows, such as the use of a centralized exchange wallet or a custodial mixing service. Nevertheless, such workarounds present a high level of counterparty and surveillance risk, thereby never able to achieve full privacy.
Another tool known as tornado.cash was created last year to overcome the challenges of the workarounds. This tool, which depends on non-custodial technology based on strong cryptography, gives users total anonymity when they send Ethereum cryptocurrency. Since its development, people in the Ethereum community have been criticizing it, but completely immutable smart contracts emerged on May 21, 2020.
Despite the immutable features of the project, several participants of the Ethereum (ETH) community are advising against depositing funds into the protocol.
According to Tornado, the protocol has positive characteristics, citing heightened decentralization and the inability for smart contracts to be altered. Nevertheless, the developers said the tornado.cash team is incapable of protecting users from bugs anymore. Likewise, Tornado told users to consider looking for insurance coverage for their funds.
In the words of cryptocurrency analyst David Gerard, the protocol is “a sitting duck for attackers, where security holes literally can’t be fixed.”
Its developers will now focus on developing the next major version of the project, with the hope of replicating the features of Zcash onto Ethereum mainnet. Perhaps the next version of the project will be good enough to rub off the criticisms.