Elliptic assessed the risks of popular cryptocurrency mixers

Elliptic experts analyzed six popular Ethereum-based cryptocurrency mixers, which are mentioned as potential alternatives to Tornado Cash, which has fallen under US sanctions.

The review includes RAILGUN, Buccaneer V3, White Ethereum, 0xTIP, Messier 87 Black Hole and Cyclone Protocol services. According to analysts’ calculations, the studied protocols collectively processed transactions worth more than $41.5 million — 0.6% of the amount of funds mixed by Tornado Cash.

Of these, $40,000 (0.1%) was obtained as a result of theft in the DeFi segment. This amount includes $37,000 of the $270,000 stolen during the June attack on the xWIN Finance protocol. Another $100,000 came directly from Tornado Cash, a small part of these funds were sent after the sanctions were imposed.

“Current indicators indicate insignificant use of the services in question for criminal purposes at this stage,” Elliptic noted.

The most popular mixing assets are ETH, BNB, Wrapped ETH and USDT. However, this data does not include Polygon-based assets.

Many protocols are based on “improved” forks of the Tornado Cash smart contract, although their small pools of liquidity make large-scale mixing less feasible, the researchers added.

Cyclone Protocol (100 ETH/100,000 USDT) and RAILGUN (without restrictions) have the highest mixing limits — they account for more than three quarters of the total amount of funds processed by the studied punctures.

Elliptic’s internal analysis has identified the Cyclone Protocol mixer as the riskiest among the Tornado Cash alternatives available today. Researchers are concerned about:

high transaction limits;

relatively high liquidity of pools;

ability to mix Tornado Cash tokens;

confirmed use to launder part of the proceeds from DeFi exploits;

large volume of processed funds;

anonymity and inactivity of the development team.

Buccaneer V3 received a “medium-high” risk assessment, which did not take into account any money laundering problems throughout the development. BV3 uses a “bait mode” that displays fake and changing BUCC balances in the interfaces of wallet providers as an additional obfuscation technique. The main mitigating factor for BV3 is the use of technology that is at the testing stage.

The other four protocols also have mitigating factors that Elliptic estimates are capable of preventing large-scale illegal use.:

RAILGUN generates compliance reports and has a partially public development team.

Messier 87 claims that it is ready to provide the necessary reports at the request of the authorities.

White Ethereum and 0xTIP are struggling with low mixing limits and low liquidity pools respectively, making them an unviable replacement for Tornado Cash at the moment.

The risk matrix. Data: Elliptic.

Recall that on August 8, OFAC imposed sanctions on the Tornado Cash mixer. The agency suspected the platform of laundering about $7 billion since 2017. Over $455 million of them were linked to North Korean hackers.

Within a month after the sanctions were imposed, Tornado Cash’s liquidity pools decreased by about 60%, which reduced its potential for anonymizing large-scale money laundering schemes.