Zcash Co-Founder Proposes Ending ZCG’s 8% Block Subsidy

• Zcash co-founder Sean Bowe wants the Zcash Community Grants share of block rewards moved into the protocol’s sustainability reserve.
• The redirected coins would be withheld from circulation, not burned, and the 21 million supply cap stays intact.
• A rival forum proposal would also sweep ZCG’s existing treasury into the reserve.
• ZEC is consolidating below its September high on falling volume.

Zcash co-founder and core protocol developer Sean Bowe published a draft Zcash Improvement Proposal on October 26 that would end the automatic 8% block subsidy paid to Zcash Community Grants (ZCG) and send it to the Network Sustainability Mechanism (NSM), a protocol reserve built to pay miners once issuance declines. The draft has no ZIP number, no reference implementation and no activation date. ZEC trades near $1,255, inside a range it has held since early October.

Miners keep 80% while ZCG’s slice moves to a ledger reserve

Every Zcash block currently pays 80% of new coins to miners, 8% to ZCG and 12% to the Coinholder-Controlled Fund. Bowe’s draft touches only the ZCG slice.

The redirected value would flow into a new stream called FS_NSM_H3, credited to a ledger entry with no address or spending key. Nothing becomes spendable at creation, transaction formats stay the same and the 21 million ZEC cap holds. At the draft’s figures, that equals about 144 ZEC a day, or 52,560 ZEC a year.

A $125 million treasury against $6 million in yearly spending

Citing ZCG’s own dashboard, the draft puts the treasury at 91,452.98 ZEC plus about $8.8 million in cash, against $2.4 million owed to grantees. The Financial Privacy Foundation reported ZCG’s first-quarter 2026 expenses at $1.53 million, an annualized pace of $6.1 million.

Because the subsidy is paid in coins, ZCG’s income rises with ZEC’s price regardless of need. At $1,300 per ZEC, one year of the 8% stream is worth roughly $68.3 million, more than eleven times annualized spending. Bowe wrote on X that the program “was never designed to handle this amount of funding.”

Years of grants the existing treasury covers at $10M a year, per Bowe’s draft. Assumes flat spending and no returns.

The draft carries its own warning: the dashboard figures have not been independently reconciled, and the worksheet behind them is marked as needing updates.

Withheld, not burned: how the NSM recycles coins

ZIP 237 defines the NSM Value Balance, a pool the protocol reissues gradually through future block rewards. Burned coins disappear for good. NSM value comes back. Once NU7 activates, ZIP 235 will also route 60% of transaction fees into the same reserve, and Bowe’s contribution would come on top of that.

The supply effect is real but limited. About 144 ZEC a day would stop reaching grantees who may sell to cover costs, yet ZCG does not sell everything it receives and the withheld value returns later. Smaller development budgets could also slow upgrades.

Two rival plans go further than Bowe’s

A forum thread opened the same day by Maxime Desalle goes much further than Bowe. Desalle disclosed that he works with Cypherpunk, a large Zcash miner, and presents the plan as personal.

Desalle argues that coinholders fund ZCG but have no say over the roughly 200-member Zcash Community Advisory Panel (ZCAP) that elects its committee. He claims 72 ZCAP members have received grants and that members are linked to about 75% of payouts. He also cites a February 2026 vote in which 98.6% of coinholders opposed Zcash Shielded Assets, a feature for issuing custom private tokens, while 70.4% of ZCAP backed them. ZCG approved another $455,000 for that work in June. None of these figures has been independently verified, and they come from a proposal author with a stated interest in the outcome.

Josh Swihart has drafted a third route that ends the entire development fund, including the 12% coinholder stream, and creates a one-time Legal Defense Fund for Zcash developers.

Developer str4d led the opposition in the same thread, arguing that miners already receive roughly 88% of the subsidy and that development matters to network security as much as hashing power, so cutting ZCG without a replacement hands money to miners by default. He also pointed to a timing problem, since NSM payouts are not due until February 2031 while ZCG’s current stream ends sooner.

ZEC holds a $1,134 to $1,342 range as volume thins

Fibonacci levels drawn from the June low at $250 to the late-September high at $1,680 show ZEC has given back less than 38.2% of that rally, a shallow pullback for a move of this size. The 0.236 level at $1,342 has capped every bounce since early October, most recently on October 21 and 22. The 0.382 level at $1,134 has held on a closing basis.

The 50-day EMA at $1,197 has flattened, and price has hugged it for three weeks. Momentum has cooled since September, but the average has not turned lower. The 200-day EMA at $817 still rises, with ZEC about 54% above it.  RSI at 51 shows buyers and sellers in balance after a cross above its 47 signal line. Daily volume near 40,500 ZEC ranks among the lowest since July. The longer-term case for ZEC also has high-profile backing, with Arthur Hayes recently arguing that Zcash will outperform HYPE from current levels.

• Upside: a daily close above $1,342 on rising volume would open $1,500 and a retest of $1,680.
• Downside: closing below $1,134 and the 50-day EMA would expose $965, then the $796 to $817 zone where the 0.618 level meets the 200-day EMA.

The funding fight has yet to reach the chart, as trading since the draft went public has been among the quietest of the quarter. The next scheduled event is NU7 around November 5, which cuts block time to 25 seconds and switches on the NSM accounting Bowe’s plan relies on. His change would still need a separate deployment ZIP and a revision to ZIP 214, with NU8 the earliest realistic window, so ZCG keeps its 8% for at least one more upgrade cycle.