Under Soleimani’s system, individual users will be responsible for indicating which other depositors they do not want to be associated with. In practice, he suggests, this will mean using blacklists compiled by companies such as Nansen, which monitors public blockchains for crime.
In theory, such a design would also limit the amount of funds linked to criminal activity passing through the mixer, he argues, “because everyone using it would be able to isolate [criminal addresses]”, reducing the size of the pool in which bad actors can hide.
The system won’t mean that criminals can’t operate a mixer, just that they won’t be able to access full liquidity.
Suleimani says an alternative system in which an administrator maintains a block list to completely deny bad actors access to the platform would be too expensive, because it costs a lot to add addresses to a list hosted on the blockchain each time, and criminals often jump between wallets . There will also be ethical questions about whether one person should decide who is allowed to use the service.
“I don’t think I should be in charge of who are good and bad people for everyone, and neither should anyone else,” Soleimani says. “What makes this system different is that it allows people to choose who they associate with or not.”
Soleimani says that Privacy Pools’ customers are likely to be people who want to transact privately — for example, those who want to donate anonymously to political causes or hide the size of their cryptocurrency earnings.
Even before the technical details were released, the project began receiving messages of support from the cryptopunk community, which advocates the use of cryptography to protect personal privacy.
“Cypherpunks love privacy, institutions love privacy, casual investors love privacy,” says Thurman. “It will be warmly welcomed.”
“I’m sure whatever he says there will be good,” says Greg DiPrisco, former head of business development at MakerDAO, another prominent Ethereum-based DAO. “I don’t think the average user understands how bad the world would look without transaction privacy.”
As for whether US regulators are likely to be receptive to the idea, Soleimani says he’s “not at all sure” — a sentiment shared in crypto circles.
The debate surrounding crypto mixers highlights a “philosophical divide” between evangelicals and regulators, according to crypto analyst Noel Acheson, over whether financial privacy is a right. She predicts that regulators in the US are likely to view any type of mixer with suspicion because of the potential for misappropriation, even if only a small percentage of users are bad actors.
But the emergence of Tornado Cash’s successor, Acheson said, highlights the difficulty regulators face in preventing similar tools from entering the market, which risks turning into a never-ending game of fraud.
Despite the headwinds, Soleimani says he hopes the project will represent a rare convergence of interests between regulators and crypto-promoters – and act as something of a “peace proposal.” (OFAC did not respond to a request for comment.)
“My goal is to have a privacy tool that I can use as an American citizen. That was always my goal — that was the goal when we created Tornado Cash in the first place,” he says. “My friends and I consider privacy normal. Someday you will be too.”
