For Zcash holders, the NU7 upgrade brought a significant custody consequence alongside changes to network funding: it retired Sprout, the original privacy pool introduced in 2016, leaving coins worth about $16 million locked in that pool, according to Decrypt’s November 6, 2026 report.
The upgrade activated at block 3,543,405 early that Friday, Zcash’s official account confirmed. It also introduced a mechanism intended to help fund network security as block subsidies decline, shortened the target block interval and reduced the private transaction data wallets need to scan.
How the fee-recycling mechanism works
The new Network Sustainability Mechanism (NSM) addresses a long-term question Zcash inherited from Bitcoin: whether transaction fees alone will provide enough compensation for miners to secure the network as halvings reduce block subsidies.
Under the mechanism:
- 60% of transaction fees are removed from circulation and gradually reissued through future block rewards.
- Reissuance begins in 2031, with recycled funds distributed along a smooth curve on top of the existing halving schedule.
- The 21 million ZEC supply cap remains in place.
The mechanism is designed to support future security funding; that objective is not a guarantee of its eventual outcome.
Jason McGee of Shielded Labs, the development organization behind the mechanism, said the NSM was the organization’s first project. It builds on an earlier idea from developer Nate Wilcox called the Zcash Posterity Fund. A separate proposal still under consideration would have Zcash Community Grants contribute 50,000 ZEC from its treasury to the NSM; that contribution was not reported as an activated part of NU7.
Faster blocks bring a trade-off
According to the Zcash Foundation, NU7 reduced the target interval between blocks from 75 seconds to 25 seconds.
Faster blocks can increase the risk of orphan blocks—valid blocks discarded because another miner’s competing 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%, because actual mining is much more concentrated and blocks are much emptier. That figure was an expectation, not a reported live-network measurement. Decrypt also noted that Zakura had proposed a quantum privacy fix for shielded swaps the previous month.
NU7 additionally limits the amount of private transaction activity that can fit in each block. According to the upgrade specification, this reduces the data wallets must scan to find their payments.
Why the halving schedule stayed
Shielded Labs initially proposed replacing Zcash’s halvings with a smooth issuance curve. Community panels supported that approach, but coinholders did not, prompting the alternative design that retained 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 protocol changes should be difficult and that the process should resist capture by any single organization, group or influential individual.
Development funding remained under debate
At the time of publication, the community was also debating the future of Zcash Community Grants (ZCG) and its share of 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 proposal and polling schedule. They said “tensions were high” and warned that a prolonged debate could deepen community divisions.
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. That remained conditional in the original report.
Original report: Decrypt, published November 6, 2026, at 18:13:27 UTC+08:00. This article preserves that reporting context.