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E10 - Tornado Cash Sanctions, Sable Protocol Unmasked - 8/12/2022

/ 01:04:52/E10 Download MP3
This week we dive into the unprecedented Tornado Cash sanctions, including the arrest of a suspected developer. We also spent some time on the fascinating story of two brothers that operated 10+ anon personas to fake a thriving DeFi ecosystem on Solana with the popular Saber protocol.

I, Degen - E10: Tornado Cash Sanctioned, Saber Protocol Unmasked - 8/11/2022

Listen at: idegen.fm
Contact us: @idegenfm

Intro
Welcome to I, Degen - We track down and explore the most exciting crypto hacks, mysteries, exploits, and anything that feeds our crypto curiosity each week. We dig in, cutting through the misinformation and hype in search of a signal in the noise.


Episode Summary
This week we dive into the unprecedented Tornado Cash sanctions, including the arrest of a suspected developer. We also spent some time on the fascinating story of two brothers that operated 11 anon personas to fake a thriving DeFi ecosystem on Solana with the popular Saber protocol.

Weekly Thought
What’s your crypto narrative, and how is it defined/created?

I,Degen - Weekly
  1. Nomad Bridge Hack Update
  1. Report of a consensus level attack on Ethereum

  2. Curve.fi DNS hijack results in theft of 570K - some stolen funds frozen on the move though FixedFloat

  3. Ethereum POS merge scheduled for September 15-16 

  4. Master of Anons: How a Crypto Developer Faked a DeFi Ecosystem from Coindesk

The Macalinao brothers used a web of bogus identities to create the illusion of a dev community, juicing value on the Saber protocol and Solana blockchain. Now they’re moving to Aptos.

I, Degen - Deep Dive Tornado Cash Sanctioned
What is TC, and how does it work?
Tornado Cash is a decentralized application launched on the Ethereum blockchain in 2019 that allows someone to un-link the source and destination of coins. That is to say, provide privacy or ‘mix’ coins.

When you deposit your 1 ETH on the contract, you have to provide a “commitment”. This commitment is stored by the smart contract. When you withdraw 1 ETH on the other side, you have to provide a “nullifier” and a zero-knowledge proof. The nullifier is a unique ID that is in connection with the commitment and the ZKP proves the connection, but nobody knows which nullifier is assigned to which commitment (except the owner of the depositor/withdrawal account). - Understanding Zero-Knowledge Proofs Through the Source Code of Tornado Cash
Why sanctions?

Tornado Cash, which has been used to launder more than $7 billion worth of virtual currency since its creation in 2019. - Treasury.gov
We should point out that statement is not factually accurate, as not all coins moving through TC were being laundered.

“Despite public assurances otherwise, Tornado Cash has repeatedly failed to impose effective controls designed to stop it from laundering funds for malicious cyber actors on a regular basis and without basic measures to address its risks. Treasury will continue to aggressively pursue actions against mixers that launder virtual currency for criminals and those who assist them.”
- Brian E. Nelson - Secretary of the Treasury for Terrorism and Financial Intelligence

Let’s look at a breakdown of funds received by TC from Chainanalysis:

Points of interest
  • 38 Addresses sanctioned
  • TC dev arrested in the Netherlands on 8/10.
“suspected of involvement in concealing criminal financial flows and facilitating money laundering,” and that “multiple arrests are not ruled out” as investigations into Tornado Cash continue. The Verge

I, Degen - Most creative personal hack attempt of the week?

References/Links
TC Feature

Sabre Protocol House of Cards
We do our best to report accurately on the topics we discuss, but we won’t always get everything correctly. Please comment here or reach out to us @idegenfm with corrections or comments!
E10 - Tornado Cash Sanctions, Sable Protocol Unmasked - 8/12/2022

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