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Regulators

Tornado Cash developer arrested while more crypto businesses comply with US sanctions

Shortly after the US Treasury Department sanctioned Ethereum’s most popular mixing service Tornado Cash, 29-year-old developer of the privacy protocol Alexey Pertsev was arrested in the Netherlands on suspicion of facilitating money laundering. The developer can be held in jail by the Dutch authorities for up to 110 days without charges.

The wife of Tornado Cash creator said that she was not able to contact her husband since the arrest and organized a #FreeAlex campaign in his support, including rallies and petitions.

Sanctions against Tornado Cash have sent shock waves through the crypto industry, drawing criticism from a wide range of crypto experts, as well as free speech and privacy advocates.

Jesse Powell — the CEO of US-based crypto exchange Kraken — stated in an interview with Bloomberg that users have a right to financial privacy and that Tornado Cash has legitimate uses, but his exchange will comply with US sanctions despite his objections.

Executives from Coinbase and Circle have criticized regulators for targeting a tool rather than an entity or person. DeFi aggregator 1inch drew attention to the fact that the arrest of Alexey Pertsev can create a “dangerous precedent” of prosecuting developers of open source software for its misuse by third parties. Cardano founder Charles Hoskinson said that sanctioning the code could be a violation of free speech.

Aave, Balancer, dYdX, and Uniswap joined the list of entities that blocked users of Tornado Cash. Ethermine, the largest Ethereum mining pool, stopped including Tornado Cash transactions into new blocks. 10KTF’s latest Combat Crate NFT drop checked against the Chainalysis on-chain sanctions oracle to prevent sanctioned addresses from revealing the NFT post-mint.

Amid the Tornado Cash crackdown, US-based crypto exchange FTX has reportedly begun freezing accounts that have sent money through the Aztec Network, a private layer-2 chain. In response, the Aztec team implemented deposit limits and announced more measures to comply with regulators.

Since its launch in 2019, Tornado Cash has received over $7 billion worth of ether (ETH).

On that note, Uniswap has disclosed that in the last four months the team blocked 253 crypto addresses from interacting with the DeFi exchange protocol using its official website.

Monero

Monero undergoes major network upgrade

Privacy cryptocurrency Monero performed a protocol upgrade that included several features to improve security and privacy of the network.

The list of changes includes:

  • The total number of signers in a ring signature, known as a ring size, has been increased from 11 to 16, improving plausible deniability of each transaction on the network.

  • “Views tags” reduce wallet sync times by 30-40% by adding a 1-byte “tag” to each transaction using a shared secret known by the sender and receiver only.

  • “Bulletproofs” — a zero-knowledge proof algorithm that hides the exact amount of transactions — has been upgraded to “Bulletproofs+”, reducing an average transaction size by ~5-7%, making it lighter and faster.

Earlier in 2021, Riccardo ‘Fluffypony’ Spagni — former lead developer of Monero — was arrested in the US at the request of the South African authorities, which alleged that Spagni made $100,000 creating fake invoices while working for Cape Cookies between 2009 and 2011. The developer has been extradited to South Africa in 2022 and then released from custody by a regional court.

In other news

  • Yuga Labs has released the long-awaited IP rights for CryptoPunks and Meebits collections, giving their NFT holders full rights to commercialize these NFTs via the creation of derivative works. Yuga Labs has acquired brands and intellectual property (IP) rights of Meebits and CryptoPunks from Larva Labs earlier this year.

  • Amid criticism of rushing the code, the Cardano network is preparing for its highly-anticipated Vasil upgrade named after its prominent community member, Vasil Dabov. The upgrade will improve scalability and requires 75% of SPO nodes to run the newest version to be activated. At the moment of writing, nearly 40% of Cardano nodes have upgraded their clients to v1.35.3, according to data from PoolTool.

  • Researchers from University of Illinois have published a paper describing various vulnerabilities of Bitcoin’s most popular off-chain scaling solution, the Lightning Network (LN). The hypothetical attacks require collusion of large LN nodes and take advantage of the way nodes close their channels via onchain transactions, which can cause temporary network congestion in case of a coordinated double-spend attack.

  • Polkadot’s DeFi protocol Acala has been exploited, allowing a hacker to mint 1.2 billion of project’s stablecoin aUSD.

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