The Halving Effect: Analyzing the Long-Term Tokenomics of Zcash (ZEC)

Zcash is one of crypto’s longest-running privacy networks, designed to bring selective disclosure to public blockchains without sacrificing auditability. Like Bitcoin, Zcash follows a hard-capped, programmatic issuance model where block rewards halve roughly every four years. With the second halving now behind us (Q4 2024), 2025 is a pivotal moment to reassess ZEC’s long-term tokenomics, miner incentives, and the sustainability of privacy as a public good.

This article breaks down what the halving means for ZEC’s supply curve, security, and demand drivers, and how users can position for the next cycle.

What changed at the latest halving

• Fixed supply: Zcash has a 21 million total supply, mirroring Bitcoin’s hard cap. The subsidy declines over time via halving events. Reference: Zcash monetary policy and issuance design were codified early and continuously stewarded by the Electric Coin Company (ECC) and the Zcash community. See ECC’s overview of major upgrades including NU5 and the Orchard shielded pool for historical context here.
• Block reward: After the first halving in November 2020 (alongside the Canopy network upgrade), the block reward dropped from 12.5 ZEC to 6.25 ZEC. With the second halving in late 2024, the reward decreased to 3.125 ZEC per block, further compressing new supply.
• Development Fund context: The Canopy upgrade (ZIP 1014) instituted a Development Fund that directed 20% of the block subsidy to ecosystem development from Nov 2020 through Nov 2024. This mechanism and timeline are documented in ZIP 1014 and the Zcash Foundation’s Canopy activation post here. Community governance discussions around funding beyond 2024 continued into 2024–2025; outcomes affect how rewards are split between miners and development efforts.

These structural features define ZEC’s long-term issuance profile: each halving pushes the network toward a future where block rewards diminish, and fee revenue or alternative incentive models must carry more of the security burden.

The halving’s tokenomics: supply, security, and incentives

• Scarcity and issuance: Lower emission reduces new ZEC hitting the market daily. In theory, reduced sell pressure from miners can be supportive of price if demand is stable or increasing. However, scarcity isn’t a catalyst by itself—utility, liquidity, and credible development matter just as much. A useful primer on Zcash’s roadmap and upgrade cadence (including Halo and Orchard) is available from ECC here.
• Miner economics and network security: Halvings cut miner revenue unless offset by price appreciation, fee growth, or alternate funding. For Zcash, average fees have historically been low, which is great for user experience but challenging for long-run proof-of-work security as subsidies shrink. ECC has publicly explored whether a transition to proof of stake could improve sustainability and enable new staking-based incentives—read their reasoning and community context here.
• Development funding: Under ZIP 1014, the Development Fund supported ECC, the Zcash Foundation, and community grants through Nov 2024. Decisions around continuation or reconfiguration influence the rate of protocol R&D, wallet UX, and ecosystem grants—key demand drivers for privacy usage. Reference the fund’s design and timeline here and here.

In short, halvings tighten supply and focus attention on two levers: (1) demand-side growth for privacy transactions and (2) sustainable incentive models for network security and ongoing development.

Demand-side drivers in 2025

• Better privacy UX: The NU5 upgrade introduced Halo and the Orchard shielded pool, along with Unified Addresses that reduce address-type confusion. These upgrades meaningfully improved usability and interoperability for shielded transactions. ECC’s overview is available here.
• Compliance and selective disclosure: Zcash’s design enables users to prove transactions without revealing full details—valuable for enterprise and compliant usage in a world shaped by the FATF Travel Rule and evolving policy. For global regulatory context on virtual assets and compliance expectations, see FATF’s guidance here.
• Wallets and tooling: Continued improvements in self-custody wallets, audit tools, and viewing key support are crucial to expanding shielded usage. Developer momentum—as influenced by funding decisions and protocol direction—remains central to adoption.

If user activity and shielded adoption grow, fees might eventually contribute more meaningfully to security. Until then, halving puts a premium on robust governance and credible development to keep the privacy utility moving forward.

Long-term tokenomics scenarios

• Status quo PoW with low fees: As block subsidies decline, miner revenue tightens. If price and usage do not materially rise, hash rate could face pressure. That scenario increases the importance of efficient hardware, low operational costs, and a healthy fee market.
• PoS or hybrid: A community-approved transition to proof of stake (or hybrid) could change the security model and incentive dynamics—redirecting issuance to stakers, creating new participation yields, and potentially making security more sustainable as block rewards decline. ECC’s exploration of PoS for Zcash lays out arguments and trade-offs here.
• Dev Fund evolution: Renewed or revised funding streams can accelerate UX milestones, shielded adoption, and ecosystem grants—raising the odds that usage (and fees or staking incentives, if applicable) will support long-run security. Governance outcomes here materially affect tokenomics.

None of these paths are guaranteed; the halving simply compresses timelines. Good tokenomics are as much about social consensus and credible execution as they are about mathematical schedules.

Portfolio implications for ZEC holders

• Cyclical dynamics: Halving narratives often attract attention, but price reactions vary by asset and cycle. Scarcity is a powerful story, yet network fundamentals—usage, development cadence, and credible governance—tend to drive sustainable value.
• Accumulation and custody: Market conditions around halvings can be volatile. Long-term holders often prioritize secure self-custody, transaction privacy, and predictable access to viewing keys.

If you hold ZEC for the long run, ensure your custody setup aligns with privacy and security expectations.

OneKey for secure ZEC self-custody

For users who prioritize cold storage and security during periods of structural change like a halving, OneKey offers:

• Open-source firmware, transparent design, and a secure element for offline key protection.
• Multi-chain support with intuitive desktop and mobile interfaces.
• Clear signing and coin-control features that help manage on-chain activity while keeping private keys isolated from internet-connected devices.

While most hardware wallets today primarily support Zcash transparent transactions, OneKey’s product strategy emphasizes safety, UX clarity, and ongoing ecosystem integrations. If you’re building a long-term ZEC position and want to minimize operational risk, using a dedicated hardware wallet can be a prudent step.

Final thoughts

Zcash’s second halving tightened the emission curve and sharpened focus on the network’s long-term incentive design. The next phase of ZEC’s tokenomics will be defined not only by scarcity but also by clear progress on usability, governance, and a sustainable security model—whether via improved PoW economics or a community-approved shift toward PoS.

For those committed to Zcash’s privacy mission, 2025 is a year to watch: halving narrows the margin for execution, but it also highlights the value of robust engineering and aligned incentives. Keep an eye on protocol updates from ECC and the Zcash Foundation, and consider stepping up your self-custody posture with solutions purpose-built for long-term holding, such as OneKey.