The Ethereum Foundation and Keyring Network have launched a new initiative to pioneer a market-aligned funding mechanism. Fees from the zkVerified DeFi vault are used to support privacy-minded open source developers.
For the first two months, your fees will be donated to the Tornado Cash developer’s legal defense fund.
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Privacy protection for DeFi funds for institutional investors
The Ethereum Foundation and the Keyring Network have devised a funding mechanism for privacy developments.
Keyring is a company focused on creating tools that give major financial institutions access to compliant decentralized finance (DeFi) products. They specialize in using advanced zero-knowledge proofs to allow users to prove that they are verified on the Ethereum blockchain without revealing their identity.
Keyring recently developed a zkVerified vault that serves as a secure and income-generating DeFi gateway that is only accessible to safelisted investors.
This joint initiative aims to fund the legal defense of Tornado Cash developers Roman Storm and Alexey Pertsev and defend their privacy-enhancing open source code.
Keyring will provide direct financial support, pledging two months of all protocol fees generated by the new zkVerified vault to developer defense. Meanwhile, the Ethereum Foundation is a strategic partner. The Ethereum Foundation will coordinate efforts and establish a successful test case for this new funding model.
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Developers convicted of open source code
In 2019, Storm, Pertsev, and Roman Semenov created and launched Tornado Cash, an open source cryptocurrency mixer on the Ethereum blockchain. This service greatly enhances the privacy and anonymity of users’ transactions.
It is stated that the main motivation for its creation was to provide financial privacy to cryptocurrency users. Since Ethereum transactions are public, Tornado Cash was created to disconnect the sending and receiving wallets.
Supporters like Vitalik Buterin praised its creation as essential for financial privacy. But critics argued that criminals, such as North Korea’s sophisticated hackers, could use it to launder billions of dollars in illicit funds.
In August 2022, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) sanctioned Tornado Cash. It also became illegal for Americans to use the protocol. Mr. Pertsev and Mr. Storm were subsequently arrested and charged with aiding and abetting money laundering and operating an unauthorized money transfer business.
The court convicted both Persev and Storm of these crimes. Roman Semyonov remains at large.
alarming standards
The lawsuit against the developers of Tornado Cash resulted in significant legal costs.
Many in the cryptocurrency community see this case as setting a dangerous precedent for criminalizing developers for simply writing open source code.
Beyond this new strategic initiative between the Ethereum Foundation and Keyring, the Foundation pledged an additional $500,000 contribution in August to fund the developer’s legal defense.
This new initiative serves as an important proof of concept for the entire industry. If successful, this new model will establish a sustainable, market-driven funding structure that will automatically lead to financial success for privacy protocols, eliminating the need to rely on emergency one-time community contributions for all future legal challenges.
