Tornado Cash is a blockchain-based service that mixes crypto assets such that the origin and destination of the transactions are untraceable. Firstly the deposit of crypto assets is directed into a pool of Tornado Cash smart addresses with equal value while generating a secret value. A commitment of the secret (essentially its fingerprint) is recorded and stored in the Merkle tree, a cryptographic data structure that records and verifies the commitment. Once deposited into the pool, the crypto assets are mixed such that the origins are functionally impossible to trace. The user then uses a second different address to make the withdrawal using a zk-SNARK zero-knowledge proof, which includes the secret corresponding to the commitment recorded by the Merkle tree and nullifier (single-use code to prevent multiple withdrawals). The U.S. Court of Appeals for the Fifth Circuit ruled that Tornado Cash smart contracts are categorically distinct from property due to “immutability”, which suggests they cannot be changed retroactively. However, Tornado Cash smart contract systems have governance mechanisms that can restrict certain functions in the contract, raising a technical counterargument to the ruling.
