Historical report based on Decrypt’s article published November 6, 2026, at 18:13:27 UTC+08:00.
Zcash activated its NU7 upgrade at block 3,543,405 early on November 6, 2026, introducing a mechanism that recycles transaction fees into future block rewards. The change is intended to help fund network security as mining subsidies decline, while preserving the 21 million ZEC supply cap.
How fee recycling works
The Network Sustainability Mechanism, or NSM, removes 60% of transaction fees from circulation and gradually reissues those funds through future block rewards. Reissuance is scheduled to begin in 2031, following a smooth curve layered on top of Zcash’s existing halving schedule.
The mechanism addresses a long-term security-funding question Zcash inherited from Bitcoin: whether transaction fees alone will provide enough compensation for miners as block subsidies shrink. Recycling fees changes when those funds become available to miners; it does not raise the supply cap or establish that future security funding will be sufficient.
Shielded Labs developed the NSM as its first project, building on an earlier idea from developer Nate Wilcox called the Zcash Posterity Fund, according to Shielded Labs’ Jason McGee. A separate proposal under consideration would require Zcash Community Grants to transfer 50,000 ZEC from its treasury to the NSM. That contribution was not described as an approved part of the activation.
Halvings remain after disagreement over issuance design
Shielded Labs originally proposed replacing Zcash’s halvings with a smooth issuance curve. Community panels supported that approach, but coinholders did not. Developers instead produced a design that retained the halvings.
“We still think the original design was simpler and better, but we respect the process that led us here,” McGee wrote. He argued that changing the protocol should be difficult and that the process should resist capture by any single organization, group or influential individual.
Faster blocks and the retirement of Sprout
NU7 also reduces the target interval between blocks from 75 seconds to 25 seconds, according to the Zcash Foundation. It retires Sprout, Zcash’s original privacy pool dating to 2016, leaving coins valued at approximately $16 million locked in that pool.
Shorter block intervals increase the risk of orphan blocks: valid blocks discarded because a competing miner’s block reached the network first. In a stress test involving 80 nodes across 11 regions, with every block full of private transactions, Zakura developers measured orphan rates of:
- 3.43% with 25-second blocks.
- 1.57% with 75-second blocks.
The developers expected the live network’s rate to remain below 1%, citing more concentrated real-world mining and substantially emptier blocks. That figure was an expectation, not a reported live-network result.
According to the upgrade specification, NU7 also limits the amount of private transaction activity per block, reducing the data wallets need to scan to identify their payments.
Development-funding decisions were still pending
At the time of publication, the community was also debating the future of Zcash Community Grants and its share of the Dev Fund—the portion of block rewards allocated to development.
The five organizations coordinating coinholder voting—Project Tachyon, Shielded Labs, Valar Group, the Zcash Foundation and ZODL—set an expedited timetable, saying tensions were high and a prolonged debate risked deepening community divisions:
- November 8, 2026: Proposals due.
- November 16–30, 2026: Coinholder and community-panel polls.
If rough consensus emerged, the organizations said they would support a further upgrade, NU 7.1, to implement the outcome. Neither that upgrade nor a final funding decision was established in the report.