Zcash co-founder Sean Bowe has proposed redirecting 8% of the network’s block rewards from Zcash Community Grants (ZCG) to the Network Sustainability Mechanism (NSM), a reserve designed to support mining rewards in the future. If approved, the change would end regular funding for the grant program.
In a proposal published on the Zcash Community Forum, Bowe suggested stopping new ZCG funding when the NU8 network upgrade takes effect and directing that share of block rewards to the NSM instead.
The proposal would stop ZCG from approving new grants, but projects with previously approved milestones would continue receiving their payments. Once those commitments are settled, any funds left in the grant program’s treasury would be transferred to the reserve.
The redirected ZEC would remain in the reserve until February 2031, when the NSM is expected to begin releasing funds through future mining rewards.
One of the main reasons behind the proposal is concern over how ZCG makes funding decisions and whether those decisions reflect the wishes of ZEC holders.
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 Bowe’s proposal, ZCAP has around 200 members, including 72 people who have previously received ZCG grants. He claims these members account for approximately 75% of the money distributed through the program.
The proposal argues that ZEC holders have limited direct control over how funds generated through block rewards are spent, even though newly issued coins increase the overall supply and dilute existing holders’ share.
Bowe pointed to a disagreement over funding for Zcash Shielded Assets (ZSAs), a project intended to support additional assets on the privacy-focused blockchain.
According to the proposal, a coinholder vote in February 2026 showed 98.6% opposition to the initiative, while 70.4% of ZCAP participants supported it. ZCG later approved another $455,000 for ZSA development in June.
Bowe cited this difference as an example of how grant committee decisions may not always match the preferences expressed by coinholders.
ZCG has continued funding other ecosystem projects, including a $750,000 grant approved in August for a group working to engage US lawmakers on cryptocurrency policy.
Under Bowe’s proposal, the NSM would receive the 8% share of newly issued ZEC currently allocated to ZCG. The funds would remain in reserve until they could be released through future mining rewards.
The mechanism is designed to build up funds now and distribute them to miners later in the network’s life.
Zcash’s separate NU7 upgrade is expected to introduce the NSM alongside faster block production. The mechanism is designed to collect 60% of transaction fees for the reserve, while miners receive the remaining 40%.
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 the NSM to begin releasing accumulated funds.
The proposed change would take effect under NU8, a later upgrade, and would leave the separate 12% allocation for Coinholder Grants unchanged.
Bowe argued that development could continue through coinholder-controlled grants, private investment, donations, and crowdfunding. He cited projects such as Tachyon, Valar, and ZODL as examples of initiatives that have secured funding without relying on ZCG.
For smaller projects, he suggested seeking initial funding from individuals or companies and then applying for reimbursement through retroactive coinholder grants.
The proposal would not immediately cancel existing grant commitments. Projects that have already reached approved funding milestones would continue receiving scheduled payments, with only the remaining treasury balance transferred to the NSM after those obligations are met.
The change would also leave miners’ existing share of block rewards and Zcash’s maximum supply unchanged.
In a disclosure, Bowe said he was involved with Cypherpunk, a Zcash mining company, but maintained that the proposal was independent of his employment ties. Cypherpunk recently became Zcash’s largest miner through a $33 million deal.
Bowe also disclosed that he had applied for a ZCG grant earlier in 2026 but canceled the application before receiving any payments, despite already incurring project costs. He said he made that decision because he did not want to argue against the grant program while still holding a grant from it.
The proposal remains open for community discussion, and Bowe has invited feedback before taking further steps toward implementing the proposed funding changes.