When I saw the news about the Tornado Cash sanction case being overturned, the first thought that flashed through my mind was, 'This is a huge victory for the privacy track.' Here’s a brief overview of my thoughts 👇🏻

Disclaimer: This article is for communication and discussion purposes only, with no investment advice, DYOR.

1. The ever-burning flame: Tornado Cash

Tornado Cash is probably the most well-known privacy protocol in the Crypto world today. Launched in 2019, Tornado Cash aims to allow users to conduct on-chain transactions while protecting their privacy. Privacy, a term that appeared alongside decentralization, has always been controversial.

Some believe that the biggest difference between Web3 and previous Web2 and Web1 is that users can genuinely have ownership and usage rights over their own data. In theory, every user can choose which data to disclose and which data to keep private. This is also the philosophy of the privacy track and a breakthrough against the current centralized organization’s monopoly on data.

However, privacy protocols are currently viewed by many black and gray industries as an excellent tool for evading legal supervision, significantly increasing the difficulty of tracking. Although 'technology is not guilty; the guilty are the ones who use the products,' currently, in the larger environment, everyone opts for the simplest and most violent methods, which is why the privacy track has been heavily impacted.

If you pay close attention, you will find that since being suppressed, Tornado Cash has changed its official website address time and again, eventually deploying the entire protocol completely on IPFS to ensure that the protocol can continue to operate.

In my previous personal experience, I was relatively fortunate to have observed the Tornado Cash community for a while after learning about it. An interesting phenomenon is that in Crypto, a project usually fades away gradually after being suppressed and FUDed, while Tornado has shown a resilient vitality; the more it is suppressed, the stronger the cohesion among community members.

The technical support for the migration of the protocol's front-end interface is from those who understand technology, while those who understand operations maintain the community, and ordinary members hold a strong faith in Tornado. In the community, I often see expressions like 'I will only recognize Tornado for the rest of my life.' They are like an ever-burning flame that cannot be extinguished.

2. The impact of the Tornado incident on the privacy track

In my opinion, Tornado's status in the privacy track is comparable to BTC's status in Crypto; both share some similarities:

  1. The clever combination of technical architecture: The technical architecture of BTC does not incorporate any new technology but cleverly combines existing technologies; Tornado's technical architecture cleverly applies ZK technology within the protocol, without any new technological innovation, yet for the privacy track, this is a significant step towards protecting individual on-chain privacy.

  2. The firm belief of the community: Most people have high faith in BTC. Throughout its development over the years, BTC has undoubtedly secured its position as the leading blockchain asset, and there is a large group of Bitcoin Maximalists who, starting from recognizing the concept of decentralization, only acknowledge BTC. In the Tornado community, there are also similar 'privacy Maxis' who despise the traditional world's monopoly on personal data. The emergence of Tornado seems to have shown them a path to breaking the deadlock and has brought everyone together to form a strong community.

During the time Tornado was sanctioned, the entire privacy track has been in a low period, especially for DeFi applications like mixers that are closest to money. Many people tend to avoid hearing terms like 'mixer' and 'privacy trading'; in the primary market, VCs also need to conduct extensive background checks to avoid potential legal risks.

The recent overturning of the Tornado sanction case is undoubtedly a huge boon for the privacy track, restoring confidence among everyone. At least from a legal perspective, privacy protocols are not illegal. However, this does not mean that the privacy track has cleared all obstacles; it still faces significant resistance from regulatory agencies and the market.

But the most important point to recognize is that privacy and regulation are not completely conflicting or opposing.

3. Vision for the development direction of the privacy track

Here I mainly talk about my vision for the future development direction of the privacy track, mainly in the following three directions:

  1. Achieving a balance between privacy and regulation: This requires protocol developers to collaborate with relevant regulatory agencies, such as utilizing current technologies like ZK and FHE to provide relevant proof materials to regulatory agencies without disclosing user on-chain data privacy.

  2. Privacy protocols aimed at B-end users: Tornado Cash is a privacy protocol with no entry barriers aimed at C-end users, which has led to its awkward situation of being used extensively by hackers. If we focus solely on B-end users, could this issue be improved? Firstly, B-end users are mostly reputable companies, so their motives for wrongdoing are smaller, and the costs of wrongdoing are higher compared to C-end users; secondly, for regulatory agencies, tracking a company is easier than tracking an individual user; thirdly, in the field of privacy trading, B-end users have a greater demand than C-end users, such as in the dark pool trading area I previously introduced. For more details, refer to my previous tweet about Singularity @singularityzk: https://x.com/weihaoming/status/1764570116245897397.

  3. Better privacy interaction experience: Privacy trading protocols like Tornado Cash, like other DeFi protocols, may encounter liquidity issues. If we want to pursue a better privacy interaction experience, we can further integrate with chain abstraction. Chain abstraction can allow users to no longer be limited by the independence of multiple chains in various ways, such as unified account balance management, universal liquidity, etc. For more details, refer to Lydia's tweet: https://x.com/HelloLydia13/status/1849298829868519777.

  4. Token issuance will only occur on-chain: If you search for $TORN's token information, you will find that it has been delisted by several CEXs. Personally, I believe the likelihood of it being relisted is very slim, mainly because major CEXs have begun to embrace regulation during this cycle, and protocols like $TORN are still controversial and difficult to meet compliance requirements. Therefore, the likelihood of CEXs listing such privacy tokens is quite low. Thus, before resolving the contradiction between privacy and regulation, the issuance of privacy protocol tokens will primarily occur on-chain.