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1. Zcash NU7 goes live on mainnet
Zcash activated its NU7 network upgrade on the evening of Thursday, November 5, when block 3,543,405 was mined at 9:34 p.m. Eastern time, according to Blockchair data. The upgrade switches on the Network Sustainability Mechanism (NSM), a Shielded Labs design under which 60% of each block's transaction fees are removed from circulation and returned to miners gradually, years later, through block rewards.
Jason McGee of Shielded Labs announced on the afternoon of the activation that the mechanism would go live later that day as part of NU7. He described it as the organization's first major mainnet deployment, a milestone for a group that has focused on funding and shaping long-term development of the Zcash network.
The activation height, 3,543,405, was fixed in advance in the specification known as ZIP 259, which is why the moment could be predicted to the block. Operators who had upgraded their software simply continued following the chain as it crossed that height, while those who had not would have been left behind on a different fork.
2. What does the Network Sustainability Mechanism change?
The Network Sustainability Mechanism changes how transaction fees flow through the Zcash economy. Under ZIP 235, miners keep 40% of the fees in each block, while the other 60% is taken out of circulation. A separate proposal, ZIP 237, then governs how that withheld ZEC is paid back out slowly, on top of the regular block subsidy.
The practical effect is a temporary reduction in the amount of ZEC available to trade, followed by a long, smoothed release. The payout does not begin immediately. ZIP 259 sets the start of reissuance at block 8,939,664, which is roughly 5.4 million blocks after activation. At the new block time introduced by NU7, that works out to early 2031, and McGee wrote that reissuance will begin in 2031.
The overall monetary framework is untouched. The 21 million ZEC supply cap remains in place, and the scheduled halvings of the block subsidy continue as before. The mechanism adds a fee-recycling layer to the existing issuance schedule; it does not replace that schedule.
3. Why did Shielded Labs drop its smooth issuance curve?
Shielded Labs' original proposal was more ambitious than the version that has now shipped. It would have replaced the halving schedule with a smooth issuance curve, removing the abrupt step-downs in miner rewards that occur every few years. That design drew support from community panels but was rejected by coinholders in a vote.
A variant that kept the halvings gained broad support instead. In September, coinholders voted in favor of a package that combined the fee-recycling mechanism with a 25-second block time and the existing halving schedule. That outcome is what NU7 implements.
McGee acknowledged the outcome with a measured comment, saying Shielded Labs still thinks the original design was simpler and better, but that it respects the process that led to the current version. The remark illustrates how Zcash changes are decided: proposals are drafted as ZIPs, debated by community groups, and put to a coinholder vote before being scheduled for activation.
4. How does NU7 speed up blocks?
NU7 reduces the Zcash block time target from 75 seconds to 25 seconds, so new blocks are expected three times as often. To prevent the faster cadence from increasing the amount of new coin created each day, block rewards are divided by three. Daily issuance therefore stays the same, according to the release notes for Zebra 7.0.0, the node software maintained by the Zcash Foundation.
Shorter intervals between blocks generally mean quicker first confirmations for payments, although the security properties of any given number of confirmations change when the interval changes. The upgrade also introduces per-block limits on shielded activity, a guardrail intended to keep the larger number of blocks from being overwhelmed by private transactions.
The release also drops support for version 4 transactions, an older transaction format. Removing legacy formats reduces the amount of historical code that node software must continue to maintain and test, which is a common reason for retiring them during a network upgrade.
5. What happens to coins in the Sprout pool?
Coins that remain in the Sprout pool can no longer be spent after NU7. Sprout is the oldest of Zcash's shielded pools, dating to the network's early design, and its transfers use only the version 4 format that the upgrade removes. With no other format available to Sprout transfers, the pool is effectively closed to spending.
Blockchair data showed about 12,224 ZEC in the Sprout pool at the activation block. At a ZEC price near $1,313 on Thursday evening, that amount is worth roughly $16 million. Holders who did not move their coins out of the pool before activation now face a locked balance.
The change fits a common pattern in protocol maintenance, where legacy pools and transaction formats are retired so that developers have less old code to support.
6. Which node operators had to upgrade?
Every operator of a mainnet node had to run NU7-compatible software before block 3,543,405 to stay on the consensus chain. The Zcash Foundation released Zebra 7.0.0 on October 22, describing it as its first stable Zebra release able to run NU7 on mainnet, and warned that all mainnet node operators must upgrade before NU7 activates.
The warning reflects how network upgrades work in a decentralized system. Because the rules change at a specific block, software that does not recognize the new rules will reject blocks built under them. Operators who stayed on old software would have been following a separate chain rather than the main Zcash network.
NU7 had been running on Zcash's test network since early October, giving developers and node operators several weeks to observe the new rules before they took effect on the live chain.
7. What is the 50,000 ZEC grants proposal?
Alongside the activation, McGee pointed to a separate proposal that would require Zcash Community Grants (ZCG) to contribute 50,000 ZEC from its treasury to the Network Sustainability Mechanism. The draft ZIP would also end the 8% funding stream that currently supports ZCG and redirect it to a new lockbox for development and legal defense that would run until the third halving.
As of Thursday, the proposal remained an open, unmerged pull request on GitHub, meaning it had not been accepted into the formal specification. McGee co-wrote it with Zooko Wilcox and Sean Bowe, and the three proposed it in late October. Earlier in the same week, ZCG had dropped its own plan to cut its funding.
The proposal is distinct from the NU7 activation itself. The upgrade that went live on Thursday contains the fee-recycling mechanism, the faster blocks and the Sprout change, while the grants proposal would need to go through its own review and approval before any ZEC moved.
8. What comes next for Zcash after NU7?
The next milestones are gradual rather than immediate. The fee-withholding mechanism begins removing 60% of block fees from circulation now, but the first reissuance of that ZEC is not scheduled until block 8,939,664, in early 2031. In the meantime, the network will operate with 25-second blocks and a reduced block reward per block, while daily issuance stays unchanged.
The open grants proposal is the most visible pending decision. Its fate will determine whether ZCG's 8% funding stream ends and whether 50,000 ZEC is contributed to the mechanism from the grants treasury. On Thursday evening, ZEC traded near $1,313, roughly flat over 24 hours.
9. How does Zcash handle private transactions?
Zcash is a proof-of-work blockchain that supports both transparent transfers, which resemble those on Bitcoin, and shielded transfers, which use zero-knowledge proofs to hide the sender, recipient and amount. Shielded funds live in dedicated pools, and Sprout, the first of them, is the pool affected by NU7. Later pools were introduced through earlier network upgrades.
Protocol changes on Zcash are written up as Zcash Improvement Proposals, or ZIPs. The numbers cited in connection with NU7, including ZIP 235, ZIP 237 and ZIP 259, are the formal specifications that define how the fee withholding, the later payout and the activation height work. Keeping the rules in numbered documents lets independent teams build compatible node software, as the Zcash Foundation did with Zebra.
Two organizations feature prominently in this upgrade. Shielded Labs, which designed the Network Sustainability Mechanism, develops proposals and software for the network, while the Zcash Foundation maintains the Zebra node implementation. Both depend on community processes, such as coinholder votes, to decide which changes proceed.
10. Why does withholding fees matter for supply?
Transaction fees are normally paid in full to miners and re-enter the market as miners sell or hold their income. By withholding 60% of fees from circulation, the Network Sustainability Mechanism makes heavier network usage reduce the amount of ZEC in circulation for a period, since more fees mean more ZEC set aside. The set-aside coins are then released slowly rather than all at once, which avoids a sudden jump in supply.
Halvings, by contrast, cut the block subsidy at fixed intervals and therefore shrink new issuance in steps. Because the halvings stay in place under the version coinholders approved, the new mechanism sits on top of that schedule instead of reshaping it. The combined effect is a modest recycling of fee income layered over the familiar fixed-cap model.
Shielded Labs has framed the design as a way to make the network's long-term economics more sustainable, which is where the mechanism gets its name. Whether that goal is met will only be measurable over years, since the first payouts are not due until 2031.