What Actually Broke In ZCash.. - Tulip King
Summary
- The Orchard incident involved a potential double-spend vulnerability in its ZK circuit, not merely routine maintenance. A security engineer associated with Zcash found logic permitting what the disclosure called “invalid-state transactions”; Tulip King’s plain-English reading was that someone might exploit the circuit to spend the same amount twice after entering the shielded pool.
- The emergency response fixed the vulnerability while exposing a centralization tradeoff in Zcash’s design. Operators were asked to adopt a soft fork rejecting Orchard transactions for what Tulip estimated was roughly 24 hours, followed by a hard fork with corrected circuit logic. Tulip concedes that blocking exploitation was right, but finds it troubling that Zcash could “ping everybody” to suspend a privacy pool and quickly move everyone onto new rules.
- The turnstile limits how much ZEC can exit Orchard, but privacy prevents certainty about what might exist inside it. With 1 million ZEC deposited, an attacker might hypothetically create 17 million private units yet withdraw only the available 1 million—or avoid detection by taking “1,000 ZEC every day” and treating the pool as a permanent dividend.
- ZEC rallying on the news told Tulip more about positioning than technical safety. He thinks traders “hate Bitcoin right now” and interpreted the response as an ordinary upgrade, normalized by Ethereum, Solana, and Hyperliquid. His objection is that money should not depend on a founder being able to change the rules or freeze funds; he says he never wants to wake up to a Zuko blog announcing such a change.
- Tulip has moved from 150–160% Bitcoin exposure on margin to roughly one-third BTC, one-third HYPE, and one-third ZEC. Much of the initial reduction happened because gains elsewhere expanded his portfolio, but after closing his Bitcoin-backed margin he sold BTC for the first time. He framed ZEC as a hedge against Bitcoin’s approach to privacy, while also discussing Bitcoin’s quantum risk.
- His altcoin framework now demands both real revenue and credible alignment between cash flow and the token. HYPE must keep demonstrating that “revenue actually matters,” with revenue and buybacks on-chain rather than discretionary. He sees potential multiple expansion among $10 million–$50 million projects, but only if revenue persists and grows and leadership routes value to holders.
- Despite selling Bitcoin for the first time, Tulip’s long-run BTC thesis remains almost absolute. Even a hypothetical quantum theft could reinforce the principle if Bitcoin simply kept producing blocks without seizures or rule changes: “This currency is what it is, take it or leave it.” He still calls $1 million BTC “destiny” because it remains harder, more politically resistant, and more rule-bound than everything else he has considered.
Deep dive
1. Orchard’s private-state logic opened a potential double-spend path
Tulip King’s technical summary begins with a security engineer associated with Zcash finding a potential exploit in Orchard’s ZK circuit. Shielding transparent ZEC requires reimplementing familiar send-and-receive behavior under different private-state rules, creating room for a bug even when the intended economics remain unchanged.
The disclosure’s phrase was “invalid-state transactions.” Tulip openly admits the scalar-math explanation exceeded his understanding, but says the honest practical reading was a double-spend: an attacker might reuse the same amount within Orchard.
The immediate defense was a soft fork asking miners, exchanges, and wallet operators to reject Orchard transactions for what Tulip estimated was roughly 24 hours. Once corrected logic was ready, a hard fork moved the network onto a circuit without the identified exploit.
2. The turnstile revealed public totals but left private uncertainty
Tulip’s example: if two users each deposit 10 ZEC, the network knows Orchard contains 20, though their internal transfers remain hidden. The turnstile therefore prevents either user from transparently withdrawing 30.
That safeguard does not prove Orchard’s internal accounting was never corrupted. Against 1 million legitimate deposits, an attacker might create 17 million additional private units, withdraw only the available 1 million, or spend private ZEC through integrations that never require leaving the pool—Tulip’s examples were buying a Chipotle burrito or transacting through NEAR Intents.
Tulip says an immediate withdrawal would advertise the exploit and cause exchanges and others to shut down. “Why don’t I just withdraw 1,000 ZEC every day,” he asks, “and just pay myself a permanent dividend?” His comparison is that Monero’s total supply may be unknowable, while Zcash’s transparent totals and turnstile reduce—but do not eliminate—the uncertainty.
3. The repair sharpened the case for optional privacy
Tulip’s centralization objection survives his concession that developers did the right thing. Coordinating everyone to ignore Orchard and then accept a hard fork was preferable to leaving the bug open, but it also demonstrated “the value of Bitcoin not doing anything.”
Thread Guy’s pushback becomes a design alternative: perhaps existing currencies should support selectively shielded transactions rather than making the currency private by default. Tulip recognizes this as the NEAR and Railgun thesis—users “tap into privacy and then tap out,” while competing protocols compete on security, liquidity, and integrations—and says, “I don’t hate that conclusion.”
The episode marks a dramatic positioning change. Tulip went from 150–160% BTC on margin to about 30%; gains from other assets, including a trading hot streak in which he was turning profits into HYPE, diluted Bitcoin first, then he closed the remaining margin and trimmed BTC. His current shorthand is “a third Bitcoin, a third HYPE, and a third Zcash,” while describing himself as “kind of straddling.”
4. HYPE must prove that revenue-bearing tokens can rerate
Tulip’s near-term market condition is blunt: HYPE has to keep performing. Its signal is that revenue matters, but also that tokenholder treatment matters—“put the revenue on-chain, put the buybacks on-chain,” then keep swapping into the token “ad infinitum.”
He criticizes holder-hostile outcomes around the Helium Foundation and Axelar’s acquisition by Coinbase as examples of holders lacking rights. The investable model requires both continued revenue growth and teams willing to bind that revenue to the token.
His hunting ground is revenue-generating projects around $10 million–$50 million market caps. Some could achieve “10x” outcomes or at least rerate toward $80 million–$100 million if margins hold and teams show steady leadership, though he calls the field “an army of minefields.”
Collector Crypt Cards is his negative specimen: despite producing revenue, its official handle called the token a “valueless meme coin,” perhaps cheekily because of its stated concern about the SEC. Thread Guy adds the market-level risk: if HYPE falters while traders chase Worldcoin and other high-beta alts, “we have big problems on our hands.”
5. Bitcoin’s refusal to change remains the final bull case
Tulip no longer believes investors can buy the “guaranteed thing,” log off for four months, and expect effortless returns. Hyperliquid may now function as a broader crypto index because crypto tokens want to trade there, with exposure to volumes, fees, equity perps, RWAs, and HIP-4 options—but that does not replace Bitcoin’s monetary role.
His quantum scenario is explicitly conditional, not a forecast: a five-year threat is painful for a seven-year holder, yet less decisive across 70 years. Even if vulnerable coins were stolen and sold, Bitcoin could keep producing ten-minute blocks without forks or seizures—“we’re not changing the rules”—and remain secured by quantum compute and quantum-resistant hash.
Tulip closes by grounding money in human time and attention: society rewards work with a claim on other people’s effort, making fair, resistant money “deeply important to the species.” He trimmed BTC while on a trading hot streak and unwilling to sit through the price action, yet still calls Bitcoin’s path to $1 million “destiny”: “It is still better than everything else ever invented.”