The core developers of the privacy coin Zcash recently released the first complete design blueprint for a dynamic fee market, sparking discussions in the community about how this blockchain, which has been running for over a decade, should price transactions as ZEC prices, user activity, and institutional interest rise simultaneously.

The proposal released by Shielded Labs advocates for moving away from the fixed fee model that Zcash has long adopted—initially set at 10,000 zatoshi and later reduced to 1,000—this design can function during periods of low demand but ultimately fosters so-called 'sandblasting' type spam attacks, causing wallet lag and severe congestion in the blockchain network.

Although the earlier proposed ZIP-317 blocked abuse attack paths by introducing an action-based accounting mechanism, it still retained a predictable, low, and non-dynamically adjustable fee design.

Developers point out that with ZEC's recent market recovery, the continuous addition of new users, and the emergence of various Zcash digital asset treasuries, the current fee mechanism is becoming increasingly difficult to maintain. The proposal notes that some users have begun reporting that the transaction costs denominated in ZEC are rising, and in certain extreme cases, such as when a single user holds a large number of very small transaction records, converting all to private transactions could require paying double-digit ZEC in fees. This clearly indicates that when the price of the token rises, the rigid fee mechanism will completely fail.

The proposal plans to introduce a dynamically adjustable fee mechanism designed to be simple and operate without state, based on so-called 'comparables', that is, pricing according to the median fee observed for each action in the past 50 blocks, and simulating market behavior under long-term network congestion through synthetic transactions.

The aforementioned median fee will be used as the 'standard fee' and further categorized into the nearest power of 10 tier, thereby reducing the correlation between transactions and avoiding the leakage of user information. When the network is congested, the system will temporarily open a priority channel with a fee that is 10 times the standard rate, allowing users to compete for block space by paying higher fees without having to redo the protocol design.

This system is designed to go live in phases: the first step is to execute off-chain for monitoring and data collection, and then it will become the fee policy on the wallet side. Finally, after obtaining community consent, it will be implemented on-chain in the form of a simple consensus change, and will incorporate expiration height limits and rules such as 'Powers-of-10'. This approach avoids the complexity and fork risks associated with mechanisms like EIP-1559 while maintaining the existing privacy constraints of Zcash.

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