Every ninety seconds or so, a new Zcash block quietly mints 1.5625 ZEC, and a fixed slice of that coin — eight percent — is set aside for the people who build and maintain the privacy network. That automatic subsidy has funded Zcash Community Grants (ZCG) since the program’s launch, turning a modest experiment in community funding into a treasury that now holds more than $125 million. On October 26, one of the protocol’s own architects concluded the arrangement has run its course.
Sean Bowe, a Zcash co-founder and protocol developer, published a draft Zcash Improvement Proposal titled “Ending the ZCG Funding Stream in Favor of the NSM.” The idea is blunt: stop paying ZCG its automatic 8% share of every block subsidy and send that value to the Network Sustainability Mechanism (NSM), a protocol-level reserve, for the rest of the stream’s existing term. “It’s time to turn off the ZCG funding stream,” Bowe wrote on X. “ZCG has over $125M in funding, and will receive millions more before the spigot is turned off. The program was never designed to handle this amount of funding.”
It’s time to turn off the ZCG funding stream. ZCG has over $125M in funding, and will receive millions more before the spigot is turned off. The program was never designed to handle this amount of funding. Draft ZIP:
— Sean Bowe (@ebfull) October 27, 2026
The draft, published on GitHub under the working title “Ending the ZCG Funding Stream in Favor of the NSM,” does not seize a single coin the grants program already holds. It only changes where future issuance flows, and it leaves Zcash’s monetary rules untouched.
A Treasury That Outgrew Its Budget
Bowe’s central argument is arithmetic, not ideology. The public dashboard linked from ZCG’s own website reports 91,452.98 ZEC, $8,796,224 in USD and $2,417,165 in outstanding grant liabilities. Valuing those holdings at three explicit prices produces a wide range: about $125.3 million at $1,300 per ZEC, $97.8 million at $1,000, and $52.1 million at $500.
Against that stockpile, the program’s actual burn rate is comparatively small. The Financial Privacy Foundation reported $1,530,844 in ZCG expenses for the first quarter of 2026, or about $6.12 million on an annualized basis. Even at a generous illustrative $10 million in annual spending, the proposal notes the treasury would cover roughly 12.5 years of outlays at $1,300 per ZEC, or 5.2 years at $500. “ZCG has accumulated sufficient resources to continue its grant-making role without an automatic share of each block subsidy,” the ZIP states.
The Arithmetic of an Automatic Stream
The 8% allocation is small in percentage terms but relentless in absolute ones. At the current 1.5625 ZEC block subsidy and a 75-second block target, the stream works out to 0.125 ZEC per block, or 144 ZEC per day — 52,560 ZEC per 365-day year. At $1,300 per ZEC, that is roughly $187,200 a day, or $68.3 million a year: more than eleven times the annualized first-quarter expense figure.
That gap is the heart of the proposal. In dollar terms, 52,560 ZEC equals about 0.25% of Zcash’s 21-million coin supply cap — value that would otherwise be issued into the hands of grant recipients each year. And the $125.3 million already sitting in the treasury represents roughly 1.8 years of the stream’s current inflow, meaning the program has effectively banked nearly two years of future funding ahead of time. “A fixed share of issuance increases in dollar value when ZEC appreciates, regardless of the recipient’s existing reserves, spending, or approved commitments,” Bowe wrote.
Under the plan, that redirected value would be credited to the NSM fund — the “NSM Value Balance” defined in ZIP 237 — as a ledger entry with no associated address or spending key. In practice it is withheld from circulation rather than paid out to grant recipients, and the ZIP adds a new accounting stream called FS_NSM_H3 that lasts until the third halving boundary.
What the Counterarguments Get Right
The proposal drew pushback almost immediately, and the sharpest critique cuts at the plan’s timing. Zcash developer str4d argued in the community forum that miners already receive roughly 88% of the block subsidy, and that ongoing development — such as the Zakura Common upgrade that made Zcash’s shielded transactions 14x faster — is as important to the network’s security as mining is. Ending ZCG’s stream without a replacement, in that view, quietly shifts funding away from developers and toward miners by default.
Str4d also flagged a funding gap: the NSM does not begin paying out until roughly 2031, while ZCG’s current stream would end sooner, leaving a stretch in between that the draft does not fully resolve. Two broader alternatives surfaced in the same thread — one from maxdesalle to sweep ZCG’s entire remaining treasury into the NSM, and another from Josh Swihart to wind down the entire development fund, including the separate 12% coinholder stream. As of October 27 the proposal remained a draft with no assigned ZIP number and no reference implementation.
What the Proposal Deliberately Leaves Alone
For all the heat around the idea, its scope is narrow. ZCG keeps every ZEC it currently holds and can keep making grants from that balance under its existing rules. The 12% Coinholder-Controlled Fund stream keeps its allocation and duration. Miners keep their 80% share. Zcash’s maximum supply, historical block validity and existing transaction formats are all preserved, and the change introduces no new transaction fields or address types.
The one real shift is accountability. Bowe frames the choice as one between letting a discretionary grants committee keep accumulating automatically and routing additional subsidy-funded grants through coinholder decisions instead. “Continuing to add to a discretionary treasury increases the resources dependent on its custody and governance arrangements,” the ZIP argues. “Ending further inflows limits that exposure without changing control of funds already allocated.”
The Activation Height That Does Not Exist Yet
Even if the community rallies behind it, the proposal cannot simply be switched on. The ZIP deliberately does not specify an activation height; it would depend on the NU7 upgrade and a revision to ZIP 214, and a separate deployment ZIP would have to set the exact block before anything goes live. NU7 itself deploys Zcash’s move to 25-second blocks and rescales the subsidy, which the draft notes leaves the daily 8% allocation approximately unchanged apart from rounding.
What the proposal does not do is touch ZCG’s accumulated money or shut the program down outright. It is a forward-looking funding decision — one that asks a community which has spent eight years paying for its own development whether the tap that made that possible should now be closed. The answer, for the moment, is still being argued in a forum thread that no vote has settled yet, and the debate arrives as Zcash’s funding and governance questions have returned to the center of the network’s news cycle.
