The recent governance attack on Tornado Cash has sent ripples through the DeFi community. This in-depth analysis explores the intricacies of the exploit, examines the hacker’s supposed “change of heart,” and assesses the lingering risks for Tornado Cash and its users, particularly looking ahead to implications for the landscape in 2025.
The Tornado Cash website before the governance attack.
Understanding the Attack Mechanism: How the Governance Exploit Unfolded
Tornado Cash, a privacy protocol on Ethereum, utilizes zero-knowledge proofs (ZKPs) to shield transaction details. Its native token, TORN, plays a crucial role in governance, allowing holders to vote on proposals and stake for rewards. The attacker exploited a vulnerability within Tornado Cash’s proposal contract, manipulating the voting mechanism to seize control of the governance process.
The core of the attack revolved around the proposal contract’s susceptibility to manipulation through the Create/Create2 opcodes and users’ blind trust in the voting process. The attacker cleverly disguised the malicious proposal using the emergencyStop function. Once approved, this function, combined with Create/Create2, allowed the contract to be updated and generate a massive number of fraudulent votes, effectively granting the attacker complete control.
quá trình tấn công tornado cashA breakdown of the attack steps. Source: BlockSec
From Exploit to Plunder: Tracing the Hacker’s Actions
Having seized control, the attacker swiftly unlocked the staked votes, converting them into TORN tokens. They then drained the governance vault, amassing a total of 483,000 TORN (approximately $2.1 million at the time). Subsequent actions included:
- Depositing 6,000 TORN on the Bittrue exchange.
- Swapping 379,300 TORN for 375 ETH (worth $680,000) on-chain at an average price of $1.8, ironically utilizing Tornado Cash to launder the proceeds.
- Further swaps of TORN to ETH, with the hacker’s wallet (0x092…) still holding substantial amounts of both tokens.
hacker swap torn sang ethOn-chain activity showing the hacker’s TORN swaps and ETH deposits into Tornado Cash.
A Twist in the Tale: The Hacker’s Apparent Remorse and Proposal for Restoration
The swiftness of the attack left the project and community reeling. Surprisingly, the attacker then proposed restoring the governance to its original state, returning the stolen votes.
hacker tornado cash khôi phụcThe hacker’s proposal to restore governance.
Lingering Risks and Uncertainties: Beyond the Governance Restoration
While the restoration proposal offered a glimmer of hope, significant risks remain. The attacker still held control, potentially manipulating the outcome before the proposal’s deadline or introducing new proposals. The possibility of this being a manipulative tactic to regain community trust and inflate the TORN price cannot be dismissed. Beyond this, other concerns loom:
- Tornado Cash Nova Funds: Nearly $1 million held by Tornado Cash Nova on Gnosis Chain is vulnerable to a similar governance attack. While a seven-day delay between proposal creation and execution exists, the attacker could target these funds in the future.
số tiền trên tornado novaFunds held by the Tornado Nova contract. Source: GnosisScan
IPFS and Domain Manipulation: The attacker could alter Tornado Cash’s IPFS records, impacting its domains and potentially creating fake Tornado Router interfaces to steal user funds. Interacting with Tornado Cash dApps is strongly discouraged until the situation stabilizes.
Long-Term Implications: Even in a best-case scenario where governance is restored, the sold TORN tokens are likely lost, potentially crippling the DAO’s treasury. The worst-case scenario could see the complete shutdown of Tornado Cash DAO, a significant blow to the privacy ecosystem in 2025 and beyond.
Arbitrage Opportunities and Market Volatility: A Rollercoaster for TORN
The attack created arbitrage opportunities for astute traders. The shallow liquidity of TORN on-chain pools exacerbated the price drop during the hacker’s TORN-to-ETH swaps, with prices plummeting as low as $0.5. Bots detected this discrepancy, enabling quick purchases on DEXs and subsequent sales on centralized exchanges for profit. Binance temporarily halted TORN deposits and withdrawals to mitigate the risks, but other exchanges, like Huobi, remained open, adding to the market volatility.
thanh khoản token tornTORN liquidity on Uniswap pools. Source: Dexscreener
The news of the restoration proposal triggered a buying frenzy, propelling TORN to the top gainers list with a 45% surge. While CEX trading dominated due to liquidity concerns, some on-chain traders profited handsomely. Examples include wallet 0x170… achieving a 60% profit and 0xc91… an 80% profit by buying low and selling high.
Transactions of wallet 0xc91 with TORN. Source: Watchers
The Road Ahead for Tornado Cash in 2025: Navigating Uncertainty and Rebuilding Trust
The Tornado Cash governance attack serves as a stark reminder of the vulnerabilities within the DeFi landscape. The long-term consequences of this exploit remain uncertain, but the event underscores the importance of robust security measures, community vigilance, and careful consideration of governance mechanisms. As the DeFi space evolves towards 2025, the lessons learned from this incident will shape the future of decentralized governance and privacy protocols.
FAQ
Q: What is the impact of the Tornado Cash hack on users?
A: Users who held or staked TORN were directly affected by the price volatility. The attack highlights the risks associated with participating in DeFi protocols, especially those with governance vulnerabilities.
Q: What are the implications for the future of privacy protocols?
A: The attack underscores the need for stronger security measures and more resilient governance structures in privacy protocols. This incident could drive innovation in decentralized governance and security practices within the privacy sector.
Q: Should users continue to use Tornado Cash?
A: It is strongly recommended to exercise extreme caution when interacting with Tornado Cash until the situation is fully resolved and security audits are conducted.
Q: How can I stay updated on the Tornado Cash situation?
A: Follow reputable news sources, community forums, and official project updates for the latest information. We encourage you to share this article and ask further questions in the comments below to foster a better understanding of this critical event.
