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1. What did Sean Bowe propose for Zcash?
On October 26, 2026, Zcash co-founder and protocol developer Sean Bowe introduced a draft proposal that would end the 8% share of each block's subsidy that currently goes to Zcash Community Grants (ZCG). The value would instead flow to the Network Sustainability Mechanism (NSM) reserve, where it would be held out of circulation. The Zcash block subsidy proposal remained a draft on October 27.
The central change is simple to state. Today, 8% of each Zcash block's subsidy is earmarked for Zcash Community Grants, the committee that funds ecosystem developers. Under Bowe's draft, the protocol would stop issuing that slice to grant recipients and would instead credit the same value to the Network Sustainability Mechanism Value Balance, the accounting entry behind the NSM reserve.
The reserve is not a spending account. The research cited alongside the draft describes no immediate issuance and no spendable output: the coins are counted in the books but held out of circulation. In practical terms, the 8% would stop reaching the market through grant payouts and would be parked instead.
Bowe published the idea as a draft Zcash Improvement Proposal, usually shortened to ZIP, and posted it to the community forum on the same day. A ZIP is the project's formal mechanism for suggesting changes to the protocol or its rules. A draft carries no authority on its own; it is a starting point for discussion before any formal process begins.
2. What would happen to existing grants and the ZCG treasury?
Existing commitments would be honored. Under the draft, ZCG would stop approving new grants but would keep paying out milestones on grants already awarded, drawing on the money it currently holds. Developers who have been promised funding for work in progress would therefore not lose those payments.
The treasury itself would also have a defined end point. Whatever remains in the ZCG treasury after existing obligations are met would eventually be transferred to the NSM. The grants body is described as holding roughly 91,453 ZEC plus cash, an amount the source estimates at somewhere between tens of millions and more than $100 million, depending on the ZEC price.
That balance matters because the draft does not leave ZCG empty-handed overnight. It asks the ecosystem to treat the existing treasury as the final pool of grant money, rather than topping it up with fresh issuance from every new block.
3. How is Zcash's block reward split today?
Since the NU6 and NU6.1 network upgrades, each block's reward has been divided three ways. Miners receive 80%, Zcash Community Grants receives 8%, and the Coinholder-Controlled Fund receives the remaining 12%. The arrangement is scheduled to run until the third halving, which is expected around 2028.
Bowe's proposal touches only one of those three shares. The 80% that goes to miners stays as it is, and so does the 12% directed to the Coinholder-Controlled Fund, whose spending is decided by coin holders rather than by a committee. Zcash's supply cap would be unchanged as well.
The subsidy itself is the newly created coin that each block pays out under the protocol's issuance schedule. Dividing it among miners and funding bodies is a deliberate design choice, and it is why changes to the split tend to draw close attention: every percentage point moved from one recipient to another alters who pays for security and who pays for development.
4. What is the Network Sustainability Mechanism?
The Network Sustainability Mechanism, or NSM, is a Zcash proposal for a reserve that takes certain value out of circulation so it can be released later in a controlled way. Its purpose is to support the network's long-term economics, in particular the question of how miners are paid as the block subsidy shrinks with each halving.
The upgrade known as NU7 is expected to introduce the first fee-reserve mechanics for the NSM, along with a cut in block times to 25 seconds. Bowe's draft would build on that by adding a second source of value to the reserve: the 8% that now goes to ZCG. Because the reserve is held out of circulation, directing more value into it reduces the amount of newly issued ZEC that reaches the market.
The draft is separate from NU7, though the two are being discussed at the same time. NU7 deals with block timing and the NSM's initial fee mechanics, while the ZCG proposal concerns who receives a share of newly created coins.
5. Why is the proposal being made now?
The draft arrives as the Zcash community is already debating how its funding should work after the NU6 arrangement, and as the NU7 upgrade draws near. Bowe, a co-founder who also works as a protocol developer, is proposing that the project change how it pays for its own development rather than continuing the current model unchanged.
The idea has an obvious appeal for holders who favor a tighter supply: coins sent to a reserve are not sold by grant recipients, so they do not add selling pressure. It also has an obvious cost, which is that a project without a steady stream of grant money has fewer ways to pay for outside developers, research and tools.
For that reason the proposal is as much about governance as about money. Deciding whether a grants committee should keep receiving newly issued coins is a question about who gets to direct the network's resources, and the draft puts that question to the community in concrete terms.
6. What does this mean for developers and ZEC holders?
For developers who rely on ZCG, the practical issue is the grant pipeline. Current milestones would continue to be paid, but there would be no new awards once the change took effect. Teams planning new projects would need to look elsewhere for funding.
One likely destination is the Coinholder-Controlled Fund, which keeps its 12% share under the draft. Discussions about paying for development would shift toward that body, whose spending is shaped by the coin holders themselves.
For ZEC holders, the effect works through supply. Redirecting the 8% into a reserve means fewer newly issued coins reach the market through grant payouts. That does not guarantee any change in price, which depends on many other factors, but it does change the flow of new coins.
7. What happens next for the Zcash draft?
As of October 27, 2026, the proposal remained a draft. It had not been accepted, and no activation date had been set. Any change to the block subsidy would need to move through the Zcash community's usual discussion process and be included in a network upgrade before taking effect.
The next signs to watch are the forum debate, any revisions to the draft text, and whether the idea is taken up in the planning for a future network upgrade. Because the existing three-way split already runs until around 2028, there is time for the community to weigh the proposal against alternatives.
8. Why do block subsidy splits matter?
A block subsidy is the pool of newly created coins that a proof-of-work network pays out each time a block is added. In Zcash, that pool is not handed entirely to miners. Part of it is set aside by protocol rules to fund work that the network's designers consider essential but that no single company is paid to do, such as protocol research, wallet development, security audits and other public goods.
This is a different approach from networks that rely on a single foundation or on private investors to pay for development. Directing a fixed percentage of every block to funding bodies makes the money predictable, but it also hard-codes a decision about who deserves it. When the community wants to change that decision, it has to change the protocol rules, which is why even a proposal that touches one slice draws attention from miners, developers and holders alike.
The 8% share at the center of this draft therefore has two roles at once. It is a line in the issuance schedule, and it is the main funding source for the grants that keep independent Zcash projects running.
9. How do Zcash upgrades and ZIPs work?
Changes to Zcash follow a documented process. Anyone can write a ZIP describing a change, and the document is discussed publicly on the community forum before it is considered for inclusion in a network upgrade. Upgrades are named with the NU prefix, and NU6, NU6.1 and the coming NU7 are the most recent examples.
A draft status means the text is still open to revision, and the author may change or withdraw it in response to feedback. Reaching consensus involves developers, node operators, miners and coin holders, since an upgrade only takes effect when the network adopts it.
In this case, the draft would need to be reconciled with the existing allocation rules, which were set in earlier upgrades and run until the third halving. Altering them ahead of that point would amount to an early change to a funding arrangement the community has already agreed to.
10. What are the trade-offs of redirecting the 8%?
Supporters of reserve-based designs argue that parking value out of circulation strengthens the network's long-term economics and avoids relying on a committee to decide where newly issued coins should go. A smaller flow of new coins into circulation can also be easier for holders to model.
The counterargument is that grant funding has paid for real work, and that ending new awards could slow the development of tools, research and applications around the network. Closing the pipeline also concentrates future funding in other channels, which raises its own questions about who decides. Both arguments rest on the same facts: ZCG holds a sizeable treasury today, and the draft would let that treasury serve as the last round of grants.