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The Network Sustainability Mechanism (NSM) proposal is progressing on the Zcash network. It is an upgrade that removes some $ZEC from circulation through fees, then recycles that value into future miner rewards. If passed, the protocol will detach from the traditional burning exercise that permanently removes digital tokens from crypto networks and repurpose them.
NSM Core Proposal Explained
NSM is a core proposal that defines the deployment of Zcash’s NU7 upgrade. It is already gaining support for critical reasons, including resolving the network’s “security budget” crisis. Routing 60% of transaction fees into a secondary protocol reserve would help developers establish a permanent pool of capital and sustain block subsidies, decoupling security from volatile daily fee markets.
The new upgrade will create a competitive differentiator for $ZEC, the Zcash native digital asset, by strategically signalling to investors about Zcash’s uniqueness as an asset built for multi-decade durability. The proposal will also prepare the network for a potential shift to a Proof-of-Stake (PoS) consensus algorithm, and satisfy the community without diluting the token supply.
A Strategy for Recycling Value
Zcash’s NSM proposal 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 tackle this by storing 60% of incoming fees during high traffic and smoothly paying out the stored capital to validators during multi-year bear markets.
Despite the various protocol alterations associated with the NSM proposal, Zcash’s maximum hard cap of 21 million $ZEC remains unaltered. The protocol will never mint new coins beyond that limit. The NSM functions by pulling existing, already-minted $ZEC out of active market circulation and placing them into a reserve pool. This would drop the active supply, leaving room to slowly re-issue the same coins to validators in the future.
Reducing Block Time to 25 Seconds
A core decision approved alongside the NSM for Zcash’s NU7 upgrade reduces the target block time from 75 seconds to 25 seconds. This fundamentally transforms the network’s user experience and operational mechanics. It will transition the network from a relatively slow, deliberate transactional model to a highly responsive, modern network. At this speed, achieving finality improves significantly, helping exchanges and merchants protect against chain reorganizations.
In addition, the upgraded speed will improve wallet users’ experience, with balance updates and transactions becoming three times faster. This reduces anxiety during retail or peer-to-peer payments.