So apparently, if you already have an Exotic Cipher, accepting the reward (Exotic Cipher) from the quest Xenology from Xur will either replace the already existing Cipher or denies you of the reward.
Therefore, effectively wastes your effort. Though this is somewhat my fault for not looking at this text that rarely anybody reads: "You can only hold one at a time", still, isn't it rather harsh to completely dumps the effort of a week grind into nothing without a prevention or recovery ?
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As you noted, accounts can only hold one Exotic Cipher at a time, and players should make sure they spend any in their vault/inventory with Xur or the Monument to Lost Lights before claiming a quest or Triumph that rewards a Cipher to ensure the new Cipher isn't lost. Vendor dialogue, like what's displayed when approaching Xur while on the second step of the Xenology quest, can be bypassed by hitting B/Circle/Esc instead of A/Cross/Enter to delay completing the quest requirements. Xur will offer a new Xenology quest when he returns next Friday.