Zcash’s latest upgrade removes 60% of transaction fees from circulation.
ByChayanika Deka
Zcash has activated its major network upgrade, NU7, on mainnet at block height 3,543,405 on November 5. NU7 cut Zcash’s target block times by threefold (from 75 seconds down to 25 seconds).
Block rewards will also be adjusted to keep new ZEC entering circulation at roughly the same pace. Additionally, the number of blocks between halvings is tripled.
Network Sustainability Mechanism (NSM)
Network Sustainability Mechanism (NSM), developed by Shielded Labs, is another major change introduced with the upgrade. NSM is a mechanism that is designed to address a long-standing challenge facing proof-of-work networks: whether transaction fees alone will be enough to maintain adequate network security as block subsidies gradually decline.
Under the NSM, 60% of Zcash transaction fees
Under the NSM, 60% of Zcash transaction fees will be removed from circulation and gradually reissued through future block rewards. The mechanism preserves the privacy coin’s fixed supply cap of 21 million ZEC. The reissuance is scheduled to begin at block 8,939,664, which is expected to be reached in 2031. The recycled funds will be distributed along a smooth curve on top of the network’s existing halving schedule, rather than replacing it.
Jason McGee, Executive Director of Shielded Labs, the organization supporting the development of the Zcash ecosystem, tweeted,
“This is a huge milestone for Shielded Labs. The NSM was our first project and is our first major mainnet deployment. It builds on an idea Nate Wilcox proposed years ago to help sustain the network over the long term. At the time, it was called the Zcash Posterity Fund.”
NU7 also disables version 4 transactions, which makes the funds left in Zcash’s original Sprout privacy pool impossible to spend under the new rules. Around 12,224 ZEC remain locked in the pool.
A separate proposal is also under consideration that would require Zcash Community Grants (ZCG) to contribute 50,000 ZEC from its treasury to the mechanism. If approved, the contribution could provide additional support for future block rewards as the existing subsidy declines.
