TL;DR

The Zcash Community is collectively deciding what to do after the current development fund sunsets in 2020 along with the Founder’s Reward.



There is broad agreement within the Community, including the Zcash Foundation and the Electric Coin Company, on three core principles: Transparency, Accountability, and Use Of Funds To Purpose.



The Zcash Foundation released its Guidance on Dev Fund Proposals, which outlines its approach to gauging community sentiment and its current perspective on acceptable models. One idea the Foundation surfaced was to require ECC to reconstitute itself into a nonprofit.



The Foundation’s guidance raises many interesting questions, the most significant being “What does the Zcash Community want?”



Our request: Weigh in, and make your voice heard.



Note: Background information is available at the end of this post.

A Blank Slate

The Founder’s Reward period sunsets in late 2020. This will end the source of funding for the Zcash Foundation and Electric Coin Company (ECC). How will the Zcash Community fund ongoing protocol work after that time?



It’s a blank slate. The Zcash Community can do whatever it wants. The “ZIP” (Zcash Improvement Proposal) process is a way for the Community to formalize and select among its options.



Members of the Zcash Community have already submitted seven different proposals. Submissions include a proposal to allow defunding to occur, and others that advocate for a new development fund as a share of ongoing mining rewards.

Zcash Foundation Guidance

The Zcash Foundation released its Guidance on Dev Fund Proposals. It is thorough, thoughtful and principled, and it brings up a variety of important issues, such as regulatory risk in the USA.



The Zcash Foundation guidance emphasizes the importance of three principles:

Transparency — The Zcash Community should have visibility into how funds are used. Accountability — The Zcash Community should have recourse if the funds are misused. Use Of Funds To Purpose — Funds are used solely to advance the Zcash mission in alignment with the entire Community, and not distributed to any special interests, such as past contributors, shareholders, or other people or organizations.

We at ECC agree with the importance of these principles, and we believe the Zcash Community has been clearly articulating these same principles.



The Zcash Foundation guidance also proposes that if ECC is to be a recipient of new development funds from the blockchain, then it must reorganize as a nonprofit. In their words:



“If ECC is to accept community funds, we ask the company to reorganize as a nonprofit entity, thus formalizing its commitment to transparency and accountability. We think doing so would bolster public confidence, ultimately helping the ECC team continue its amazing work to build a privacy-focused protocol for the public good.”



We currently don’t know the implications of reorganizing as a nonprofit, or whether it’s logistically feasible. There are both benefits and trade-offs of either structure. For example, some nonprofit structures would preclude us from doing certain work, such as continuing government outreach work. This work is important to educate governments world-wide, so they continue to support the roll-out of Zcash as a protective technology for their citizens, instead of misguidedly banning it (example outcomes: 1, 2, 3).



However, we are in favor of formalizing our transparency and accountability commitments through some legal mechanism, and we are open to a nonprofit option.



Outside of the Zcash Foundation, we are not aware of others within the Zcash Community proposing ECC reorganize as a nonprofit. Currently, none of the active proposals include this mandate.

What We’re Doing To Help The Community Decision Process

We are committed to posting our assessments of all active proposals by August 26 (blog post). If the Zcash Community submits a proposal that mandates a change to ECC corporate structure, we will do our best to assess the feasibility and potential trade-offs. As it’s likely a complex legal and logistical question, we do not expect that we will have all the answers, but we will tell you what we have learned so the Community can make an informed decision.

Call To Action

If nonprofit status matters to you, please include it in a proposal. Be as specific as you can with the principles behind the proposal, as this allows others in the Community to assess whether it aligns with their principles and thinking.



You might also simply specify the outcome that matters to you. For example, your proposal might mandate that recipients of the funds satisfy specific transparency requirements (see the Zcash Foundation Guidance for examples). That would allow the community to work through how to best implement the mandate should it have consensus support.



We are thankful to be a part of the Community, for the Zcash Foundation’s shared commitment to build a future for the good of all people, and for the Zcash Community’s active leadership in writing its own future.



Additional Resources

Arjun Balaji: Zcash & the founder incentive trilemma

Amentum: A Case for Zcash & Privacy

ECC Q2 2019 Transparency Report

Colin Baird’s On the Future of Zcash Funding

Zcash Community Active Proposals and Mega Thread

Andrew Miller: Notes on reaching agreement about a potential Zcash dev fund

Placeholder Capital: Resources, Governance, and Legitimacy in Zcash’s 2020 Network Upgrade

ECC Activities and Accomplishments

ECC Statement on Sustainability

ECC Dev Fund Assessment Timeline

Zooko: Letter to the Zcash Community

Zcash Block Reward Discussion hosted by Justin Ehrenhofer

Zcash Foundation Guidance on Dev Fund Proposals

Conversations on Twitter:

#ZcashDevFund

I've been reading the proposals on Zcash dev funding given the Founder's Reward ends Oct 2020. Factors I believe are important:



– dev funding continues

– early investor rewards discontinue

– continued transparency from @ElectricCoinCo & @ZcashFoundation on spending & roadmap https://t.co/7tdX1znCW4 — Linda Xie (@ljxie) August 5, 2019

Is there any functional difference between ZCash's funding from ECC and the ZCash Foundation, and Bitcoin's funding from Chaincode, MIT, and Blockstream?



Serious question. Methinks the only real difference is that ZCash launched years after crypto's value was "discovered." — Ryan Selkis (@twobitidiot) July 21, 2019

zcash community would be crazy not to guarantee that funds are available for further development. one of the few projects with a justice league of cryptographers. dont lose it. #ZcashDevFund — Patrick McCorry ☘️ (@paddypisa) August 1, 2019

I'll play Devil's Advocate: I like ZCash's dev funding model: no premine, pay devs in-kind out of mining rewards to incent continued work. This mirrors the traditional stock-vesting structure for venture-backed tech companies and avoids the "exit event at founding" ICO trap. https://t.co/CsZ0euPwvv — Gabriel Shapiro (@lex_node) August 1, 2019

The #ZcashDevFund has successfully answered the question of:



"How do we support and sustain the health and well-being of the people (and their families) crafting positive alternatives for society?"



It would be ludicrous to eliminate any chance we have to compound that success. https://t.co/jQwY6rosey — Chase (@heychase_) August 1, 2019

zcash has…

1) a very loyal & strong community

2) an amazing team (and not just in terms of crypto companies) ultra active with community & transparent

3) smart money (@winklevoss @barrysilbert etc)



No reason for them not to go "all In" — CloudedLogic 🌎 (@CloudedLogic) July 19, 2019