Zcash's institutional supporter, Shielded Labs, disclosed that a vulnerability related to its privacy features had existed on the network for approximately four years until recently detected through an AI-assisted audit. The team has rolled out an emergency fix this week but stated that it cannot guarantee the vulnerability was never exploited in the past, leading to a weakening in market sentiment.
ZEC experiences a sharp daily decline
According to CoinGecko data, ZEC briefly dropped to around $329, marking a nearly 37% decline over 24 hours. This drop also erased much of the token’s previous gains. In November last year, ZEC reached a multi-year high of nearly $700.
The core of market concern is not just the vulnerability itself, but the difficulty of post-event auditing on privacy chains. Since transaction details are inherently harder to trace, it is much more challenging for outsiders to quickly identify unusual minting or fund transfers, unlike on standard public blockchains.
Cypherpunk holdings under pressure
In November last year, Cypherpunk (formerly Leap Therapeutics) announced the completion of a private funding round of nearly $59 million, led by Winklevoss Capital. Since then, the company has accumulated a total of 314,185 Zcash, with a total value of approximately $102 million.
- Holdings: 314,185 ZEC
- Total amount purchased: approximately $102 million
- Average purchase cost: approximately $337
Based on the company’s average purchase cost of approximately $337, this position has now fallen below cost following ZEC’s recent decline. Cypherpunk also disclosed last month that, for the three months ended March 31, the company incurred a net loss of $77.2 million, partly due to fluctuations in the value of its Zcash holdings.
Market skepticism has not yet subsided
Cameron Winklevoss of the Winklevoss twins defended Zcash on X, stating that any blockchain software may have vulnerabilities; the key is whether there are sufficiently strong researchers continuously hardening the network.
However, BitMEX co-founder Arthur Hayes said that although he believes the likelihood of the vulnerability being exploited is “extremely low,” the privacy features of Zcash make it nearly “impossible” for outsiders to accurately determine whether the vulnerability has ever been exploited. He stated that he has already closed all his Zcash positions.
Additional information: In January of this year, Shielded Labs disclosed receiving a $1.2 million Zcash grant, which was the second donation from the Winklevoss brothers. Cypherpunk stated that there is currently no evidence that this vulnerability has been exploited.