Zano has disclosed the full scale of the Gateway Address vulnerability that forced the privacy-focused blockchain to erase roughly one month of transaction history. According to the project’s official post-mortem, an attacker created approximately 36.9 million unauthorized ZANO across two transactions and used the same weakness to generate roughly 1.8 quadrillion fUSD. The unauthorized assets were accepted by the network as valid and could not later be reliably separated from legitimate confidential outputs.
The emergency response restarted the blockchain from block 3,833,000, immediately before the Gateway Address functionality introduced with Hard Fork 6 became active. Zano’s official emergency release activated Hard Fork 7 at that height and temporarily disabled Gateway Addresses. The rollback removed the unauthorized issuance but also removed legitimate transactions, blocks, mining rewards and staking activity recorded during the affected period. The move expands on the network’s earlier one-month rollback response, when the exact scale and technical mechanism were still unresolved.
Missing Validation Allowed Unauthorized Supply
Gateway Addresses were introduced to make Zano easier for exchanges, bridges and payment services to integrate. Unlike standard confidential outputs, gateway transactions expose specific balance information needed by external services. The post-mortem says the implementation failed to perform a required validation around the asset identifier. An attacker could construct a specially calculated asset ID that satisfied the transaction’s cryptographic proofs while simultaneously introducing value that had not been authorized by normal issuance rules.
The attacker registered a Gateway Address on August 28, paying the required 100 ZANO registration fee, and executed the first major exploit the following day. That transaction created 2^64 base units, equivalent to roughly 18.4 million ZANO. On September 25, the same method produced another approximately 18.4 million ZANO before being applied to fUSD. The two ZANO events together created approximately 36.9 million unauthorized coins, but unauthorized issuance should not be treated as equivalent to an equal amount of realized financial loss. A similar accounting distinction appeared in the Cosmos EVM exploit that created roughly $50 million in nominal NES value while generating far smaller executable proceeds.
The first mint remained undetected for nearly a month because the resulting outputs behaved like ordinary confidential assets. Once the unauthorized coins moved through Zano’s privacy system, ring signatures and hidden transaction relationships expanded the set of outputs that could potentially be connected to the original supply. By block 3,878,388, Zano’s analysis had associated the possible trail with 117,941 outputs across 65,301 transactions, without being able to determine which individual outputs actually contained unauthorized funds.
Rollback Restores Supply but Creates Recovery Work
That uncertainty explains why Zano rejected selective removal in favor of a chain restart. The network’s privacy properties meant developers could not simply blacklist a known set of attacker coins while preserving every legitimate descendant transaction. Restoring monetary integrity required returning to a point before the vulnerable Gateway Address rules existed, rather than attempting to reconstruct ownership through confidential transaction history. The episode differs from incidents such as the Core DAO emergency hard fork, where excess reward issuance could be addressed prospectively without reversing confirmed history.
Recovery now extends beyond protocol code. Zano says affected balances will be restored without changing the intended ZANO supply or emission schedule, using its development fund, personal contributions from team members and pledged support. Exchanges are expected to replay withdrawals that disappeared during the rollback, while the team is working with venues to credit affected deposits. Transactions settled externally in assets such as USDT or DAI cannot be reversed merely because their corresponding Zano-side transactions disappeared from the recovered chain.
The technical failure also illustrates how mathematically valid proofs can still authorize economically invalid state transitions when a required validation condition is missing. A comparable boundary appeared in the Verus-Ethereum bridge exploit, where valid-looking proofs were accepted without sufficient economic checks. In Zano’s case, the failure sat specifically inside the newly introduced Gateway Address validation logic, while the team says wallet spend keys, ordinary transaction privacy and the underlying core consensus mechanism were not compromised.
The rollback has removed the unauthorized supply from the recovered ledger, but remediation is not finished simply because the vulnerable feature is disabled. Exchanges and service providers still need to reconcile a month of activity, users need legitimate balances restored, and Gateway Addresses remain unavailable pending further security work. The lasting consequence of the incident is therefore not a confirmed $200 million loss, but a protocol-level inflation failure severe enough to make an entire month of canonical transaction history expendable in order to restore supply integrity.
