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Railgun Crypto Mixer Thriving Despite Sanctions With Coinbase CLO Backing Tornado Cash’s Privacy

Last Updated April 16, 2024 2:55 PM
Shraddha Sharma
Last Updated April 16, 2024 2:55 PM
By Shraddha Sharma
Verified by Peter Henn

Key Takeaways

  • Vitalik Buterin has transferred 100 ETH to Railgun.
  • Despite its intended privacy benefits, Railgun has been associated with North Korean hacker groups.
  • Railgun differentiates itself from mixers, but the privacy debate continues.

Privacy protocols have been a matter of debate with regulators increasing scrutiny and imposing sanctions. Railgun, a privacy-focused Ethereum Virtual Machine (EVM) protocol, gained attention due to a recent transaction from Ethereum co-founder Vitalik Buterin. Is it another Tornado Cash?

Vitalik Buterin’s Endorsement of Railgun

Railgun has come into the spotlight following Vitalik Buterin’s transfer of 100 ETH to the platform. In response, he endorsed its privacy-preserving capabilities. Journalist Colin Wu notes that Buterin has been consistently interacting with Railgun. Just like most crypto community members, he is showing a pattern of support for its technology that aims at ensuring private decentralized finance (DeFi) transactions.

Buterin said: “Privacy is normal.”

The co-founder explained that Railgun employs a privacy pool protocol that enhances security by making it challenging for malicious actors to compromise user privacy.

This system allows for the mixing of various crypto transactions while maintaining security measures. Industry experts like Grayscale researcher Michael lauded the technology. He emphasized the importance of understanding Railgun’s underpinnings and advocated for a focus on privacy in the crypto conversation.

The Reputation of Crypto Mixers

Despite its technological innovations, Railgun has issues. Elliptic research reported  that hackers like the North Korean Lazarus Group have used Railgun, similar to other mixers, to launder stolen cryptocurrency. In January 2023, the US FBI reported that North Korean hackers exploited the Railgun crypto mixer to launder over $60m in Ethereum, stolen in June 2022.

Railgun has become an alternative to the Tornado Cash crypto mixer, particularly after the latter faced sanctions.

CCN previously noted a trend where cybercriminals progressively shift their laundering operations across various crypto mixers. Starting from Tornado Cash, these operations moved to Sinbad, and then to YoMix.

Privacy tools offer enhanced anonymity that hackers exploit for illicit activities. And the strategic migration by bad actors to Railgun doesn’t save it from scrutiny.

However, Railgun disagrees that it is a crypto mixer. Railgun noted in a post on Medium that it is a more advanced privacy system and not a crypto mixer. It aims to provide more than just transaction mixing by enhancing the privacy protocol itself.

The post noted: ” Not only is the RAILGUN Privacy System capable of so much more than what can be achieved by using a Mixer, the technological method to achieve privacy is very different and much more complete. Indeed, there are many advantages to using RAILGUN over a Mixer.”

The platform asserts that its method is not only about mixing tokens but also about maintaining transparency and security throughout the transaction process.

Community and Legal Backing for Privacy

The crypto community continues to rally around the need for privacy, with Coinbase CLO Paul Grewal advocating for legal recognition of privacy rights. Grewal’s detailed legal arguments against the sanctions on Tornado Cash, another privacy protocol, as it faces broader pushback with US Treasury OFAC sanctions. He emphasized the use of open-source software for privacy should not be curtailed without clear legislative backing.

In a series of tweets, Grewal explains the current status of the legal proceedings, where the Tornado Cash plaintiffs have responded to the Treasury’s arguments in the Fifth Circuit Court of Appeals. He outlines the Treasury’s need to prove that those associated with Tornado Cash, including all 1.5 million token holders and its developers, share a common illicit purpose.

Grewal points out that the sanctions imposed stretch the legal boundaries, noting that immutable, open-source software code isn’t “property”.

Further explaining that it should not fall under the Treasury’s usual regulatory scope. He argues that it creates a legal challenge for the Treasury, as it traditionally only regulates “property” in which a foreign national has an interest.

Grewal notes that if the Treasury wants to regulate the use of such software by American citizens, it needs explicit congressional authority.

Privacy Vs Security

Railgun wants to offer a privacy-focused service. However, regulatory scrutiny and misuse by bad actors leave mixers under sanctions. 

Crypto figures like Vitalik Buterin and Paul Grewal have started a dialogue about the balance between privacy and security. But, the list of Tornado Cash alternates is endless. Railgun has joined the likes of Sinbad and YoMix even if it wants to distinguish itself from being a crypto mixer.

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