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ACE Webinar | Derecho: An Alternative to US Sanctions on Tornado Cash using Zero-Knowledge Proofs

About this event

In August 2022, the U.S. Department of Treasury sanctioned Tornado Cash, the largest Ethereum privacy pool, on the premise that it enables illicit actors to hide the origin of funds, citing its usage by the DPRK-sponsored Lazarus Group to launder over $455 million dollars worth of stolen cryptocurrency. This ruling effectively made it illegal for U.S. persons/institutions to use or accept funds that went through Tornado Cash, sparking a global debate among privacy rights activists and lawmakers. This talk puts forward a perspective on why such actions may be overkill. We present a technical solution that fits into the current regulatory framework and has the same potential to mitigate illicit activity without removing all users’ ability to transact privately.

Derecho is a system that institutions could use to request user-generated cryptographic attestations (zero-knowledge proofs) of fund origins coming from privacy pools. Derecho is a novel application of proof-carrying data, which allows users to propagate allowlist membership proofs through a privacy pool’s transaction graph. Derecho is backwards-compatible with existing Ethereum privacy pool designs, adds no significant overhead in gas costs, and costs users only a few seconds to produce attestations.

Hosted by

  • Team member
    Doro Unger-Lee Head of University Programs

    Doro Unger-Lee is the Head of University Programs at Algorand Foundation. Together with the Algorand research team she launched the Algorand Centres of Excellence (ACE) programme. Before joining Algorand Foundation Doro Unger-Lee was a senior programme manager at international top universities.

  • Guest speaker
    Josh Beal Yale University

    Josh Beal is a Ph.D. student in the Yale Applied Cryptography Laboratory, advised by Prof. Ben Fisch. He received a B.S and M.S. in Computer Science from Stanford University. He conducts research in privacy and verifiability with a focus on blockchain applications. GitHub: . Yale University is part of the Algorand Centres of Excellence (ACE) program. Their ACE is focusing on privacy, accountability, verification, and economics of blockchain systems (ACE-PAVE). Yale works together with The City College of New York (CUNY), EPFL in Switzerland, Columbia University in New York and CERTIK on a multi-year grant supported by Algorand Foundation.

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