The NU7 network upgrade of Zcash was launched earlier on Friday at block 3,543,405, enabling the network sustainability mechanism ( Network Sustainability Mechanism, NSM ). This change is aimed at providing financial support for the network security of this privacy coin as the block rewards gradually decrease.
The official project account posted on X, stating: “NU7 has been successfully launched on the mainnet. A new era for Zcash has begun.”
Jason McGee, before the upgrade and activation, stated: "This is a major milestone for Shielded Labs." Shielded Labs is the development organization behind this mechanism.
NSM attempts to address an issue inherited from Bitcoin by Zcash: as each halving occurs and the block subsidy decreases, whether transaction fees alone are sufficient to pay miners to ensure network security. Under this mechanism, 60% of transaction fees will be taken out of circulation and gradually reissued through future block rewards, while maintaining the maximum supply of Zcash at 21 million coins. The reissuance will begin in 2031, and the funds recovered will be distributed along a smooth curve, above the existing halving schedule.
McGee indicates that NSM is the first item of Shielded Labs, which is based on an idea proposed by developer Nate Wilcox many years ago. That idea was initially called Zcash Posterity Fund. McGee states that another proposal under consideration will require Zcash Community Grants to contribute 50,000 ZEC from its treasury to NSM.
NU7 also brings about other changes. Zcash Foundation indicates that this upgrade will reduce the target block time from 75 seconds to 25 seconds, and it will also phase out the Zcash earliest privacy pool. There are still tokens worth approximately 16 million US dollars locked in that privacy pool.
A faster block generation speed increases the risk of orphan blocks, which means that a valid block may be discarded by the network because another miner's block is transmitted to other nodes in the network first. Developers of Zakura measured in a stress test that with 80 nodes distributed across 11 regions and each block being filled with private transactions, the orphan block rate was 3.43% when blocks were generated every 25 seconds, and it was 1.57% when blocks were generated every 75 seconds. They expect that the actual orphan block rate on the mainnet will remain below 1%, as real mining is more concentrated, and blocks are not nearly as full as those in the test.
According to the upgrade specifications, NU7 also limits the amount of private transaction activities that each block can accommodate, thereby reducing the amount of data that wallets need to scan in order to find recipients.
Shielded Labs The initial design was to replace the halving mechanism of Zcash with a smooth issuance curve. The community group supported this change, but the token holders did not, so in the end, an alternative solution that retained the halving mechanism was developed.
McGee writes: 'We still believe that the initial design was simpler and better, but we respect the process that led to the current outcome. Changing the protocol should be quite difficult, and this process should be able to resist control by any single organization, group, or influential individual.'
Zcash's Dev Fund Dispute
As this upgrade is being launched, the Zcash community is discussing the future of Zcash Community Grants ( ZCG ) and its share within Dev Fund. Dev Fund is the portion of the block rewards that is allocated for covering development costs.
The five organizations coordinating the voting of Zcash token holders – Project Tachyon, Shielded Labs, Valar Group, Zcash Foundation, and ZODL – have established an accelerated timeline for the proposal and voting process, and expressed that "there is a high level of tension." They stated that delaying discussions could "deepen the divisions within the Zcash community."
The deadline for proposal submission is November 8th, and the voting by token holders and community groups will take place from November 16th to November 30th. If a general consensus is reached, these organizations will support the further network upgrade NU 7.1 to implement this plan.
