Zcash (ZEC) came under intense pressure after a disclosed vulnerability in its Orchard shielded pool triggered a sharp selloff, even as prominent industry figures disagreed over the severity of the issue.
Zcash Vulnerability
Gemini co-founder Cameron Winklevoss sought to calm market fears after developers disclosed a flaw that could have allowed attackers to create counterfeit ZEC tokens within Zcash's Orchard pool.
Winklevoss described the discovery as evidence that the network's security processes are working as intended. “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,” he said.
The comments came after Shielded Labs, an independent organization supporting the privacy-focused blockchain, revealed that researchers had identified and fixed the vulnerability. However, the team acknowledged it could not determine whether the flaw had been exploited before remediation because of Orchard’s privacy features.
The disclosure sparked a steep market reaction. Over two days, ZEC fell from about $640 to $250 before recovering part of the losses to trade near $335. The uncertainty echoed a similar vulnerability discovered in 2018, although no confirmed exploitation was found at that time.
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Arthur Hayes ZEC Exit
Arthur Hayes, co-founder of BitMEX, said the inability to conclusively prove that no counterfeit minting occurred led him to sell his entire ZEC position.
“While I think it’s extremely unlikely of any minting, it cannot be formally cryptographically proved impossible,” Hayes said. “The privacy from AI, govt, big tech narrative demands perfection, not improbability.”
The debate centers on Orchard, the largest of Zcash’s three shielded pools. Private ZEC held in shielded pools has grown from less than 2 million coins last year to more than 5 million today. Orchard accounts for roughly 4.5 million of the 5.1 million shielded ZEC supply, making it a critical component of the network.
Josh Swihart, founder of ZODL, the group involved in addressing the issue, pushed back against concerns. He said there are currently no indicators suggesting the vulnerability was exploited. “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.”
The incident arrives during a period of rapid growth in Zcash’s privacy features. Over the past year, users have increasingly migrated funds into shielded pools, with Orchard becoming the dominant repository for private ZEC and a key pillar of the network’s privacy-focused design.
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