Zcash Holds Back 60% of Transaction Fees After NU7 Upgrade Activation
Key Facts
The Zcash network activated the NU7 upgrade, which temporarily holds back 60% of transaction fees, with their return through block rewards set to begin in February 2031, according to a filing with the U.S. Securities and Exchange Commission. This places part of the fees in a reserve rather than treating them as a permanent reduction in supply. The activation coincided with changes to the network’s transaction rules, including invalidating a transaction format required to spend balances in the Sprout pool. By contrast, transaction formats 5 and 6 remain valid after the upgrade, according to the ZIP specification published on GitHub. NU7 therefore combines a change to the fee mechanism with a change in compatibility with transactions from the older pool.
The U.S. filing says the target block time will be cut from 75 seconds to 25 seconds. This change is linked to a lower reward for each block and a longer interval between halving events, while largely preserving ZEC’s issuance rate and roughly four-year halving schedule. The pace of block production will therefore change, while the design is not intended to materially alter the overall issuance rate, according to the filing. An earlier CoinDesk report said the upgrade could shorten the wait for three transaction confirmations from nearly four minutes to about 75 seconds. That duration remains an estimate reported before activation; the filing specifies a target block time, not a guaranteed time for every transaction.
The changes affect the Sprout pool, one of the network’s older privacy pools. Under the ZIP specification, version 4 transactions become invalid after NU7 activation, while versions 5 and 6 remain accepted. Because Sprout transfers can only be represented by version 4 transactions, balances left in the pool become unspendable under the new rules. The specification does not describe this as a temporary freeze, nor does it guarantee that spending will be restored in the future. On the morning of November 5, CoinDesk estimated that 12,226 ZEC remained in the pool, compared with about 22,263 a week earlier; it said about 9,094 ZEC left on Sunday and another 40 on Wednesday.
A CoinDesk report published on November 5 described NU7 as an anticipated upgrade, noting that about 12,200 ZEC remained in Sprout and that version 4 transactions were the only format capable of spending those coins. After activation, this restriction directly affects the remaining balances, as the required format is no longer accepted by the network. Separately from the protocol rules, a coin-holder vote reported by CoinDesk Research in October showed support from 2,375,932 ZEC for keeping the four-year halving cycle, while 22,385 ZEC opposed it. The vote is consistent with largely retaining the existing halving schedule, as described in the U.S. filing. These figures provide context on participant views and issuance design; they do not measure the upgrade’s effect on price.
ZEC/USD closed at $1,281.11 on November 5, compared with a close of $1,296.78 on November 4, according to EL7 data. The comparison puts the close on activation day below the previous session’s close, without establishing on its own that the upgrade caused the price move. The filing set February 2031 as the start date for returning withheld fees through block rewards. Under the ZIP specification, the changes taking effect include invalidating version 4 transactions while versions 5 and 6 remain valid. Sprout balances that were not spent before activation remain unspendable under the new rules, with no guarantee they can be recovered in the future.