Zcash Proposes Fee Recycling and Miner Rewards
Zcash is proposing a new mechanism to recycle fees and reward miners, rather than burning them as traditional cryptocurrencies do. The Network Sustainability Mechanism (NSM) proposal would remove some ZEC from circulation through fees, then reissue that value into future miner rewards.
The NSM is an essential part of the NU7 upgrade, which includes reducing the target block time from 75 seconds to 25 seconds, fundamentally transforming the network's user experience and operational mechanics. This change will transition the network from a slow, deliberate transactional model to a highly responsive, modern network.
The NSM addresses the long-term decline of block subsidies through multiple strategies, including recycling value rather than destroying it, preventing hashrate shocks via issuance smoothing, and decoupling security from volatile free markets. The proposal would store 60% of incoming fees during high traffic and smoothly pay out the stored capital to validators during multi-year bear markets.
The maximum hard cap of 21 million ZEC remains unaltered by the NSM proposal, ensuring that no new coins will be minted beyond this limit. The protocol functions by pulling existing, already-minted ZEC out of active market circulation and placing them into a reserve pool, dropping the active supply and leaving room to slowly re-issue the same coins to validators in the future.