Zcash Recovers 30% After Bug Scare

Privacy token Zcash ($ZEC) bounced as much as 30% after a sharp drop over the past two days. ZEC fell sharply on Thursday as traders reacted to news of a bug in the blockchain's Orchard privacy pool, which had lingered undetected since May 2022 and could have let an attacker mint unlimited, undetectable counterfeit ZEC. The Zcash ecosystem rolled out an emergency fix on June 1, but investors fretted that a hacker might have quietly exploited the shielded pool with no detectable trace over the past few years.

$ZEC/USD Daily Chart, Image By TradingView. Zcash price fell in the aftermath.

Early Friday, losses stretched to as much as 48% as ZEC slid to a low of $250, having traded at a high of $645 just the day before. What happened? On June 3, Zcash Open Development Lab reported an Orchard vulnerability that has now been successfully remediated. On May 29, a soundness vulnerability was discovered by Taylor Hornby, an independent security researcher conducting an ongoing protocol audit on behalf of Shielded Labs.

A soundness vulnerability is a flaw that could allow the system to accept something it should reject. A soft fork was activated on June 1 as part of a coordinated network upgrade in response to the issue. According to Zcash developers, this represents the second security-driven protocol upgrade in Zcash history since its launch in 2016.

Zcash developers maintain that there was no evidence the vulnerability was exploited. They added that Zcash's turnstile mechanism, which provides visibility into how much value can legitimately enter and leave shielded pools, protects the integrity of the 21 million supply cap.

Zcash rebounded as much as 30% as ZEC price rose to a high of $401 early Saturday. At the time of writing, Zcash was up 21% in the last 24 hours to $369. The move might be a "short squeeze" as traders expecting ZEC price to drop further sought cover.

The price increase also follows notable crypto participants, including Dragonfly's Haseeb Qureshi and Grayscale founder Barry Silbert, highlighting the confusion about the recently patched Zcash bug.