Zcash has proposed a dynamic fee plan that aligns transaction costs with real‑time network demand to prevent low‑value users from being priced out during congestion. The proposal combines action‑based fee accounting, privacy‑preserving “fee bucketing”, and a phased rollout to balance usability, miner incentives and institutional readiness.
Technical design and privacy features
The model computes base fees from the median fee per action observed over the preceding 50 blocks, replacing a fixed fee with a demand‑responsive measure. Under the action‑based accounting approach, each transaction component — spends, outputs, JoinSplits or Orchard actions — is treated as a uniform “action.” (An “action” here denotes a discrete transaction operation used to scale fees to resource use.)
To reduce linkability of payments, the proposal groups the calculated median into powers‑of‑ten buckets, a privacy enhancement that obfuscates the precise fee paid. For urgent transfers a temporary priority lane allows users to pay up to 10× the standard fee to accelerate inclusion. The specification contemplates a fee‑burning element that would remove a share of collected fees from circulation; fee burning here refers to permanently destroying a portion of fees to reduce supply or align incentives.
Implementation is staged: initial off‑chain monitoring will collect and calibrate parameters, followed by wallet policy adoption to surface the mechanics to end users, and ultimately a simple consensus change bounded by expiry‑height limits and the power‑of‑ten fee rules. The proposal also suggests exploring long‑term heuristics — such as mining difficulty — for USD‑denominated fee adjustments to further stabilise price‑sensitivity, while complementing the existing Network Sustainability Mechanism (NSM).
Operational and institutional implications
The change addresses well‑documented shortcomings of Zcash’s static fee regime, which originally set fees at 10,000 zatoshi and later lowered them to 1,000, a structure that left the chain vulnerable to spam “sandblasting” and left small transactions effectively unserviceable under congestion. By tying fees to recent median activity, the network aims to reduce fee volatility, prevent mempool clogging and restore predictability for routine payments.
Predictable fees are explicitly framed as a precondition for institutional adoption: custodians, VASPs and treasury operations require auditable, stable cost structures to integrate a privacy coin into settlement, custody and compliance workflows. The proposal’s fee‑burning element is presented as an alignment tool for miners, discouraging spam by imposing a financial cost and thereby stabilising miner revenue streams.
“A dynamic fee market is essential to prevent users from being priced out during high activity periods”, said Shielded Labs, a contributor to the proposal.
For compliance teams, the plan’s optional transparency and predictable economics may reduce jurisdictional risk by making transaction costs and policy more auditable; for wallet vendors, staged integration provides a window to develop fee‑prediction tools and user education that limit operational risk.
The proposal reorients Zcash’s fee economics toward demand‑responsive pricing while preserving privacy through bucketed fees and optional priority lanes. The next verified milestone is the off‑chain monitoring period and subsequent wallet‑policy phase, which will determine parameter calibration before any consensus‑level change. For VASPs, custodians and token issuers, the outcome will influence operational cost forecasting, auditability and the practical viability of privacy‑preserving settlement.
