As the government attacks the Tornado mixer, it can produce a whirlwind


IAt the end of the 13th century, in present-day Germany, a monk wrote a book on magic.

It wasn’t really about magic.

The three-volume “Steganographia”, written by the Benedictine abbot Johannes Trithemius, describes the use of spirits to communicate secretly over long distances. Trithemius was suspected of black magic and the Catholic Church added “Steganographia” to its list of forbidden books, the Index Librorum Prohibitorum, where it remained until 1900.

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But the Church may not have blacklisted Trithemius’ work for fear of spiritual corruption, for the “Steganographia” was not what it seemed. Although he was talking about angels and spirits, his real topic was far more dangerous: encryption.

Written in 1499, “Steganographia” is one of the first major works on cryptography in the West, introducing, for example, the now widespread idea of ​​a simple cipher that could consistently replace letters in a message. Among other things, the book uses what is called the “Ave Maria” cipher, replacing each letter of a message with a short Latin phrase about Jesus. It is now widely suspected that the blacklisting of the book had little to do with religion, but was an attempt to suppress knowledge of cryptography. (I tell this story in more depth in my 2018 book “Bitcoin Is Magic.”)

You can probably imagine how threatening an imminent explosion of hidden written messages would have been to the various warlords and strongmen who ruled Europe at the time (more than a few were in church attire). The divine right of kings theology held by the Church of Trithemius implied that most people were not entitled to any privacy, or anything else.

Read more: US Government Amplifies Inevitable Conflict With Crypto Privacy In Blacklisting Tornado Cash

Half a millennium later, another Index Librorum Prohibitorum was launched by a powerful governing force. On Monday, the US Office of Foreign Assets Control (OFAC) placed a decentralized privacy service called Tornado Cash on its list of specially designated nationals. This makes interaction with the Service illegal for US nationals and entities.

But the impact and even the intent seem even broader than that: Tornado Cash developer Roman Semenov claimed his Github code repository account on Tuesday. had been suspended. Semenov has not been personally sanctioned by OFAC and he has no direct role in the Tornado Cash service. Instead, he coordinated the creation of code that can be executed by other people to form a decentralized network. Writing on Twitter, Semenov nailed the key question raised by his announced suspension:

“Is writing open-source code now illegal?”

Tornado Cash is a “mixer” on the Ethereum network. Basically, this allows Ethereum users to send Ether (ETH) or ERC-20 tokens to the service to be “mixed” with other users’ tokens before being sent back, which helps hide who sent what to whom and when. While Ethereum has virtually non-existent privacy controls by default, Tornado Cash is apparently quite effective – if it wasn’t, OFAC might not have bothered to blacklist it. And because the code is transparent, decentralized, and automated, Tornado Cash can be trusted to do what it says on the box.

OFAC has very legitimate reasons for wishing that Tornado Cash did not exist. According to the agency, Tornado was used by North Korean group Lazarus to launder hundreds of millions of dollars in proceeds from hacking huge crypto projects, including the Ronin Bridge. It’s been suggested that North Korea is using proceeds from these hacks to fund weapons programs, so stopping that seems to be pretty good for the world.

But OFAC’s sanction is itself an indiscriminate dirty bomb of catastrophic proportions, poised to vaporize the basic human rights of millions around the world as it (perhaps) shuts down the activities of a small nation. impoverished. Everyday non-criminals have countless reasons for using a service like Tornado Cash, from making anonymous political donations to concealing the extent or location of their private wealth.

Even Ethereum co-founder Vitalik Buterin jumped into the discussion to admit that he used Tornado Cash to conceal donations to the Ukrainian war effort – not, he claims, to protect himself, but to protect recipients in Ukraine.

This is not only an ethical problem, but a legal one. OFAC’s sanction, and even more so Github’s subsequent attempts to stifle the Tornado Cash code, may point to intense internal contradictions in US law. It’s not entirely fair to blame OFAC singularly for this: a regulator’s job is usually to tackle a single problem rather than consider the broader consequences.

Rather, the responsibility for the whole situation lies primarily with legislators and, in this case in particular, with the judiciary.

From a legal standpoint, understanding what Tornado Cash does may be less important than understanding what it is. It is not a business or a human or even a machine with a physical presence. It is open source code – text, commands, numbers, and words – that executes a certain pattern of commands when compiled and deployed in its intended environment.

Tornado Cash is therefore a network of peer-to-peer channels, rather than a discrete company, entity or service. So while the sanction document targets Tornado Cash by name and has a series of specific Ethereum addresses associated with it, the code could in principle be redeployed under a different name and using different addresses. It seems likely that this would create some sort of “mole hit” situation as new iterations of Tornado Cash are sanctioned as quickly as they appear.

This could indicate why someone may have leaned on Github owner Microsoft (MSFT) to ban Semenov. The real threat here is not the operational Tornado Cash service on Ethereum, but the infinitely and freely replicable code that makes it work.

Read more: Someone is stalking celebrities sending ETH from Tornado Cash

That means OFAC faces a serious constitutional challenge in trying to overturn it: As Washington, DC-based lobby group Coin Center has pointed out, various legal judgments have found that money and computer code can be forms of speech protected by the First Amendment. In the case of money, this seems to apply particularly to monetary policy donations.

This puts Semenov in the company of Johannes Trithemius and, more recently, Phil Zimmerman, the inventor of PGP encryption, an effectively unbreakable public-key encryption scheme. Zimmerman released PGP in 1991, declaring it “guerrilla freeware”. But within months, the National Security Agency had declared PGP to be a sanctioned “munition” so dangerous for warfare that it should not be legally distributed.

Zimmerman fought a years-long legal battle before two Federal Court decisions in 1996 declared that encryption techniques were protected by the First Amendment. It seems plausible that a similar conclusion could be reached by the courts given OFAC’s actions against the Tornado Cash code.

This is a fundamental dilemma for the United States, and indeed for global jurisprudence and social structure. There are very good reasons for not wanting North Korea or anyone else to freely conceal global financial activity.

But is it worth sacrificing the values ​​that America claims to stand for?

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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