Zcash faced fresh market pressure after founder Zooko Wilcox disclosed more details about a critical Orchard pool bug, while BitMEX co-founder Arthur Hayes said he sold his full ZEC position.
Summary
- Orchard flaw raised supply doubts after Shielded Labs said hidden counterfeit ZEC was technically possible.
- Arthur Hayes sold his full ZEC position, saying privacy trades need certainty, not mere probability.
- Zcash developers fixed Orchard and may propose a new pool to verify full supply integrity.
Zooko shared a Shielded Labs post saying security researcher Taylor Hornby found the issue on May 29. The bug sat in Zcash’s Orchard shielded pool, which forms part of the network’s private transaction system.
Zcash Open Development Lab led an emergency response with other ecosystem teams. The fix closed the window of risk by June 2, after an upgrade process that paused Orchard activity and restored it with corrected code.
Shielded Labs said the bug was real and exploitable. In a local test, Hornby used the exploit to create unlimited counterfeit ZEC inside Orchard without detection. The team said the same tool could have worked on mainnet before the fix.
The main concern now centers on proof. Because Orchard protects transaction privacy, Shielded Labs said cryptography alone cannot show whether anyone used the bug before the repair. It still said prior use looked unlikely.
Hayes says the privacy trade needs perfection
Arthur Hayes added market pressure when he said he had sold his entire ZEC position. He linked the decision to the Orchard disclosure and said the event broke his privacy thesis for the asset.
Hayes wrote that minting looked “extremely unlikely” but could not be formally ruled out. He also said the privacy narrative against AI, governments, and big tech needs “perfection not improbability.”
The comment came after ZEC dropped about 30%. Hayes said the move forced him to rethink the position and take profit. He added that he could buy again if his assumptions prove wrong.
His exit mattered because he had recently framed ZEC as part of his “Holy Trinity” trade. That theme had linked Zcash with privacy, while HYPE and NEAR represented other crypto narratives.
Zcash eyes upgrade to prove supply integrity
Shielded Labs said users should not rely only on its view that prior misuse was unlikely. It is now exploring a network upgrade that would let anyone verify the Zcash supply.
The proposal would create a new shielded pool and use turnstile accounting for coins leaving Orchard. The goal is to prove that counterfeit ZEC does not remain inside the affected pool.
The plan still needs more detail and community support. Shielded Labs said it will publish a follow-up post next week explaining how the upgrade could work and what tradeoffs users should weigh.
Zcash Foundation had already released Zebra 5.0.0 through the NU6.2 hard fork. As previously reported by crypto.news, the upgrade re-enabled Orchard with a corrected circuit, while no evidence of unauthorized value creation had been found.
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