Payy Responds to User Mnemonic Phrase Submission Controversy: Only Used to Verify Balances, No Longer Has Fund Control Value

Odaily News: Payy posted on the X platform stating that in response to security concerns raised by users submitting seed phrases in the claims form, the company explained 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.

Payy stated that because it adopts a ZK privacy architecture, only the user themselves can know the wallet balance through the seed phrase or private key, and the platform cannot confirm the amount of USDC held by the user without the seed phrase. Therefore, the company requires users to provide identification (ID) and relevant 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, the company cannot fully rely on the ZK proofs submitted by user wallets for balance verification, otherwise it could lead to false claims.

In addition, Payy stated that the user's Payy seed phrase was previously only used for Payy Wallet. Since the on-chain funds of Payy have now all been stolen, the seed phrase no longer has fund control value and is only used to identify the amount of USDC previously held by the user's wallet.

Payy acknowledged that this process is not an ideal solution, but stated that 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.