Protocol-level Censorship | Is ChipMixer Next Target?

Crypto ecosystem gained a new type of censorship 2 weeks ago with the blacklisting and front-end restrictions on Tornado Cash. The platform was aimed to be restricted to be used by OFAC to protect the users from fraudal actions that have been happening in the platform.

It was the first time we experienced protocol-level censorship to "protect" the users and make it easier for regulators to track the blockchain data of people. We asked the question: Who is next? I think I have an answer...

Lazarus Used ChipMixer for Money Laundering

That is a catastrophic situation for ChipMixer as the objective of the platform was to provide privacy-based services to common people rather than help hackers launder their money as they wish.

According to Cryptoslate,

A total of 6,531.04 BTC were transferred to the Bitcoin network. ChipMixer facilitated the laundering of 3,460 BTC (49.1% of funds), while 36.6% are still held in the hacker’s address.

The hackers withdrew a total of 2,671 BTC from the ChipMixer protocol and sent the funds through Blender, Wasabi Coinjoin, and a small portion to the Binance exchange.

It seems like ChipMixer is a frequently visited spot for money laundering. At that point, it is too hard for the team behind ChipMixer. Either they will support their operations and keep working on it or the team should come up with solutions that will still enable people to own better privacy but eliminate the hackers.

Best-Bitcoin-Blender!

ChipMixer is used to initiate zero knowledge Bitcoin mixing operations. You receive a permanent deposit address that you will send the funds to mix them. Your Bitcoin deposit is collected as Chips (1.024 BTC) and you are given a split or whole sum in the third section (with a reduced fee)

As the system of chips is intended to make it too hard to be tracked by anyone, regulators are not comfortable with the outputs that help Lazarus and more to launder the money.

Basically, Tornado Cash was the option that was used for Ethereum laundering. For stolen Bitcoin Funds, ChipMixer has worked perfectly well so far.

What Precautions can be taken?

I do not feel good about OFAC or any other regulators to censor any project in crypto ecosystem. As. the regulators go harsh against crypto people, it is likely to turn into a cold war between two sides.

• There might be "suggested" suspicious wallets (hackers, scammers etc.) and privacy-based projects can use and contribute to the list to show that they are only for people; not for hackers.

Note: Directly banning wallets cannot fix the problem of turst!

• In the cases of big hacks, the devs of protocols and the hacked projects may team up to solve the problem.

If these cases are not worked on deeply, then the protocol-level censorship will be in vain. Also, in open source projects, it is impossible for OFAC to spot and take action for every single project that can be created via the same open source codes.

To find a real solution, there can be small teams that focus on the hack cases consisting of people from hacked projects, Privacy protocol devs and regulators. If any one of the sides dares to play harder, it may easily turn it into an endless conflict between crypto people and regulators.

No need to have a lose-lose scenario for privacy projects; if the aim is to find against dark crypto, better to team up!

Posted Using LeoFinance ^Beta