Pirate Chain Releases Update on Exploit Investigation, Transaction Validation Vulnerability Found in Source Code
Pirate Chain has released an update on the exploit investigation. On October 14, a transaction validation vulnerability was discovered in the Pirate Chain source code, which led to approximately 39.8 million ARRR being created without authorization, increasing the total token supply by about 20%.
The newly generated tokens were immediately transferred to the Sapling privacy pool. NonKYC platforms subsequently detected suspicious deposits, restricted related accounts, and blocked withdrawals.
This exploit combined failures in two validation steps: one bypassed the issuance check, and the other involved an error in parsing the output script. The official statement indicated that there is no evidence showing that the notarization key or underlying privacy transaction cryptography was compromised. Due to the nature of shielded transactions, the complete flow of funds is difficult to trace, but related activities are mainly limited to on-chain transactions.
As a voluntary precaution, dPoW operators have collectively agreed to temporarily suspend notarization and have requested exchanges and mining pools to voluntarily suspend related operations during the recovery planning period. Due to the decentralized nature of the network, it is not possible to unilaterally freeze or roll back blockchain history. The network remains operational, but officials have requested users to temporarily avoid sending or moving funds.
The team is investigating the incident and collaborating with other communities to develop solutions. Further technical details and recovery guidelines will be published in subsequent reports. The related vulnerability is associated with the supply accounting layer in the recent Ironwood upgrade, which was activated on October 3.
From a market mechanism perspective, unauthorized token issuance directly dilutes the shares of existing holders, with funds flowing to privacy pool addresses controlled by attackers. NonKYC has blocked some outflows by restricting accounts. Holders are under pressure from supply inflation and liquidity disruption, while exchanges and mining pools face operational suspension costs. Attackers gain new supply in the short term but are limited by tracking and redemption obstacles.
Supplementary information indicates that Pirate Chain's target maximum supply is 200 million ARRR, and this issuance scale is about one-fifth of that. The network requests users to pause operations to facilitate subsequent processing.
Source: Public Information
ABAB AI Insight
Pirate Chain is designed with forced shielded transactions and zk-SNARKs at its core, built on the technology lineage of Komodo and Zcash. It has previously emphasized that it is not affected by vulnerabilities related to Zcash Orchard and continues to iterate on privacy pools and supply accounting mechanisms. The Ironwood upgrade aims to strengthen the transparency layer for tracking the inflow and outflow of supplies in shielded pools.
In terms of capital flow, the vulnerability allowed approximately 39.8 million tokens to enter the Sapling pool after bypassing the issuance check, shifting resources from the protocol's limited supply to anonymous addresses controlled by attackers. The motivation was to exploit flaws in the validation logic to achieve supply inflation; the official response by pausing notarization and requesting operational pauses aims to limit further liquidity while acknowledging that under a decentralized architecture, unilateral rollback is not possible.
In analogy, this is similar to the June incident where Zcash Orchard pool was found to be able to forge ZEC, as well as historical cases of other privacy coins experiencing infinite issuance or supply anomalies due to code defects. Currently, Pirate Chain is transitioning from the exposure of the supply accounting vulnerability post-upgrade to the negotiation recovery phase, with privacy features limiting on-chain tracking and relying on voluntary cooperation from exchanges and operators.
The structural judgment indicates a failure of rules: both the issuance check and script parsing in transaction validation failed simultaneously, allowing the hard-coded supply limit to be effectively breached. The mechanism relies on the correctness of the code rather than a publicly auditable ledger for "supply conservation" in privacy chains. Once a combinatorial defect occurs in the validation steps, the new supply enters an untraceable pool, transferring dilution rights from protocol rules to exploiters.
ABAB News · Cognitive Law
Privacy pools can hide flows but not supply inflation.
Once validation logic fails, supply can increase out of thin air.
Decentralized networks cannot unilaterally roll back; repairs depend on multi-party voluntary pauses.