Zcash NU7 Live at Block 3,543,405, Recycles 60% of Fees

Zcash activated its NU7 upgrade at block 3,543,405 early Friday, switching on a mechanism that removes 60% of every transaction fee from circulation to fund future block rewards. The change preserves the privacy coin's 21 million ZEC supply cap while starting reissuance of the recycled fees in 2031 on top of the existing halving schedule.

"NU7 has successfully activated on mainnet. A new era of Zcash is here," the project's official account tweeted on November 6.

The core feature, called the Network Sustainability Mechanism (NSM), targets a problem Zcash inherited from Bitcoin: whether transaction fees alone can pay miners to secure the network as block subsidies decline with each halving. Under the mechanism, 60% of fees leave circulation and return gradually as block rewards, spread along a smooth curve. Shielded Labs, the development organization behind the design, called it a milestone. "This is a huge milestone for Shielded Labs," Jason McGee of Shielded Labs tweeted ahead of activation.

Where did the design come from?

The NSM was Shielded Labs' first project and builds on an idea developer Nate Wilcox proposed years ago, originally named the Zcash Posterity Fund, McGee said. A separate proposal under consideration would require Zcash Community Grants to contribute 50,000 ZEC from its treasury to the mechanism.

The activated version is a compromise. Shielded Labs' original design would have replaced Zcash's halvings entirely with a smooth issuance curve. Community panels backed that approach; coinholders did not. Developers then produced an alternative that kept the halvings.

"We still think the original design was simpler and better, but we respect the process that led us here," McGee wrote. "It should be difficult to change the protocol, and the process should resist capture by any single organization, group, or influential individual."

What else changes in NU7?

The upgrade cuts Zcash's target time between blocks from 75 seconds to 25, the Zcash Foundation said, and retires Sprout, the network's original privacy pool from 2016. Coins worth roughly $16 million remain locked in the retired pool.

Faster blocks raise the risk of orphan blocks — valid blocks the network discards when another miner's block propagates first. In a stress test of 80 nodes across 11 regions, with every block filled with private transactions, developers at Zakura, which last month proposed a quantum privacy fix for shielded swaps, measured an orphan rate of 3.43% at 25-second blocks versus 1.57% at 75 seconds. They expect the live network to stay below 1% because real mining is more concentrated and blocks are far emptier.

NU7 also caps how much private transaction activity fits into each block, reducing the data wallets must scan to find their payments, according to the upgrade specification.

What happens with the Dev Fund?

The activation lands as the community debates the future of Zcash Community Grants and its share of the Dev Fund, the slice of block rewards that pays for protocol development.

The five organizations that coordinate Zcash's coinholder voting — Project Tachyon, Shielded Labs, Valar Group, the Zcash Foundation and ZODL — have set an expedited timeline, warning that "tensions were high" and a drawn-out debate risked "deepening divisions within the Zcash community." Proposals are due by November 8, with coinholder and community panel polls running from November 16 to November 30. If rough consensus emerges, the groups will back a further upgrade, NU 7.1, to implement the outcome — putting the network's funding architecture up for a decision before the end of the month.