The biggest Ethereum mining pool, Ethermine, no longer generates blocks with Tornado Cash transactions in them, as reported by Cryptoslate.
This is an instance of protocol-level censorship and is probably brought on by OFAC sanctions. Takens Theorem, a cryptocurrency expert, found that Ethermine no longer processes Tornado Cash transactions and provided the chart below. CryptoSlate examined on-chain data and verified that, throughout the time period depicted below, Ethermine had not generated a block containing a Tornado Cash transaction, Cryptoslate noted.
Following this sanction, Circle “blacklisted” USDC on the Ethereum network, preventing any holders who had dealt with Tornado Cash from doing so again. This action effectively stopped all $USDC from passing via Tornado Cash.
Then, DeFi protocols like Aave, Uniswap, Balancer, and others added an API from TRM Labs that disabled the front end of their dApps and essentially banned addresses included on OFAC’s list.
According to reports, Aave gave access back to wallets that had been “dusted” with 0.1 ETH by a hacktivist in an effort to draw attention to one of the major problems with following the penalties. Any address that dealt with Tornado Cash, according to OFAC, was now subject to American sanctions. So, when the hacktivist gave 0.1 ETH to various powerful figures in the cryptocurrency industry, it demonstrated how easy the sanctions might be broken.
A step beyond any of the aforementioned is Ethermine’s decision to discontinue creating blocks that contain Tornado Cash transactions. Processing transactions in a particular order goes against the Ethereum blockchain’s fundamental tenets. The network is meant to be inclusive, open-source, free, and decentralised.
After The Merge, Vitalik Buterin was so incensed by the idea that validators would abide by OFAC penalties that he vowed that any validators who did so should have their ETH staked burnt. He agreed such acts should be viewed as “an attack on Ethereum and burn their stake via social consensus” if they do not include Tornado Cash transactions.
Since Ethermine is based outside of the United States, it is not subject to the OFAC penalties. However, the Ethermine pool’s users can be American citizens. It can be construed as dealing with Tornado Cash if Ethermine mines a block that contains a Tornado Cash transaction, violating the restrictions.
(With insights from Cryptoslate)
