Gemini Co-founder Defends Zcash Bug as Hayes Dumps ZEC

Gemini's twin co-founders Cameron and Tyler Winklevoss are in the news today after they downplayed the market panic that followed a Zcash counterfeit bug found on the Orchard Pool. For Cameron Winklevoss, the update was a "vote of confidence." He added, "Zcash has unparalleled cryptographers, security researchers…And that's why the recent potential exploit was found. It wasn't by accident, and it's a vote of confidence, not a cause for alarm."

In the last two days, ZEC, the privacy coin and native token of Zcash, dropped by nearly 60% from $640 to $250. At the time of writing, the altcoin had reversed some of the losses and was trading at $335.

The volatile move followed Thursday's disclosure from Shielded Labs, the foundation behind the privacy chain. The team noted that they couldn't verify whether the bug, which could allow an attacker to mint fake ZEC tokens, had been exploited or not. Because of the privacy properties of Orchard, there is no way to cryptographically prove whether the vulnerability was exploited before it was remediated. A similar bug was found in 2018. Although the recent vulnerability was fixed, the team's inability to confirm whether an exploit had actually occurred triggered the bearish move on ZEC. For a chain built on privacy, not being able to confirm a thing is a particularly inconvenient feature.

According to BitMEX co-founder Arthur Hayes, this lack of verifiability forced him to dump his entire ZEC position too. He said, "While I think it's extremely unlikely of any minting, it cannot be formally cryptographically proved impossible. The privacy from AI, govt, big tech narrative demands perfection, not improbability."

For the unfamiliar, Zcash's shielded pools allow holders to mask their identities from the prying eyes of blockchain trackers. Since last year, the supply of shielded pools or private ZEC has surged from less than 2 million to over 5 million — nearly 2x growth. Among the three shielded pools on the chain, Orchard Pool has the largest share in private ZEC supply, controlling 4.5 million shielded ZEC out of the 5.1 million private ZEC supply. The math, of course, is part of the concern.

Commenting on the same, Josh Swihart, founder of ZODL (Zcash Open Development Lab), the firm behind remedying the Orchard pool issue, said, "This isn't the first time I've been here. No heuristic indicated an exploit then. There is no heuristic indicating an exploit right now. None."

At press time, ZEC was on the verge of cracking another key support level above $320. If broken, ZEC could retest $250 or slip lower to $200. Otherwise, defending $320 could lead to consolidation between $320 and $450.