​Tornado Cash users now have access to an anonymous AML checking tool

What’s new? Chainway, a blockchain development company, has released a tool for users of the Tornado Cash crypto mixer called Proof of Innocence. It can be used to prove that deposited funds were not taken from wallets containing stolen funds without revealing your own address. The Chainway team disclosed this in a blog post on the social media platform Medium.

Announcement on the Chainway blog

How does the tool work? Proof of Innocence is an open-source protocol. It will be useful in cases where users need to demonstrate that their use of Tornado Cash is not against the rules and is not related to illegal activity, and deposits are not coming from sanctioned or blacklisted addresses.

This proof is based on the use of the Merkle tree structure and allows for proof of user status without revealing any identifying information about themselves or their transaction history. By providing this proof, users can show that they are not hackers or other unscrupulous players.

Merkle trees organize data (such as transactions in smart contracts or transfers between accounts) into hashes arranged as a series of parent and child nodes, which theoretically allows a third-party auditor to verify the relevance of reserves in cryptocurrency services.

On August 8, the US Treasury Department added Tornado Cash to the sanctions list. According to the authorities, the service was used by North Korean hackers from the Lazarus group, they also linked the mixer with the DPRK’s nuclear program. Later, Tornado Cash developer Alexey Pertsev was arrested in the Netherlands on suspicion of involvement in money laundering through the mixer.

LianAn Technology reported that the DeFi sector lost $3,64 billion in hacking attacks in 2022, of which $1,4 billion was laundered through Tornado Cash. And Chainalysis analysts pointed to the ambiguous effect of sanctions against the service: despite the decline in deposits after the restrictions imposed by the US authorities, it is still available for use.

To find out what awaits DeFi projects after the sanctions against Tornado Cash, see GetBlock Magazine’s article.