In a recent development, Binance reopened TORN deposits following a security breach on the privacy-focused crypto mixer Tornado Cash DAO. The exchange announced on Monday that it has resumed deposits for TORN via the Ethereum (ETH) network and Binance’s own BNB Smart Chain. TORN deposits on these two networks were suspended on May 21 “due to the recent incident” involving the TORN decentralized autonomous organization (DAO).
The good news is that a proposal to restore the state of governance in the TORN DAO has been passed and executed, allowing Binance to reopen TORN deposits. Furthermore, Binance has decided to move Tornado Cash into the Innovation Zone by May 30, which will see the project closely monitored for future developments. This swift action is certainly a positive step towards mitigating potential incidents in the future.
The situation raises concerns about the security of decentralized systems like TORN DAO. The recent incident referred to by Binance was a hack that gave an unidentified attacker or group of attackers control of the DAO managing the operations and funds of Tornado Cash. The attacker used a malicious proposal containing a hidden code function that granted them fake votes within the DAO. They then withdrew and sold 10,000 votes as TORN, maliciously minting over 1 million TORN tokens with a value of more than $4 million.
It is important to note that the actual Tornado Cash protocol, which allows users to obscure the movement of funds, was not impacted by the attack. In response to the security breach, the Tornado Cash community proposed to revert the changes made by the attacker. Eventually, the hacker ended up restoring the state of governance themselves. However, the digital tokens plundered during the attack were still laundered through the protocol, swapping most of the stolen TORN for ETH.
The temporary pause on TORN deposits by Binance in the wake of the attack did have a knock-on effect on TORN prices, with the token experiencing drops following the developments related to the security breach. At the time of writing, Tornado Cash’s governance token, TORN, was trading at $4, down over 10% in a day, 13% in a week, and 50% in a month. Over the course of a year, it dropped by an astounding 87%.
This incident highlights the potential risks and vulnerabilities that decentralized systems can face. As the crypto world continues to expand, it is crucial that security measures are consistently evaluated and updated to stay ahead of potential threats. Although it is reassuring to see exchanges like Binance taking decisive action to protect investors in such situations, one can’t help but question the overall safety and preparedness of the space. However, moving projects like Tornado Cash into monitored zones can be a step in the right direction to ensure better stability and security for participants in the future.