Zcash Co-Founder Proposes Redirecting Block Subsidies to Sustainability Fund

On October 26, 2026, Sean Bowe, a co-founder and protocol developer of Zcash, introduced a draft proposal to redirect the 8% block subsidy currently allocated to Zcash Community Grants (ZCG) towards a new Network Sustainability Mechanism (NSM) reserve. This proposal, published as a draft ZIP on the community forum, aims to hold these funds out of circulation rather than distributing them to grant recipients.

The mechanics of the proposal are straightforward: instead of issuing the 8% allocation to grant recipients, the protocol would credit that value to the NSM Value Balance, effectively parking the coins without immediate issuance or spendable output. While ZCG will continue to honor existing milestones, it will cease approving new grants, eventually transferring any remaining treasury funds to the NSM.

Current Funding Structure of Zcash

• Miners receive 80% of block rewards.
• ZCG receives 8%.
• The Coinholder-Controlled Fund takes the remaining 12%.

This funding structure is set to remain until the network’s third halving, anticipated around 2028. Bowe's proposal specifically targets the 8% grants allocation, leaving the miner share and coinholder fund unaffected.

The motivation behind this proposal stems from governance concerns regarding the control coinholders have over ZCG allocations, as well as worries about the committee's decisions diverging from previous coinholder votes. This proposal is separate from the upcoming NU7 network upgrade, expected to activate around November 5, 2026, which will introduce new mechanics for the NSM.

Community Reaction

As of October 27, 2026, the proposal remains in draft status, with mixed reactions from the community. Some members support the idea, while others argue that such a significant change warrants broader discussion regarding its governance implications.

Implications for ZEC Holders and Developers

For developers relying on ZCG, the immediate concern is the impact on funding pipelines, as new grants would be halted. This shift may lead to increased reliance on the Coinholder-Controlled Fund, which retains its 12% share. For ZEC holders, redirecting 8% of block subsidies into a reserve means fewer newly issued coins will enter the market through grant payouts.