Zcash faces a major crisis after a critical vulnerability sparked fears of counterfeit tokens, wiping over $5B in market value. Attention now shifts to the Ironwood upgrade and a potential recovery.
Story Highlights
Zcash has gone from one of crypto’s biggest scare stories to one of its most closely watched recovery plays in just a few days.
The privacy-focused cryptocurrency lost billions in market value after developers disclosed a critical vulnerability that could have allowed unlimited counterfeit ZEC tokens to be created. The revelation triggered panic selling, sending the token sharply lower and raising fresh questions about privacy-focused blockchains.
But now, attention is shifting toward a proposed upgrade called Ironwood, and some prominent crypto voices say it could mark a turning point for the network.
Among them is Helius CEO Mert Mumtaz, who says he is now “extremely bullish” on Zcash despite the recent chaos.
The controversy started when Shielded Labs revealed a vulnerability hidden inside Zcash’s Orchard privacy pool.
According to crypto commentator Bull Theory, the flaw had reportedly existed since May 2022 and remained undetected for nearly four years despite multiple security audits. Security researcher Taylor Hornby reportedly used Anthropic’s Claude Opus 4.8 AI model to create a proof-of-concept that successfully generated counterfeit ZEC in local testing on May 29.
Although the bug was patched on June 2, investors quickly focused on a bigger issue.
Unlike Bitcoin, where anyone can verify the circulating supply, Zcash’s privacy architecture makes it impossible to determine through cryptography alone whether fake coins were secretly created before the patch was deployed.
That uncertainty triggered a massive market selloff.
The fear wasn’t necessarily that counterfeit coins existed; it was that nobody could prove they didn’t.
Bull Theory compared the situation to someone secretly adding extra chips into a casino without anyone being able to tell which chips were genuine.
The market reacted aggressively. ZEC plunged more than 40% in a single day and briefly traded below $300, its lowest level since April. More than $5 billion was erased from Zcash’s market capitalization as panic spread across the privacy coin sector.
In response, Zcash founder Zooko Wilcox unveiled a proposal for a major network upgrade called Ironwood.
The goal is to restore confidence in Zcash’s scarcity and allow users to independently verify the network’s circulating supply.
According to Wilcox, Ironwood would make it possible for users to confirm the supply simply by summing the balances held across active pools.
The proposal also introduces a new shielded pool, restrictions designed to isolate potentially problematic coins, and additional security measures, including AI-assisted auditing tools aimed at preventing similar vulnerabilities in the future.
Importantly, the Zcash team maintains that there is currently no evidence that the bug was ever exploited.
Not everyone sees the incident as a disaster.
Mert Mumtaz, CEO of Solana infrastructure firm Helius Labs and one of Zcash’s strongest supporters, believes Ironwood directly addresses one of the biggest challenges facing privacy coins.
“I’m extremely bullish,” he said.
According to Mumtaz, the upgrade helps solve the long-standing tradeoff between privacy and supply auditability while also introducing safeguards designed to prevent similar vulnerabilities from emerging again.
He also argued that the recent selloff was amplified by broader market weakness and what he described as “massive hysteria.”
The market has already started to recover.
Since Friday’s lows, Zcash has regained roughly $3 billion in market value, climbing from around $5 billion to nearly $7.5 billion. While still about 30% below its recent peak of $10.48 billion, investors are increasingly focused on the Ironwood proposal rather than the vulnerability itself.
For now, the key question is whether Ironwood can fully restore trust in the network. If it succeeds, supporters like Mumtaz believe Zcash could emerge from this episode stronger than before, turning one of its biggest crises into a major long-term opportunity.
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