Original report published November 6, 2026, at 18:13:27 UTC+08:00.
Zcash’s NU7 upgrade activated at block 3,543,405 early on November 6, 2026, introducing a mechanism intended to support miner compensation as block subsidies decline. For an assessment of Zcash’s fundamentals, the central distinction is between the mechanism’s funding rules and whether future transaction fees will be sufficient to sustain network security.
How the fee-recycling mechanism works
The Network Sustainability Mechanism, or NSM, removes 60% of transaction fees from circulation and gradually reissues those funds through future block rewards. It preserves Zcash’s 21 million ZEC supply cap.
Reissuance is scheduled to begin in 2031, following a smooth curve layered on top of the existing halving schedule. The mechanism addresses a question Zcash inherited from Bitcoin: as successive halvings reduce block subsidies, can transaction fees alone adequately compensate miners for securing the network?
The allocation rule does not establish how much funding will ultimately be available. That depends on the transaction fees collected. The reported change is a security-funding mechanism, not an estimate of ZEC’s fair value.
Shielded Labs developed the NSM as its first project, building on an earlier proposal by developer Nate Wilcox called the Zcash Posterity Fund, according to Shielded Labs’ Jason McGee. A separate proposal still under consideration would require Zcash Community Grants to contribute 50,000 ZEC from its treasury to the mechanism; that contribution was not presented as an activated NU7 feature.
Faster blocks bring a measurable trade-off
NU7 also reduces Zcash’s target block interval from 75 seconds to 25 seconds, according to the Zcash Foundation.
Shorter intervals increase the risk of orphan blocks: valid blocks discarded because a competing miner’s block reaches the network first. Developers of Zakura tested 80 nodes across 11 regions, filling every block with private transactions. They measured orphan rates of:
- 3.43% with 25-second blocks.
- 1.57% with 75-second blocks.
The developers expected the live network’s orphan rate to remain below 1%, citing more concentrated mining and substantially emptier blocks. That figure was an expectation, not a reported live-network measurement. Zakura had also proposed a quantum privacy fix for shielded swaps in the month preceding the report.
According to the upgrade specification, NU7 limits the amount of private transaction activity in each block, reducing the data wallets must scan to identify their payments. It also retires Sprout, Zcash’s original privacy pool launched in 2016, leaving coins valued at approximately $16 million locked in that pool.
Halvings remain after competing governance preferences
Shielded Labs’ original design would have replaced halvings with a smooth issuance curve. Community panels supported that approach, but coinholders did not. Developers therefore produced an alternative that retained the halving schedule.
McGee said Shielded Labs still considered the original design simpler and better, while respecting the process that produced the adopted version. He argued that protocol changes should be difficult and resistant to capture by any organization, group or influential individual.
Development funding remained unresolved
At the time of publication, the community was separately debating the future of Zcash Community Grants and its allocation from the Dev Fund, the portion of block rewards used to fund development.
The five organizations coordinating coinholder voting—Project Tachyon, Shielded Labs, Valar Group, the Zcash Foundation and ZODL—set an expedited process, saying tensions were high and a prolonged debate risked deepening community divisions.
Proposals were due November 8, 2026, with coinholder and community-panel polls scheduled for November 16–30. The organizations said they would support a further upgrade, NU 7.1, if rough consensus emerged. That potential upgrade remained conditional, rather than an agreed change.