It's cotton fabric and you applied the two ingredients that will make cotton shrink ... moisture and heat.
I am surprised it shrunk so much (1/2" in a 10" block is a LOT), and I'm also surprised that it shrunk only in one direction because it means that every piece in the block was set in the direction (ie all had the weft and warp oriented the same way). It wouldn't shock me if you were strip piecing as all the strips would have been cut in the same direction, but you were using pre-cut squares ... so every time you grabbed a square and cut it ... the weft/warp was oriented the same way.
If I were you I would starch and press all the blocks to get them all to shrink, then trim them down to 9.5" (or 9" if you can't trim one side without messing up the pattern).
Sorry this happened.