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The Decentralised: Tornado Cash storm, Solana’s signs of life

The Decentralised: Tornado Cash storm, Solana’s signs of life
The US DoJ has charged the founders of Tornado Cash with money laundering and sanctions violations. Credit: Andrés Núñez/DL News.
  • The DeFi world has been rocked by a barrage of stories over the past week.
  • The DoJ charged Tornado Cash’s founders with money laundering and sanctions violations.
  • Elsewhere, Wintermute’s CEO Evgeny Gaevoy responded to market manipulation accusations.
  • We also looked at how Solana is showing signs of recovering from the FTX crash.
  • That, and much more, in this week’s The Decentralised newsletter.

A version of this story appeared in our The Decentralised newsletter. If you want to read this or our other newsletters before your friends do, don’t hesitate to sign up.

Hey everyone, Tim here.

Welcome back to The Decentralised, where we cover the week’s top DeFi stories and give a teaser on what we’re watching for the week ahead.

Last Wednesday, the DeFi community was taken aback. The US Department of Justice charged Tornado Cash founders Roman Storm and Roman Semenov with money laundering and sanctions violations.

In the unsealed indictment, prosecutors argued that the pair sought to profit from the Tornado Cash protocol, which has facilitated millions of dollars’ worth of money laundering from state-sponsored North Korean crime syndicate Lazarus Group.

Prosecutors presented messages sent between Storm and Semenov discussing the possibility of putting know-your-customer and anti-money laundering checks in place on the popular privacy protocol — a move which they never took.

NOW READ: They’re coming for the DeFi devs: ‘You can’t just decide that the law doesn’t apply to you’

Shortly after the indictment, Storm was arrested in the state of Washington, but has since been released on bail. Semenov, who is believed to be living in Dubai, has evaded arrest. According to Theo, a pseudonymous Tornado Cash developer, Storm’s arrest came as a surprise because nobody thought he lived in the US.

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However, the bigger issue for many is that in making its case against Storm and Semenov, the indictment argues that the Tornado Cash protocol is a money transmitter.

If the DoJ can get the money transmitter classification to stick, it might put other DeFi protocols which facilitate token transfers, such as decentralised exchanges and lending protocols, in jeopardy.

Developers across DeFi are now wondering if they, too, could be hit with similar enforcement actions for not implementing KYC and AML checks for users on their protocols.

Read the full story from Aleks Gilbert, and find out when Storm is scheduled to appear in court, here.

NOW READ: Code is not speech: ‘Wild theories’ won’t protect DeFi developer Alexey Pertsev

Next up, I interviewed Wintermute founder and CEO Evgeny Gaevoy to find out what he thinks about recent allegations of market manipulation levelled against his firm by some in the crypto community.

Gaevoy said accusations that Wintermute could move the market for the assets it traded were “flattering,” and that he sought to educate those who believed his firm was involved in shady dealings.

He also made the case for Wintermute’s recent proposal to DeFi protocol Yearn Finance, calling it a “win-win” for both parties. Wintermute has offered to deposit CRV tokens to Yearn to provide liquidity, but wants a loan of 350 of the protocol’s YFI tokens in return to use in its market making business.

Read the full story here to find out why market makers like Wintermute need token loans from DeFi projects.

NOW READ: How hackers turn stolen crypto into cash

Lastly, Aleks also took a look at how the Solana ecosystem has been doing since the collapse of its biggest benefactor: Sam Bankman-Fried and his defunct firms FTX and Alameda Research.

According to the data, things are looking up. DeFi protocols like Drift have experienced steady growth since the start of the year, bringing the blockchain’s total value locked to over $310 million — a 51% increase since January.

Solana-based developers are calling it a “renaissance,” and referring to the activity as “Solana DeFi 2.0″ to distinguish newer protocols from those with “predatory tokenomics” like the SBF-backed Serum protocol.

Additionally, almost $10 million entered the Solana ecosystem in the week ending Aug. 7, the largest single week of inflows since March 2022, according to crypto research firm CoinShares.

Read the full story here to find out which DeFi protocols are attracting capital back to Solana.

Data of the week

After plummeting over 97% from its 2021 bull market highs, Solana’s total value locked is showing signs of life. Spurred on by a handful of new “Solana DeFi 2.0″ protocols, the value of deposits on the blockchain has climbed 51% since the start of the year.

Solana TVL increases in 2023

This week in DeFi governance

TEMP CHECK: Deploy Uniswap V2 on all chains with V3

Uniswap is polling interest for deploying its popular V2 version to more chains than just Ethereum. Currently, Uni V2 forks launched by third parties have met demand for the product. Officially launching Uniswap V2 on other chains should help concentrate liquidity on Uniswap while also providing more efficient swaps through Uniswap’s universal router.

VOTE: NFT platform Rarible proposes Arbitrum integration

The Rari Foundation wants to jumpstart the growth of NFTs in the Arbitrum ecosystem by integrating Arbitrum One with the open-source Rarible Protocol. Rarible says the integration will take five weeks to complete at a cost of $100,000 to the Arbitrum DAO.

VOTE: Yearn Finance to launch V3 version

Yearn is finally ready to release its long-awaited V3 version. V3 aims to be a fully decentralized protocol that provides the most secure and trusted infrastructure for on-chain capital allocation. How V3 works is too technical to get into here, so check out the full proposal for more info.

Tweet of the week

Despite the sluggish market, crypto is still alive and kicking. It can be difficult to zoom out from the day-to-day grind and put everything that’s happened in the past six months into perspective. But last week tervo did just that, so we want to thank him for his service.

What we’re watching for next week

Controversial crypto personality Ben Armstrong, more commonly known online as Bitboy Crypto, has parted ways with collaborators TJ Shedd and Justin Williams.

Armstrong has accused his former associates of staging what he calls a “coup.” In response, Shedd and Williams cite Armstrong’s alleged “substance abuse” and claim it led to “physical and financial damage” to employees and the community around the Bitboy Crypto brand.

Armstrong has previously received harsh criticism for, among other things, taking undisclosed paid advertisements and using his platform to promote crypto tokens to his followers while selling the same tokens himself.

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Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out to him with tips at tim@dlnews.com.

Disclosure: Tim holds over $1,000 worth of Ether, Swell staked Ether, Redacted Cartel, and GMX. He also holds an insignificant amount in NFTs.