Source publication: November 6, 2026, at 18:13:27 UTC+8. This article reflects the reporting and proposal status at that time.
Zcash’s NU7 upgrade activated at block 3,543,405 on November 6, 2026, introducing a mechanism intended to support future mining rewards as block subsidies decline. Alongside that monetary change, the upgrade shortened target block intervals, retired the original Sprout privacy pool and limited private transaction activity per block.
The central question is whether recycling transaction fees can help sustain network security without changing Zcash’s 21 million ZEC supply cap. The reported design establishes a funding mechanism; it does not establish that future mining incentives will be sufficient.
How the Network Sustainability Mechanism 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 question Zcash shares with Bitcoin: as subsidies fall through successive halvings, will transaction fees alone provide enough compensation for miners to secure the network?
Under NSM, part of the fee stream is shifted into future rewards rather than permanently removed from supply. The 21 million ZEC cap remains intact. The source does not provide a quantified projection of the resulting security budget or evidence that the mechanism will resolve the long-term incentive problem.
Shielded Labs developed NSM as its first project. According to the organization’s Jason McGee, it builds on an earlier proposal by developer Nate Wilcox called the Zcash Posterity Fund. A separate proposal under consideration at the time would require Zcash Community Grants to contribute 50,000 ZEC from its treasury to NSM; that contribution was not reported as approved.
Why the halving schedule remains
Shielded Labs’ original design would have replaced halvings with a smooth issuance curve. Community panels supported that approach, but coinholders did not, prompting development of the alternative that retained halvings.
McGee said Shielded Labs still considered the original design simpler and better, while accepting the governance outcome. He argued that protocol changes should be difficult and that the process should resist capture by any single organization, group or influential individual.
The implemented design therefore reflects both a technical objective—smoothing the reissuance of recycled fees—and a governance constraint: retaining the existing halving structure.
Faster blocks introduce a propagation trade-off
According to the Zcash Foundation, NU7 reduced the target interval between blocks from 75 seconds to 25 seconds.
Shorter intervals increase the risk of orphan blocks: valid blocks discarded because a competing miner’s block reaches the rest of the network first. Developers of Zakura tested that trade-off using 80 nodes across 11 regions, with every block filled with private transactions. They measured:
| Target block interval | Measured orphan rate in the stress test |
|---|---|
| 75 seconds | 1.57% |
| 25 seconds | 3.43% |
The developers expected the live network’s orphan rate to remain below 1%, arguing that actual mining is much more concentrated and blocks are much emptier than in the test. That figure was an expectation, not a reported mainnet measurement. The source does not specify the stress test’s measurement date.
Zakura’s developers had also proposed a quantum privacy fix for shielded swaps in the month before the report.
Privacy-pool retirement and wallet scanning
NU7 retired Sprout, Zcash’s original privacy pool introduced in 2016. The report said this left coins worth approximately $16 million locked in the pool.
The upgrade also limits how much private transaction activity can fit into each block. According to the upgrade specification cited in the report, this reduces the data wallets must scan to identify their payments. No quantified improvement in wallet scanning performance was supplied.
Development funding remained unresolved
NU7 activated amid a separate debate over Zcash Community Grants and its share of the Dev Fund, the portion of block rewards allocated to development.
Five organizations coordinating Zcash’s coinholder voting—Project Tachyon, Shielded Labs, Valar Group, the Zcash Foundation and ZODL—set an expedited proposal and polling schedule. They said “tensions were high” and warned that a prolonged debate risked “deepening divisions within the Zcash community.”
At publication, proposals were due by November 8, 2026, with coinholder and community-panel polls scheduled for November 16–30, 2026. The organizations said they would support a further upgrade, NU 7.1, if rough consensus emerged. That upgrade remained conditional, not an agreed implementation.
NU7’s documented changes establish a new fee-recycling structure and alter block production and privacy-pool operation. Their longer-term effects—particularly the adequacy of future mining rewards and the live-network cost of faster blocks—remain distinct from the fact of activation.