Draining Web3.0
The Tornado Cash Arrest: When Authorities Themselves Mix Malicious Users with Mere Developers
The Dutch Fiscal Information and Investigation Service (FIOD) arrested a man suspected to be a Tornado Cash developer in Amsterdam [1]. For those not familiar with the protocol, Tornado Cash is a crypto mixer. Such tools offer an extra layer of privacy when carrying out transactions. The FIOD argues that Tornado Cash has been extensively used by criminals to conceal large-scale criminal money flows. Earlier this month, the service was sanctioned by the Office of Foreign Assets Control (OFAC) [2], meaning that U.S. entities are prohibited from (indirectly) interacting with the protocol.
As a Dutch Web3 advocate, some considerations popped up that must be readily shared and elaborated upon. Hopefully, it will generate some interest from the authorities arresting the developer.
First, blockchain technology and corresponding applications such as mixing tools are characterised by technological neutrality, meaning that they can be deployed for the good, for the bad or for anything in between. That technological neutrality implies that the authorities wrongfully target the mixing tool. Secondly, the developer was arrested for writing code. For writing open-source code, to be precise. One could argue that the arrest is a mere ideologially coloured attempt to drain Web3.0 from progressing.
Paradoxically (yet much in line with the Dutch tradition of draining and grinding), it appears that the Dutch authorites mix up the distinction between the malicious users of the Tornado Cash mixer and the mere developer of some of the code, resulting in an attempt to drain Web3.0.
Here’s why.
Mixers’ Nature, Nurture and Neutrality
To start answering the first consideration, it is crucial to mention that the Tornado Cash case clearly illustrates that blockchain technology and the underlying code are the product of humans. Indeed, code does not get written by itself. The protocol is a product of (a set of) continuous choices and motives, or values, so you will. It can be assumed that these values originate primarily from the people engineering the blockchain technology, and subsequently also from other (third) actors there where governance mechanisms consist of a Decentralised Autonomous Organisation (DAO) like in the Tornado Cash case. Lastly, those using open-source code for creating new products and solutions may implement other values in their work.
One can argue that the mixer, as a result of a set of values, can’t be neutral as it promotes some values and demotes others. In the case of Tornado Cash, a prime example of a highly promoted value was anonymity. However, ‘anonymity’ is an overarching value that characterises the nature of the tool itself. Fundamentally something different is the very use of the tool for, for example, laundering money or sending crypto to war-torn countries. In that case, Tornado Cash helps to nurture those ends. The practical implication of the promotion of certain values and ends is that a particular blockchain tool may be considered by users as convenient or not so convenient to reach a particular end.
Hence, a tool’s utility entirely depends on third-party judgement, needs and use. In that regard, even if a tool such as Tornado Cash incorporates an overacting value such as anonymity, the tool is indeed neutral in the sense that it provides anonymity to all users in an unbiased manner. This aspect must be perceived separately from third parties’ actual usage and the real-world impacts that usage subsequently generates.
Mixing Mixer’s Use and Code
So the decision to use blockchain technology, such as a mixing tool, for a particular end is entirely up to an individual’s personal choice and underlying motives. This can be called one’s morality. Because analogical reasoning often provides new insights, it is worthwhile to take a little detour towards legal theory on law and morality. Hopefully, this anology somewhat speaks to law enforcers as well.
Lawyers know that one can debate whether the law is necessarily connected to morality. In his book The Concept of Law, the philosopher of law Hart argues that there is no inherent relation between law and morality[3]. Law is simply what is established as law by the authorities. Indeed, life is filled with examples of (im)moral laws being established and executed by authorities. Moreover, whether or not we consider legal rules to be in line with our morals may variate over time. Depending on one’s moral judgement, the law may be considered as good, bad or something in between. Likewise, technology is also not necessarily correlated with a moral judgement.
Interestingly, as for how the rules of a legal system may be described or evaluated, Hart distinguishes the ‘external’ and ‘internal’ points of view. Without elaborating too much on the legal side of the analogy, it might be of use to briefly discuss how a blockchain tool such as Tornado Cash can be evaluated, loosely applying those external and internal perspectives.
An external observer may simply describe a fact from an unbiased perspective without necessarily endorsing the product. An external observer thus might take a value-free perspective on Tornado Cash and say that certain values as enshrined in the technology are not right or wrong. For instance, the external observer glimpsing at the mixer can mention that apparently, some engineers have found it alright to design a tool that can be used to increase anonymity.
The normative verdict on whether it is OK to design and use such tools depends entirely and only on the values of the engineers that created the technology and on other players in the ‘game’ that use or observe the tool, such as oppressed individuals, criminal organisations or legal authorities. Indeed, the internal perspective reasons from within. For instance, from the internal perspective of the developer and of a Tornado Cash end-user, using the tool may be completely acceptable and even morally just. Yet, from the internal perspective of an authority such as the FIOD or the OFAC, the use of Tornado Cash may be completely undesirable or immoral.
Thus, the answer to the question of whether Tornado Cash itself and its underlying code are indeed neutral depends not only on one’s values and one’s morality but also on the corresponding perspective adopted.
The author would adopt Hart’s external perspective and would argue that although Tornado Cash’s code and the very tool are the result of human actions, the tool is indeed neutral as it may be deployed for all sorts of outcomes, in an unbiased manner. Just as laws are simply laws as established by ‘the relevant authority’, technological tools such as crypto mixers are simply tools as created by ‘the engineer’.
Subsequently, one’s internal judgement upon whether using Tornado Cash is indeed OK or not probably indicates more about the morals of the judge than about the judged itself. What is undoubtly clear is that the Dutch FIOD does not appreciate the developer nor the usage of the tool itself.
What remains is the fundamental question whether it is reasonable to arrest a developer for the (supposed) writing of open-source code of a neutral tool as sanctioned by some authorities.
The Role of Engineers
As mentioned, the potential use cases of blockchain tools such as Tornado Cash are enabled by their design. That design rests in the hands of the engineers who establish the rules according to which the protocol works. In other words, the underlying code of the protocol is established by the developer and that code is implemented in the smart contracts as well. Enters again a legal analogy to speak to enforcers. From the perspective of the law, Dworkin has argued that rules are applicable in ‘an all-or-nothing fashion’, ‘with [legal] consequences that follow automatically when the conditions provided are met’[4].
Smart contracts that ultimately make up the mixing tool can be understood as prescribed guides that lead to a conclusive outcome (or execution) when rules are met. It implies that there is no discretion to be found in the code. Indeed, since the protocol is neutral, it executes when it executes; despite of who commands. The protocol will not distinguish whether a criminal launders terrorist funds or if it is Vitalik Buterin sending ETH to Ukraine.
Having arrested the deverloper, could it be argued that the developer has a specific responsibility to prevent the use of the blockchain tool for illegal conduct? Or should the developer even have abstained from writing the code in the first place?
If so, that judgment would necessarily entail an analysis of the regulation of blockchain tools through their design. Making engineers responsible for the indirect impacts of their code would imply that they actually need to embed certain laws and norms into the design of the blockchain tools. Those in favour of the regulation of human behaviour through the design of smart contract code encounter several issues that are both practical and philosophical in nature.
First, one such issue is that engineers by their nature tend to focus on functional requirements. Technological tools have a ‘utility value’ that is, ‘the value of being useful for a certain end, whether that end is good or bad’[5]. This concept of utility value fits well with the idea that the mixer is indeed neutral by nature yet deployed for an objective as chosen by the end-user. Engineers simply are no lawyers or regulators and nor should they be (or do they even want to be!).
Moreover, code is often developed by large teams of engineers over time. Individual developers also use open-source code created by others, as in this very case. These practicalities make a holistic understanding of the development process and values embedded in blockchain systems and their underlying code less attainable.
In theory, there could be space for the weighing of principles in the design of blockchain technology. One can choose to embed certain user configurations in the code. Just as a system of laws is the outcome of the societal weighting of principles, one could consider translating legal principles into code and hereby into the design of blockchain tools. Code=law, law=code?
Yet, the embedding of legal rules and principles in blockchain code may be theoretically preferred by some, but practically problematic because there is a clash between the prescribed nature of code and the flexibility of the law. Simply put, the regulation of blockchain tools’ real-life impacts through the code itself raises many issues as the translation of legal rules or principles into smart contract ‘rules of conduct’ is problematic.
In the lack of blockchain regulation and design obligations, one cannot argue that the developer holds a special responsibility to prevent the use of the technology for malicious ends. The open-source nature of both the code and the decentralised nature of the sector itself even practically prevent that. Nor can one argue that the developer should not have written the code in the first place as it is a mere means that actors — ‘good’ or ‘bad’ — use towards achieving their objectives.
Appreciating Technological Neutrality and the Opportunities of Web3.0
Human behaviour is complex, blockchain tools can be complex and the motivations behind the law can be complex. Ultimately the way in which we use technology such as crypto mixers and whether that is ‘good’ or ‘bad’ depends on the end-user, their objectives and morality and on third parties forming a normative judgement upon that acting. Does that make crypto mixers neutral? Probably.
Should the Dutch authorities arrest engineers for writing code? Probably not. It could set a dangerous precedent as an attempt to pulverise the progress of Web3.0, let alone the personal drama that goes along with it. Unfortunately, the ultimate verdict on how to move on from here will concern a normative ‘insider’ valuation made by legal authorities that are not much appreciative of the nature of Web3.0.
Dear enforcers, until you better grasp the opportunities of Web3.0 and appreciate technological neutrality, please consider shifting your normative judgements and target the evil and malicious end-users of blockchain technology, not the bound-breaking enablers of a more unbiased and open monetary future.
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To connect — https://www.linkedin.com/in/alexandra-overgaag/
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Appendix
* by Alexandra Overgaag MAS, MSc, LLB (Business Development Strategist — Radom Network), August, 2022. This article is written in the author’s personal capacity and does not necessarily represent the view of her employer. The author declares no competing interests and received no financial support for the research, authorship, and/or publication of this article.
[1] https://www.fiod.nl/arrest-of-suspected-developer-of-tornado-cash/
[2] https://home.treasury.gov/news/press-releases/jy0916
[3] Hart, H. L. A., & Oxford University Press,. (1961). The concept of law.
[4] Dworkin, R. M. (1967). The Model of Rules. The University of Chicago Law Review, Vol. 35, №1, p. 25
[5] Leenes, R., Lucivero, F. (2014). Laws on Robots, Laws by Robots, Laws in Robots: Regulating Robot Behaviour by Design. Law, Innovation and Technology, 6:2, p. 216
