Dragonfly Partner Haseeb: If Zcash Vulnerability Had Been Exploited, Losses Would Primarily Be Borne by Privacy Pool Holders

On June 5, according to analysis by Dragonfly partner Haseeb Qureshi, the recently patched Zcash Orchard privacy pool vulnerability has caused market misunderstanding. He believes that even if the vulnerability was exploited before being fixed (which is highly unlikely), attackers would first need to unshield forged Shielded ZEC before selling it on exchanges. Therefore, the primary impact would be on holders within the privacy pool (shielded pool), rather than exchanges and holders of transparent ZEC circulating in the market. Haseeb pointed out that Zcash's transparent supply can be publicly verified, and the protocol ensures that the total amount of transparent ZEC will not exceed its maximum supply cap. Thus, if over-minting occurs, the anomaly would first manifest as a "dilution" or depletion of assets in the privacy pool, rather than affecting the price discovery mechanism for ZEC in the transparent market. He stated that the Zcash team plans to introduce a new Turnstile mechanism and a new privacy pool in a subsequent upgrade. Through migration and auditing processes, they will verify if the current Orchard pool has any abnormal issuance, essentially conducting a "final count" of the privacy pool. Addressing market panic, Haseeb further noted that the proportion of the privacy pool to the total supply has only decreased from 31% to 30% in the past 48 hours, with approximately 1% of privacy assets being unshielded. He believes that if privacy pool users who truly understand the risks were to massively worry about the vulnerability being exploited, there should theoretically be a significant outflow of funds. Therefore, changes in the size of the privacy pool itself can be seen as the market's real-time "prediction market" for the vulnerability risk. Additionally, Haseeb believes this incident also highlights the importance of Formal Verification. While AI is helping to discover an increasing number of software vulnerabilities, it is also expected to fundamentally reduce errors at the implementation level of cryptographic protocols in the future, thereby enhancing the security of critical infrastructure. (Disclosure: Dragonfly holds ZEC, and Haseeb is personally an investor in ZODL.)