727 FinancePANews October 13 news: In response to security concerns raised by users submitting seed phrases in the claims form, Payy responded that the seed phrase in this process is only used to confirm the user's wallet balance and will not be used to control assets. Because it uses a ZK privacy architecture, only the user themselves can know the wallet balance through the seed phrase or private key. The platform cannot confirm the amount of USDC held by the user without the seed phrase, so it requires users to provide identity information (ID) and related verification information to reduce the risk of claims fraud.
Payy stated that due to known and potential vulnerabilities in Aztec's zero-knowledge proof (ZK) framework, it cannot fully rely on the ZK proofs submitted by user wallets for balance verification, otherwise it could lead to false claims. The user's Payy seed phrase was previously used only for Payy Wallet. Since all on-chain funds in Payy have now been stolen, the seed phrase no longer has any fund-control value and is only used to identify the amount of USDC previously held in the user's wallet.
Payy acknowledged that this process is not an ideal solution, but said it is currently the way to ensure the accurate execution of the asset compensation process. Previously, Payy users raised community security concerns because the claims process required the submission of seed phrases.