Welcome back to Chain reaction.
Last week, we were talking about a hack that gave a new ironic meaning to the word “unreliable”. This week we’ll touch on one of the most controversial aspects of cryptography – privacy.
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A weekly window into the thoughts of a senior crypto reporter Anita Ramaswami:
This week, Tornado Cash has become a topic of discussion in cryptocurrency circles. Office of Foreign Assets Control (OFAC) of the US government, the oversight body in the Treasury Department, imposed sanctions against the cryptocurrency mixer for his role in facilitating money laundering. North Korean-backed hackers have, among other things, used the Tornado Cash platform to disguise stolen cryptocurrencies associated with some of the most high-profile web3 hacks to date, including last week’s Nomad heist and the Axie video game hack. Infiniti earlier this year.
But in imposing sanctions, OFAC essentially used a sledgehammer to crack a nut. The agency’s official notice on the topic states that the platform has facilitated $7 billion in money laundering, which is the total value of crypto assets sent through Tornado Cash since its inception in 2019. Meanwhile, blockchain analytics provider Elliptic says that only about $1.5 billion of funds on Tornado is actually related to crime, including ransomware attacks and fraud. The rest, Elliptic claims, could include “legitimate use of mixers like Tornado, for example, to maintain financial privacy.”
So what are some of these legitimate uses? One example was given by Ethereum co-founder Vitalik Buterin, who confessed. on twitter that he used the service to securely send donations to help Ukraine without the knowledge of the Russian government.
However, the OFAC dictum does not distinguish between criminal and legal use cases. As a result, many law-abiding crypto users are likely to suffer. Two major crypto infrastructure providers, Alchemy and Infura, have blocked access to their API from any wallets that used Tornado Cash. Circle reportedly froze about $75,000 of its USDC stablecoins that were connected to Tornado through a shared wallet. according to Dune Analytics.
Of course, Internet pranksters joined in the fun, as is usually the case in the crypto world. A little sent cryptocurrency via Tornado Cash to famous wallets of celebrities such as Jimmy Fallon and Shaquille O’Neal in an attempt to troll them by having their wallets banned under sanctions rules.
OFAC’s tough action seems like an inept approach that raises more questions than it solves when it comes to enforcement. Only time will tell how the latter plays out, but in the meantime, the crypto community is understandably quite upset.
This week in Chain Reaction Jacqueline as well as Anita hosted the show while Lucas was on vacation. Jacqueline was finishing up an exciting conversation Friday night with Vitalik himself, so she shared some of his comments on where crypto is heading.
We then dived into the news that Tornado Cash was sanctioned in the US, Coinbase’s disappointing Q2 earnings and the disagreement between Binance and India’s largest cryptocurrency exchange, WazirX, over a transaction that allegedly took place two and a half years ago (or really did)?
Be sure to listen to it for the latest news on cryptocurrencies, and tune in next Tuesday for Anita and Lucas’ talk with Lee Jin, web3 investor in creator economics at Variant Fund.
Where is startup money moving in the crypto world:
Here are some of this week’s cryptanalysis available on our TC+ subscription service from a senior reporter. Jacqueline Melinek:
Once extremely profitable after a direct listing in 2021 thanks to strong cryptocurrency-related trading activity, Coinbase is now working to contain costs and overcome the ongoing “winter” in its market and adhere to previous profitability targets for the full year. . Below are five takeaways from the Coinbase report that TC’s Alex Wilhelm and Ram Ayer highlighted.
The crypto community has relied on social media sites like Twitter or messaging apps like Discord and Telegram for interaction. But some say that Telegram is the perfect hub for communication and information — a must-have place to get involved in the crypto community. “Using Telegram is the backbone of the crypto community,” Telegram channel founder nakamotocat told TechCrunch. “Projects have come and gone, players have risen and fallen, but most of the discourse between various projects and market participants is on Telegram and that remains constant.”
As the Level 1 Ethereum blockchain continues to navigate the roadmap for greater decentralization, its co-founder Vitalik Buterin believes this moment may come sooner than expected. Looking to the future, Buterin believes the next decade will be a pivotal one for crypto. “In general, I think that in the next 10 years, cryptocurrency should evolve into something that is not based on promises of being useful in the future, but actually useful.”
It seems like yesterday the NFT boom caught the attention of the crypto community, making waves even outside of the web3 world. But after about a year, the excitement around the NFT subsided somewhat. But this does not prevent some representatives of the crypto world from remaining optimistic about non-fungible tokens. “I think everything is just superficial in NFT,” Raj Gokal, co-founder of Solana, told TechCrunch. “I think NFT has 50 different use cases that seem to be lumped into one. I think we expect most [crypto] projects on the use of NFTs”.
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