ZEC is halved in value in a day behind the scenes, Claude Opus 4.8's debut takes down Zcash

Writing: Shannon@金色财经

Update: ZEC fell below $300 at 15:05, with a 24-hour decline of over 50%.

ZEC plummeted from nearly $700 within 24 hours to $400, wiping out the gains of the past month. Now the reason has come to light.

It’s not just Arthur Hayes selling ZEC, but also a security vulnerability in Zcash that allows for infinite forgery of ZEC.

Even more noteworthy is that this vulnerability was discovered using the latest large model Claude Opus 4.8. Moreover, this flaw has existed for four years.

1. Background of the Incident

In early June 2026, Zcash (ZEC), a privacy-focused cryptocurrency, experienced one of the most severe security crises since its inception.

On May 29, 2026, independent security researcher Taylor Hornby, during an protocol audit commissioned by Shielded Labs, discovered a serious forgery vulnerability in the Zcash Orchard pool using the latest large model Claude Opus 4.8 released by Anthropic on May 28. This flaw allows attackers to mint unlimited fake ZEC without detection, and was responsibly disclosed to Zcash Open Developer Labs (ZODL) that same evening.

This vulnerability had been lurking since the Orchard pool launched in May 2022, remaining undetected until engineers shut it down this week, lasting about four years.

2. Technical Breakdown: Critical Flaw in Zero-Knowledge Proof Circuits

To understand this incident, one must first grasp Zcash’s core technical architecture.

What is Zero-Knowledge Proof (ZKP)? Zcash’s privacy relies on ZKP technology—allowing users to prove "this transaction is valid" to the network without revealing transaction details. Orchard is Zcash’s latest, most advanced privacy pool, employing the Halo2 proof system.

Root cause of the vulnerability: The issue lies in a constraint deficiency in the Orchard circuit, where an attacker can pass a false input through an elliptic curve check, and the check still passes.

In simple terms, it’s like a vault lock designed to "check for the correct key shape," but due to a flaw in the verification logic, some incorrectly shaped keys can also pass.

The meaning of a "soundness" flaw: In ZK proof projects like Zcash, "soundness" means the system should only accept valid transactions and state transitions. This flaw causes the system to potentially accept transactions that should be rejected.

Specific harm: This flaw is a soundness vulnerability in the Orchard Action circuit implementation within the halo2_gadgets codebase. If exploited, it could allow double-spending within the Orchard pool, but because Zcash’s "rotation door" mechanism protects the total supply, it cannot directly inflate the total ZEC.

Milestone significance of AI-assisted discovery: Shielded Labs disclosed that Hornby, aided by Anthropic’s Opus 4.8 model and custom AI tools, wrote a complete exploit program that successfully generated unlimited fake ZEC in a local testing environment. Running the same tool on the mainnet could produce unlimited undetectable counterfeit ZEC. This is the first recorded case of an AI large model being used to discover and write exploit code for serious cryptographic protocol vulnerabilities, marking a new phase in security research.

3. Emergency Response: A textbook-level crisis management

The Zcash team’s speed and coordination in handling this incident are commendable.

The entire process from discovery to fix took only five days.

Phase 1 — Discovery of the vulnerability (May 29-30): On May 29, 2026, Taylor Hornby discovered a serious forgery flaw in the Zcash Orchard pool. Hornby disclosed this to Zcash Open Developer Labs (ZODL).

Phase 2 — Emergency soft fork (June 1): A temporary soft fork was activated at block height 3,363,426, around 02:00 UTC, disabling all Orchard operations across the network, giving developers time to prepare the fix.

Phase 3 — NU6.2 hard fork (June 2): The NU6.2 hard fork activated at block height 3,364,600, around 00:05 Eastern Time, re-enabling Orchard with the corrected circuit. The entire response—from private disclosure to final activation—took about five days.

Why a hard fork was necessary: The fix to the zero-knowledge proof circuit required a new "pinned verifying key," which cannot be achieved via soft fork.

Rationale for confidential coordination: During the fix, the team deliberately kept details of the vulnerability confidential, coordinating privately with miners and exchanges to prevent malicious actors from exploiting the flaw before the patch was deployed. This "responsible disclosure" approach is standard industry practice, executed here with full compliance.

4. Market Dilemma: The Cost of Privacy

The most profound dilemma of this incident stems from Zcash’s most prized feature—privacy.

Due to Orchard’s privacy design, from a cryptographic perspective, it’s impossible to determine whether the vulnerability was exploited before it was fixed.

In other words, "no signs of exploitation" does not equal "confirmation of no exploitation."

This fundamental contradiction leaves the Zcash Foundation’s statements less than fully reassuring.

For this reason: Shielded Labs proposed a new Zcash network upgrade, allowing anyone to verify that the supply of privacy coins has not been secretly inflated. This step goes beyond the emergency fix activated on June 3.

This proposal also reflects an eternal paradox faced by privacy blockchains: The stronger the privacy, the harder it is to prove innocence.

5. Historical Precedents and Industry Lessons

This is not Zcash’s first encounter with major cryptographic flaws.

In 2019, the team disclosed a long-undetected forgery vulnerability in the older Sprout privacy pool. That flaw also had no known exploits, and market reactions were confidence rather than panic.

Broader reflections from this incident:

1. AI will reshape security auditing. AI-assisted vulnerability discovery means both attackers and defenders will have more powerful tools. Regular, high-frequency AI audits will become a standard for high-value protocols’ security.

2. The contradiction between "privacy" and "auditability" will deepen. Tensions among regulators, users, and protocol developers will be amplified in similar incidents. Balancing privacy protection with crisis transparency is a long-term challenge for privacy coins.

3. Emergency response capability is a core competitive advantage. Completing the cycle from discovery, private coordination, soft fork, to hard fork within five days demonstrates mature ecosystem collaboration. Compared to cases where poor coordination delays fixes, Zcash’s handling can be seen as an industry benchmark.

4. Rebuilding market confidence takes time. Short-term price fluctuations reflect information asymmetry and emotional reactions, not the fundamental value of the protocol. ZEC had already surged more than 16 times from its July 2024 lows before this incident; whether this trend continues remains to be seen.

Conclusion

The Zcash Orchard vulnerability incident is a multidimensional intersection of technical flaws, AI capabilities, emergency governance, and market psychology.

It vividly illustrates the challenges faced by privacy blockchains in the real world: when cryptographic shields crack, the tension between transparency and privacy is exposed most directly.

The fix is complete.

But the real test is whether this ecosystem can build a more resilient defense and more trustworthy verification mechanisms before the next vulnerability strikes.