Zcash co-founder proposes redirecting 8% of block rewards to network reserve

Zcash co-founder Sean Bowe has proposed redirecting 8% of the network’s block subsidies from Zcash Community Grants to a reserve designed to support future mining rewards, potentially ending the grant program’s regular funding.

In a proposal published on the Zcash Community Forum, the author outlined a plan to stop allocating new block rewards to Zcash Community Grants (ZCG) when the network activates its NU8 upgrade and send the funds to the Network Sustainability Mechanism (NSM) instead.

The proposal calls for ZCG to stop approving new grants once the changes are accepted, although projects with previously approved milestones would continue receiving their payments. Any funds remaining in the program’s treasury after those commitments are settled would then be transferred to the NSM.

The redirected ZEC would remain in the reserve until February 2031, when the funds are expected to start being released as mining rewards, following a timeline supported by a recent governance vote.

Zcash proposal questions how community grants are managed

One of the main arguments behind the proposal concerns how ZCG makes funding decisions and who gets to participate in the process.

Currently, the grant program is overseen by representatives elected through the Zcash Community Advisory Panel (ZCAP), whose membership is determined by the Zcash Foundation.

According to the proposal, ZCAP has roughly 200 members, including 72 who have previously received ZCG grants. Bowe claims those members account for approximately 75% of the money distributed through the grant program.

The proposal argues that this arrangement leaves ZEC holders with little direct control over how funds generated through block rewards are spent, even though the allocations dilute their holdings as new coins enter circulation.

Concerns over the program’s governance were illustrated through a disagreement over funding for Zcash Shielded Assets (ZSAs), a project designed to support additional assets on the privacy-focused blockchain.

In February 2026, a coinholder vote reportedly returned 98.6% opposition to the initiative, while 70.4% of ZCAP participants supported it. ZCG subsequently approved another $455,000 for ZSA development in June, according to the proposal.

The author used the disagreement to argue that decisions made by a relatively small committee may not always match the preferences expressed by coinholders.

ZCG has continued financing ecosystem initiatives this year, including a $750,000 grant approved in August for a group working to engage U.S. lawmakers on cryptocurrency policy.

Network Sustainability Mechanism would retain ZEC for future rewards

As part of the proposal, the NSM would receive the share of newly issued ZEC currently allocated to ZCG, with the funds remaining outside circulation until they are released through the mechanism.

The reserve is designed to support future block rewards, allowing funds accumulated during earlier periods to be distributed to miners later in the network’s life.

As crypto.news previously reported, developers have selected November 5 as the target date for Zcash’s NU7 upgrade, which is expected to introduce the NSM alongside faster block production.

The NSM is designed to collect 60% of transaction fees in a reserve, while the remaining 40% goes to miners. The accumulated funds would eventually return to circulation through future mining rewards.

In September, Zcash coinholders voted to preserve the network’s existing halving schedule, with approximately 96.6% supporting February 2031 as the starting point for NSM reissuance.

The proposed funding change would come under NU8, the subsequent network upgrade, and would not affect the separate 12% allocation for Coinholder Grants.

The author argued that development funding could continue through this coinholder-controlled allocation, private investment, donations, and crowdfunding.

Several ecosystem initiatives, including Tachyon, Valar, and ZODL, were cited as examples of projects that have secured funding without relying on ZCG grants.

For smaller projects, the proposal suggested that developers could seek initial financing from individuals or companies and later apply for reimbursement through retroactive coinholder grants.

Existing grant commitments would be honored

Although the proposal calls for ending ZCG’s regular funding, it would not immediately cancel financial commitments already approved by the program.

Projects that have reached approved funding milestones would continue receiving their scheduled payments, with only the remaining treasury balance transferred to the NSM after those obligations are completed.

The proposal would leave miners’ existing share of block subsidies and ZEC’s maximum supply unchanged, with the redirected funds held for future distribution through the reserve.

In a disclosure accompanying the proposal, the author said he was involved with Cypherpunk, a Zcash mining company, but maintained that the initiative was independent of his employment ties.

Cypherpunk recently became Zcash’s largest miner through a $33 million deal, expanding its mining operations within the network.

The author further disclosed that he had previously applied for a ZCG grant earlier in 2026 but canceled it before receiving any payments, despite having incurred costs associated with the project.

According to the disclosure, the decision was made because he did not want to advocate against the grant program while continuing to hold a grant from it.

The proposal remains open for community discussion, with its author inviting feedback before proceeding with further steps toward implementing the proposed funding changes.

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