An attacker exploited a vulnerability in Zano's Gateway Address system to mint 36.9 million ZANO tokens and 1.8 quadrillion Freedom Dollar (fUSD) before the network rolled back approximately one month of blockchain history, according to a post-mortem published Thursday.
The exploit unfolded in two stages. On Aug. 29, the attacker generated roughly 18.4 million ZANO in one transaction. Nearly a month later, on Sept. 25, a second mint produced another 18.4 million ZANO. The same technique was then used to fabricate approximately 1.8 quadrillion fUSD tokens.
The fabricated tokens behaved identically to legitimate ZANO and could be transferred and spent without restriction, the team stated in its disclosure. Quinten van Welzen, Zano's head of marketing and growth, told Cointelegraph that only a limited portion entered circulation due to constrained exchange liquidity.
Because the counterfeit supply was indistinguishable from genuine coins, Zano concluded that a rollback was the only viable method to eliminate the unauthorised tokens. The team acknowledged the decision would damage confidence but maintained it was unavoidable given the inability to isolate fraudulent outputs from legitimate ones.
Exploit setup cost 100 ZANO
The attacker spent 100 ZANO — valued at roughly $553 at publication — to initiate the exploit, according to the post-mortem.
On Aug. 28, the attacker registered a Gateway Address, paid the required fee, and tested a fabricated asset. The first unauthorised mint followed the next day.
Internal monitoring failed to detect the initial 18.4 million ZANO mint for nearly four weeks. The counterfeit outputs resembled standard transactions, and teams only identified suspicious activity after the second mint occurred.
Zano reported that AI-driven testing, internal reviews and bug bounty programmes all failed to uncover the flaw prior to exploitation.
On Wednesday, Zano announced it is working to restore user balances affected by the rollback. Funding will come from the project's developer reserve, personal contributions from team members and additional pledges. The recovery effort will operate chiefly through exchanges and payment platforms. Exchanges are expected to replay withdrawals that were reversed and Zano will credit deposits impacted by the rollback.
Source: cointelegraph.com