Zcash Proposes Dynamic Fee Model to Address Rising Transaction Costs and Network Congestion
Shielded Labs has proposed a dynamic fee market for Zcash aimed at addressing rising transaction costs and network congestion. The new fee structure bases charges on the median fee per action observed over the prior 50 blocks, introducing a priority lane at 10 times the fee during periods of high demand.
The plan seeks to preserve Zcash's privacy features without necessitating complex protocol redesigns, such as an EIP-1559-style fork. This marks the first detailed blueprint for a dynamic fee model from a Zcash developer and has spurred a community discussion amid increasing ZEC activity.
This proposal represents a shift away from the historic static fee model, which was initially set at 10,000 zatoshi and later reduced to 1,000. The static fees contributed to spam-like "sandblasting" episodes. While ZIP-317’s action-based accounting fixed abuse vectors, it retained low, predictable fees that did not adjust to network usage, an issue the new plan aims to resolve.
The proposed mechanism is stateless and uses "comparables" with synthetic transactions to simulate ongoing congestion. The median fee is bucketed into powers of ten to reduce linkability. The rollout strategy includes off-chain monitoring, followed by wallet policy changes, and eventually a simple consensus change featuring expiry-height limits and power-of-ten fee rules.
Alternative ideas under consideration involve using mining difficulty as a long-term heuristic to set USD-denominated fees based on mempool pressure. Following the announcement of the proposed fee reform, ZEC traded around $395, up over 12% in 24 hours.
