Elliptic experts analyzed six popular Ethereum-based cryptocurrency mixers that are mentioned as potential alternatives to the U.S.-sanctioned Tornado Cash.
The review includes services RAILGUN, Buccaneer V3, White Ethereum, 0xTIP, Messier 87 Black Hole, and Cyclone Protocol. According to the analysts, the studied protocols together processed transactions totaling more than $41.5 million — 0.6% of the funds mixed by Tornado Cash.
Of these, $40,000 (0.1%) were obtained from DeFi-related thefts. This amount includes $37,000 of the $270,000 stolen during the June attack on the xWIN Finance protocol. Another $100,000 came directly from Tornado Cash, a small portion of these funds having been sent after sanctions were imposed.
\”Current figures indicate limited use of the examined services for criminal purposes at this stage,\” Elliptic noted.
The most popular assets for mixing are ETH, BNB, Wrapped ETH, and USDT. However, this data does not include Polygon-based assets.
Many protocols are based on ‘improved’ forks of the Tornado Cash smart contract, though their small liquidity pools make large-scale mixing less feasible, the researchers added.
The highest mixing limits are with Cyclone Protocol (100 ETH/100,000 USDT) and RAILGUN (unlimited) — they account for more than three-quarters of the total funds processed by the studied protocols.
An internal Elliptic analysis identified Cyclone Protocol as the riskiest among today’s alternatives to Tornado Cash. The researchers’ concerns include:
- high transaction limits;
- relatively large liquidity pools;
- ability to mix Tornado Cash tokens;
- documented use for laundering some proceeds from DeFi exploits;
- large volume of funds processed;
- anonymity and inactivity of the development team.
\”A medium-high risk rating was assigned to Buccaneer V3, and throughout development no money-laundering issues were identified. BV3 uses a ‘lure mode’ that displays fake and changing BUCC balances in wallet-provider interfaces as an additional obfuscation technique. The main mitigating factor for BV3 is the use of technology that is still in testing.\”
The remaining four protocols also have mitigating factors that, according to Elliptic, could prevent widespread illicit use:
- RAILGUN generates compliance reports and has a partially public development team.
- Messier 87 says it is ready to provide the necessary reports on demand to authorities.
- White Ethereum and 0xTIP tackle low mixing limits and small liquidity pools respectively, making them not a viable replacement for Tornado Cash at present.
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On August 8, OFAC placed sanctions on the Tornado Cash mixer. The agency suspects the platform of laundering around $7 billion since 2017. More than $455 million of those funds were linked to North Korean hackers.
Within a month of the sanctions, Tornado Cash liquidity pools shrank by about 60%, reducing its potential to anonymize large-scale money-laundering schemes.
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