Original reporting published November 6, 2026, at 18:13:27 UTC+08:00.
Zcash’s NU7 upgrade activated at block 3,543,405 early Friday, November 6, according to Decrypt’s report. Its central change is the Network Sustainability Mechanism (NSM), which will recycle 60% of transaction fees into future block rewards to help fund network security as mining subsidies decline.
The upgrade also shortens the target block interval, retires Zcash’s original privacy pool and arrives amid a separate debate over development funding. Activation is confirmed in the report; whether the changes deliver their intended long-term benefits remains unproven.
How fee recycling works
The NSM addresses a question Zcash inherited from Bitcoin: as halvings reduce block subsidies, will transaction fees alone provide enough compensation for miners to secure the network?
Under NU7, 60% of transaction fees are removed from circulation and gradually reissued through future block rewards. Reissuance is scheduled to begin in 2031, following a smooth curve layered onto the existing halving schedule. The mechanism preserves the 21 million ZEC supply cap.
Shielded Labs developed the mechanism as its first project. According to the organization’s Jason McGee, it builds on an idea developer Nate Wilcox proposed years earlier under the name Zcash Posterity Fund.
Shielded Labs originally wanted to replace halvings with a smooth issuance curve. Community panels supported that approach, but coinholders did not, leading to the version that retains halvings.
“We still think the original design was simpler and better, but we respect the process that led us here,” McGee wrote. He added that protocol changes should be difficult and resistant to capture by any single organization, group or influential individual.
A separate proposal under consideration would have Zcash Community Grants contribute 50,000 ZEC from its treasury to the NSM. That contribution was not presented as an approved part of NU7.
Faster blocks bring a trade-off
According to the Zcash Foundation, NU7 cuts the target time between blocks from 75 seconds to 25 seconds. It also retires Sprout, Zcash’s original privacy pool introduced in 2016, leaving coins worth about $16 million locked in that pool.
Faster blocks increase the risk of orphan blocks: valid blocks discarded when a competing miner’s block reaches the network first.
In a stress test involving 80 nodes across 11 regions, with every block filled with 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 orphan rate to remain below 1%, citing more concentrated mining and much emptier blocks. That figure was an expectation, not a reported live-network measurement. Zakura had also proposed a quantum privacy fix for shielded swaps the previous month.
NU7 additionally limits private transaction activity per block, reducing the amount of data wallets must scan to identify payments, according to the upgrade specification.
Development funding remains unsettled
The activation coincided with debate over Zcash Community Grants and its share of the Dev Fund—the portion of block rewards that pays for 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 the time of the report, proposals were due November 8, 2026, with coinholder and community-panel polls scheduled for November 16–30. If rough consensus emerged, the organizations said they would support a further upgrade, NU 7.1, to implement it.
The distinction matters: NU7’s technical changes had activated, while the treasury contribution and broader development-funding decisions remained proposals or conditional next steps.