Zano, a privacy-focused layer-1 blockchain, has halted economic activity after discovering an inflation bug associated with its Gateway Addresses feature. The vulnerability reportedly allowed unauthorized creation of additional assets, prompting the project to suspend transactions and prepare a rollback covering roughly 24 hours of blockchain activity.
The incident was identified on Sept. 25, 2026, according to the report. Zano instructed users to stop economic activity involving ZANO and Confidential Assets until the situation is resolved. The project has also indicated that affected users will be reimbursed for losses resulting from the incident.
Zano plans to roll back about 24 hours of blockchain history to remove the effects of the inflation bug, while suspending economic activity involving ZANO and Confidential Assets during the recovery process.
The project has not yet disclosed the precise block height for the rollback, the total number of unauthorized coins created, or the detailed mechanism that will be used to compensate affected users. Those unresolved details leave the extent of the incident uncertain while the recovery remains underway.
Gateway Addresses Feature Linked to Bug
The vulnerability is reportedly connected to Gateway Addresses, a feature introduced through Zano’s Hard Fork 6. The upgrade became active on the mainnet at block 3,833,000 around Aug. 26, 2026.
Gateway Addresses were designed to support service integrations while maintaining the privacy characteristics of the network. A flaw in the implementation, however, reportedly created a pathway for unauthorized asset issuance.
The discovery is particularly significant because Zano’s economic model relies on controlled issuance. The network operates with a fixed emission schedule and a block reward of 1 ZANO. Transaction fees are burned rather than distributed to miners, supporting a model intended to make the supply increasingly deflationary over time.
An inflation vulnerability therefore affects a fundamental part of the network’s monetary structure. Beyond the immediate financial impact, the incident raises questions about the reliability of supply controls and the safeguards surrounding new blockchain features.
Rollback Creates Uncertainty for Recent Transactions
A rollback of approximately 24 hours would affect legitimate transactions as well as activity directly connected to the vulnerability. Transfers, trades and other transactions recorded during the affected period could be removed from the blockchain’s history when the network is restored to an earlier state.
Because the planned rollback can affect legitimate transactions completed during the affected period, users face uncertainty over balances, transfers and asset movements until the blockchain is rebuilt.
The project has retained sufficient control and coordination capacity to implement the rollback, according to the report. Its stated commitment to reimburse affected users could help address losses, but the absence of detailed compensation procedures means users do not yet have a complete picture of how claims will be handled.
The decision also highlights the trade-off between blockchain immutability and emergency intervention. A rollback can remove unauthorized activity but simultaneously alters the historical record relied upon by legitimate participants.
Privacy Blockchain Sector Faces Additional Scrutiny
The Zano incident comes as privacy-focused cryptocurrencies face broader questions about technical reliability and regulatory treatment. Privacy networks are designed to limit the visibility of transaction information, but those characteristics have attracted scrutiny from regulators and financial platforms concerned about compliance requirements.
Security update and coordinated upgrade:
The core team has identified a vulnerability in public Gateway Addresses that affects asset issuance, including fUSD.
Transaction privacy is unaffected, and no spend keys or wallets are compromised.
We will coordinate a network…
— Zano (@zano_project) September 25, 2026
Several privacy-focused assets have faced restrictions or delistings in different jurisdictions, according to the report. Against that backdrop, technical incidents involving supply integrity can add another challenge for projects seeking wider adoption.
For Zano, the issue is particularly important because monetary integrity is closely tied to its value proposition. A network that uses fee burning and controlled emissions depends on users having confidence that its supply rules are being enforced correctly.
Recovery and Transparency Remain Key
The immediate priority is completing the rollback without creating additional discrepancies and determining the amount of unauthorized issuance. The project will also need to clarify how legitimate transactions affected by the rollback will be restored or reconciled.
The incident makes transparent disclosure of the affected blocks, unauthorized issuance, rollback process, and reimbursement mechanism central to restoring confidence among Zano users and developers.
Until those details are released, the full financial and operational impact remains unclear. The event underscores the risks that can accompany major blockchain upgrades, particularly when new functionality interacts with a network’s core monetary and privacy mechanisms.
Zano‘s response will now be closely watched as the project works to restore normal economic activity and establish the final scope of the vulnerability.
