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Decentralization is quarreling with forbidden activity


The Thorchain is called a monetary laundering protocol – a label wants no decentralized financial project (DEFI) unless it is willing to have regulators breathing around its neck.

Its supporters ride to criticize the champion of decentralization, while its critics point to recent activities that have shown some of the centralized protocol tendencies.

After being exploited bybit for $ 1.4 billion, North Korean state-supported hackers behind the attack, known as The Lazarus Group, flock to the Thorchain, making it their leading choice to convert stolen funds from Ether (Eth) to bitcoin (Btc). Lazarus finished converting its ether In just 10 days of hack.

The controversy triggered the internal conflict, cracks of management and resignation to the developer, exposing a deeper issue and question: Can the defi remain neutral when criminals take advantage of it?

Thorchain is not a mixer

Thorchain is a decentralized swap protocol, so some say it’s not fair to call it a laundering machine, as the output can be monitored. It’s not like a mixer, whose goal is to hide cryptocurrency funds – although the causes of the use of mixers vary between users, with some simple want to maintain their privacy and others who use them for prohibited purposes.

Federico Paesano, investigations are leading Crystal Intelligence, Argued In a LinkedIn post it is misleading to say that North Korea hackers have “laundered” the proceeds of the hack hack.

“So far, there is no secretion, just returning to the interior. The stolen ETH has been to BTC using different providers, but each replacement is fully monitored. It is not laundering; it is just a movement of the asset across the blockchain.”

Decentralization, Cybercrime, North Korea, Cybersecurity, Money Laundering, Thorchain, Features, Lazarus Group

Monitoring funds that have been replaced with Bitcoin is up to date, but not impossible. Source: Federico Paesano

Hackers also transferred funds through Uniswap and Okx Dex, but the thorchain has been the focal point of investigation due to the thin volume of funds that have passed it. In a Post 4 x Post, Bybit CEO Ben Zhou Says 72% of stolen funds (361,255 ETH) flow through the thorchain, which further exceeds activity with other Defi services.

Decentralization, Cybercrime, North Korea, Cybersecurity, Money Laundering, Thorchain, Features, Lazarus Group

More than $ 1 billion in Ether from the BYBIT robbery has been traced to Thorchain. Source: Coldfire/Dune Analytics

A truly decentralized platform strength lies in neutrality and resistance to censorship, which is the foundation of the blockchain value, according to Rachel Lin, CEO of decentralized exchange synfutures.

“The line between decentralization and responsibility can change technology,” Lin told cointelegraph. “While human intervention opposes the ethos of decentralization, changes in protocol levels can automatically care against illicit activity.”

Related: From Sony to Bybit: How the Lazarus Group became supervillain

Thorchain has collected somehow $ 5 million in fees from these transactionsA windfall for a project that has difficulty in financial unevenness. This financial benefit is further stimulating criticism, with some inquiry whether Thorchain’s reluctance to intervene is ideological or simple self-preservation.

Decentralization, Cybercrime, North Korea, Cybersecurity, Money Laundering, Thorchain, Features, Lazarus Group

Source: Yogi (Screenshot that has been -crop of cointelegraph for visibility)

Management cracks show when decentralization becomes a shield

Controversy caused a problem with whether thorchain should act. In an attempt to block hackers, three validators voted to stop ETH trade, effectively closing their replacement route. However, the four validators quickly voted to recover the decision.

It exposes an contradiction to the thorchain management model. Protocol is claimed to be fully decentralized, yet it is mediated with I -Pause its lending feature due to insolvency risks (Swaps remain operational).

Some members of the Crypto community call Thorchain’s actions as selective decentralization, which only occurs management intervention when it serves the self -interest of the protocol.

Decentralization, Cybercrime, North Korea, Cybersecurity, Money Laundering, Thorchain, Features, Lazarus Group

Source: And dadybayo

The backlash immediately. Pluto, a major thorchain developer, Nagbiw. Another developer, the TCB, who introduced themselves as one of the three validators to vote to stop the ether trade, Hinted In removal unless management issues have been addressed.

Meanwhile, blockchain investigator Zachxbt Called Asgardex, a decentralized thorchain-based exchange, for not returning fees obtained from hackers, while other protocols have been reported to have refunded those who have not been acquired.

Thorchain founder John-Paul Thorbjornsen responded by claiming that the centralized pocket exchange millions from facilitating illicit transactions unless being forced by authorities.

“It’s annoying to me. Do we get ETH and BTC nodes to return their transaction fees? What about Geth or BTCCORE Devs – who wrote the software, funded by grants/donations?” Question Thorbjornsen.

Decentralization, Cybercrime, North Korea, Cybersecurity, Money Laundering, Thorchain, Features, Lazarus Group

Source: Zachxbt

Growing risks to thorchain regulation, as shown by privacy tools

Today, Thorchain has avoided any direct implementation actions from governments, but history suggests that defi protocols that facilitate illicit finance may not escape the investigation forever. Tornado Cash, a prominent crypto mixer, is Punish by the US Treasury in 2022 after being used to take away billions -billions of dollars, though it was later revoked by a US court. Similarly, the railgun arrived under the FBI Scattering investigation In 2023 after North Korea hackers used it to move $ 60 million to stolen Ether.

Related: Cash Cash developer Alexey Pertsev has left prison guard

Railgun presents a unique case, as it is for sale as a privacy protocol rather than a mixer or a dex. But the difference is that thorchain comparisons still get comparisons, given that privacy protocols are often faced with criticism for the potential of enabling illicit activities.

“Critics often claim that privacy-focused projects enable crime, but in fact, protecting financial privacy is a major right and a foundation of decentralized change,” Chen Feng, head of Autonomys research and associate professor and chairman of the blockchain research at the University of British Columbia’s Okanagan Campus, said Cointelegraph.

“Technologies such as ZK-Proofs and trusted implementation environments can secure user data without obscuring the prohibited activity. Through the optional transparency steps and stable onchain forensics, weeping patterns can still be seen. Built-in care to discourage and monitor the use of prohibited.

Lin of Synfutures said that the use of decentralized protocols has continued to be “completely” led to violent steps from the authorities.

“Governments are likely to increase the steps if they see decentralized protocols as systematic risks. This may include penalizing protocol addresses, pressing infrastructure providers, clinching the entire network or following the builders,” he said.

Rising pressure against the thorchain

Thorchain supporters Argue This is unfairly singled out, as hackers also use other defi protocols. But regulators tend to focus on the largest enablers, and thorchain processes most stolen funds from the Bybit Hack. This makes it easy to target for actions that are already implementing the Foreign Assets Control (OFAC) office penalty for prosecuting the developer.

“When the large majority of your flows are stolen funds from North Korea for the biggest money heist in human history, it will be a national security issue, this game is no longer,” TCB write In X.

“The threshold you want to be decentralized credentials you need a network of 1000+ unique validators. There is a reason why @chainFlip has fixed this issue at the network level very fast and all ends of the end are applying censorship.”

If regulators decide to break, the consequences can be severe. Penalties on thorchain validators, front services, and liquidity providers may worsenRune), it cuts its access to liquidity.

There is also a possibility of legal action against the developers, as seen in Tornado Cash Case.

Thorchain’s seizure with North Korea hackers put it in a branch. The protocol should decide whether to take action today or the risk of getting regulators to make that decision for them.

So far, the protocol remains stable in the laissez-faire approach, but history suggests DeFI projects that ignore the forbidden activity will not remain uncontrollable forever.

Magazine: Founder of thorchain and his plan on ‘vampire attack’ all defi