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FIGR_HELOC $1.03 Technology · News brief
Zcash activates NU7 upgrade with fee-recycling mechanism
The upgrade removes 60% of transaction fees from circulation for reissue after 2031 and cuts block times to 25 seconds.
Key takeaways
- Fee recycling. Miners keep 40% of each block's fees; the other 60% leaves circulation and is paid back gradually on top of regular block rewards from 2031.
- Faster blocks. The target block time drops from 75 seconds to 25, with block rewards divided by three so daily issuance stays the same.
- Sprout retired. The 2016 privacy pool is closed, leaving roughly 12,224 ZEC, worth about $16 million, permanently unspendable.
What happened
Zcash's NU7 network upgrade went live at block 3,543,405, activating the Network Sustainability Mechanism (NSM), a system intended to help fund the privacy coin's security as block subsidies shrink over time. Unchained reported that the block was mined at 9:34 p.m. ET on Thursday, while Decrypt described the activation as occurring early Friday. The project's official account posted that NU7 had successfully activated on mainnet.
Under the mechanism, 60% of transaction fees are removed from circulation, with miners keeping the remaining 40%, according to ZIP 235 as cited by Unchained. A second specification, ZIP 237, provides for that ZEC to be paid back out gradually on top of ordinary block rewards. Reissuance is set to begin at block 8,939,664, which Unchained calculated falls in early 2031 at the new block time. The 21 million ZEC supply cap and the existing halving schedule remain unchanged.
The upgrade also shortens Zcash's target time between blocks from 75 seconds to 25 seconds, the Zcash Foundation said. Block rewards are divided by three so that daily issuance stays level. NU7 additionally places per-block limits on shielded activity, drops support for version 4 transactions, and retires Sprout, Zcash's original privacy pool from 2016. Because Sprout transfers have no other format, coins remaining in that pool can no longer be spent.
Jason McGee of Shielded Labs, the development organization behind the mechanism, called the activation a major milestone and said it was the group's first mainnet deployment. Shielded Labs' initial design would have replaced halvings with a smooth issuance curve, but coinholders did not support that approach even though community panels did, so an alternative that keeps the halvings was developed instead.
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