I’ve spent a good amount of time in the crypto space, and one thing continues to nag at me:
Integrating privacy into crypto has proven to be quite a challenge.
A Conflicted Beginning
On the one hand, Bitcoin started as a medium for people to transact cash in a peer-to-peer manner anonymously.
While Bitcoin is not entirely anonymous, it opened a gateway for privacy-seeking individuals to adopt cryptocurrencies as their primary medium for transacting money between each other in exchange for various goods—some legal and some not.
But on the other hand, the blockchain as infrastructure is essentially a trust layer. Everything is open to the public, and everyone can verify the correctness of the ledger (Bitcoin) or the correctness of the execution (Ethereum).
This distinction often leads to confusion about where crypto truly stands when it comes to privacy.
Why Is This a Problem? Well, to put it simply: Regulation.
Let’s dive in.
The Purge of Tornado Cash
On blockchains like Bitcoin and Ethereum, there is no inherent privacy. Although one can hold many addresses, if someone connects the identity to an address - privacy ends.
Once you know Alice is the owner of 0xabc... and Bob is the owner of 0x123..., you can trace all their transactions.
But there was a workaround: Tornado Cash.
Tornado Cash was a Dapp on Ethereum—a cryptocurrency mixer that breaks the connection between the depositor and the withdrawer.
In other words, it was an open-source protocol that could be used for money laundering.
The connection break was achieved using Zero-Knowledge proofs.
Each deposit generated a unique "password," parts of which could be used for withdrawal from a different address—thus unlinking both ends of the transaction.
Then Something Happened...
On August 8, 2022, the U.S. Treasury sanctioned an open-source protocol—a first-of-its-kind event.
A domino effect followed:
- The Tornado Cash website was blocked.
- IPFS links were closed—possibly through a backdoor.
- Alchemy, an RPC provider, blocked access to Tornado contracts.
- Circle, the USDC issuer, blacklisted all addresses that interacted with Tornado.
If your address ever interacted with Tornado—even years ago—you couldn’t use USDC.
These moves were expected from centralized services under pressure from the U.S. government.
But what happened next wasn’t expected.
GitHub Steps In
GitHub, once the stronghold of open-source collaboration, closed the Tornado Cash repository.
Even worse, it suspended developer accounts that had contributed to it.
And then, just two days later, on August 10, a core Tornado Cash developer—a 29-year-old man from Amsterdam—was arrested.
"He was suspected of involvement in concealing criminal financial flows and facilitating money laundering through the decentralized Ethereum mixing service Tornado Cash."
It was later revealed that the developer was Alex Pertsev. His arrest sparked both protests and a petition, endorsed by none other than Vitalik Buterin.
Tornado Cash: The Real Story
To someone unfamiliar with crypto, the story might seem straightforward:
A money laundering tool was shut down. The end.
But the truth is, Tornado Cash was not a money laundering protocol.
It was a cryptographic mixer using zero-knowledge proofs to sever the link between deposit and withdrawal.
Yes, criminals could use it. But so could privacy-seeking users with legitimate reasons.
Allowing privacy ≠ endorsing crime.
Usually, I’m passive about news—even crypto news.
But this hit differently.
Not because I didn’t expect the U.S. government to intervene—this has happened elsewhere.
What truly shook me was the open-source community's reaction and the break in decentralization ideals.
It felt like a betrayal.
A truth pill.
A test.
Solving the Dichotomy
So what’s the real issue here?
Privacy: Good or Bad?
And the answer?
Privacy, like Decentralization, is a spectrum—not binary.
The primary perceived enemy of both is Regulation.
But here's the twist: Regulation should be seen as an ally.
What do I mean by ally?
An ally isn’t someone you always like—just someone with overlapping interests against a shared threat.
So who’s the real enemy?
A closed, centralized financial system with long-term consequences.
Want to dig deeper?
Check out The Mystery of Banking by Murray Rothbard (not affiliated).
A Dangerous Precedent
Without crypto, we risk falling into a future controlled entirely by powerful gatekeepers.
Regulators must understand this:
Banning mathematical innovations won’t stop criminals—it will only force them to evolve.
And yet, regulators are necessary.
They exist (hopefully) to protect investors and maintain fair markets.
I disagree with banning Tornado Cash. But I understand why governments did it.
Still, they must remember:
Ignoring innovation hurts the very people you're trying to protect.
A Call to Collaborate
Bitcoin was born from the 2008 financial crash—a result of irresponsible banking.
Privacy and Decentralization are not all-or-nothing.
Each protocol must carefully decide how to implement these principles.
If you want to understand crypto's roots in privacy, read the Cypherpunk Manifesto.
In Conclusion
The crypto community and regulators must stop seeing each other as enemies.
Without regulation, crypto can’t really reach its full potential.
Without innovation, criminals will always find a way to exploit systems.
Creating a fair, permissionless, and open economy requires mutual understanding and collaboration.