Zcash co-founder Sean Bowe has released a draft ZIP proposal that would stop the automatic 8% block subsidy allocation to Zcash Community Grants (ZCG) and redirect that share to the Network Sustainability Mechanism (NSM) reserve.
The proposal is based on the size of ZCG’s current treasury. Bowe said ZCG now holds about 91,452.98 ZEC, worth roughly $125 million at current fair market value. On that basis, the draft argues that ZCG already has enough assets to cover milestone payments for projects under development and to support ecosystem expansion for years, without continued per-block funding from the base protocol.
ZCG treasury size sits at the center of the draft
Bowe published the draft on Oct. 27, taking direct aim at the current community grant allocation model. The proposal says that after years of developer fund and community grant distributions, a fixed and mechanically continued funding stream without dynamic adjustment can leave capital sitting idle while also diluting circulating supply.
Using the treasury figures cited in the draft, Bowe argues that ZCG’s roughly 91,452.98 ZEC reserve is already large enough that the network no longer needs to keep sending newly issued block rewards to the grants body automatically.
The article also notes that crypto communities have long criticized public blockchain foundations and grant entities that continue to receive block subsidies while creating sell pressure in secondary markets. In that context, Bowe’s proposal puts capital efficiency and inflation pressure at the center of the discussion.
The 8% share would no longer flow to ZCG
Under the earlier ZIP 1014 developer fund framework, 20% of each Zcash block reward goes to the developer fund, and 8% of the block reward is automatically assigned to ZCG’s dedicated treasury. Bowe’s new draft would end that automatic allocation.
The draft says that from a future hard fork activation height, the rule sending 8% of the block subsidy to ZCG would be terminated. During the transition period before the current developer fund stream expires, that same 8% share would be redirected in full to the NSM fund pool.
The change applies to future inflows, not to ZCG’s existing holdings. The draft states that ownership of the more than 91,000 ZEC already held by ZCG would remain unchanged, and its current independent governance and approval rules would stay in place. The ZCG committee would still be able to use its treasury under existing procedures to support open-source tools, privacy infrastructure and audit teams.
Under that design, projects already moving through the pipeline would not be disrupted. The main shift is that newly issued block subsidies would no longer enter ZCG’s regular grant funding stream.
NSM is framed as a long-term security budget reserve
A second pillar of the proposal is to turn funds that might otherwise have entered market circulation into part of the protocol’s long-term security budget. The article describes NSM as an economic framework Zcash has been exploring in response to the kind of post-halving security budget pressure seen in Bitcoin, with ZIP 233, ZIP 234 and ZIP 235 forming part of that effort.
As described in the article, once the 8% block subsidy is sent to the NSM reserve, that portion of ZEC would be removed from active secondary-market circulation for a period and would not be used for routine transfers or trading settlement. The draft presents that as a tightening on the supply side.
At the same time, NSM would still respect Zcash’s hard cap of 21 million coins, meaning reserve accumulation would not increase total token supply. The article says the funds held in reserve would not be permanently destroyed. Instead, after several future halving cycles, they would be gradually fed back into block rewards through an algorithmic smoothing curve to provide ongoing security incentives for miners or future proof-of-stake validators.
On that logic, the block subsidy that would have gone to ZCG would be converted into a reserve aimed at future network security.
The draft centers on capital efficiency and token economics
The article presents the proposal as a sign that Zcash’s core leadership is reassessing capital efficiency and the structure of the network’s token economy. Governance debates around Zcash have long been tied to token performance and early distribution disputes. Against a backdrop of regulatory pressure and stronger market competition, the question of how to improve supply-demand structure and raise the efficiency of ecosystem funding has become part of the project’s broader governance agenda.
From the text of the proposal as described in the article, Bowe is not calling for the grant system to be dismantled outright. The focus is on ending new automatic transfers and redirecting those resources toward the network’s long-term security budget. The draft leaves ZCG’s existing treasury and governance arrangements intact while changing where future block subsidy flows would go.
The article adds that as Zcash moves toward a hybrid proof-of-stake model and new cross-chain interoperability, a leaner token economy with tighter inflation control could become part of the foundation for that next phase. Ending the automatic flow to ZCG and routing the funds into the NSM reserve is presented as a key governance adjustment in that process.
