Zertilizer Capital (Skill Building, Entry-Level Funding)

A pain point for developers is the up-front cost for working on ZEC. As such, Zertilizer is meant to award developers up-front for the investment made into learning the ZEC code-base and applying for a Zcash Developers’ Endowment Fund grant (more on this in the next section). Zertilizer funding will be a set % of the Developers’ Endowment Fund.

Zertilizer represents a community-agreed-upon amount that will be disbursed via a voting mechanism, preferably through a smart contract, by which x-amount of ZEC is used to cast votes. The online vote will expire after 24h post-communication, thus ensuring a quick and timely response for applicants. The Zcash network (meaning all ZEC-holders, inclusive of Electric Coin Company and Zcash Foundation employees) will be the sole decision-making-body for awarding Zertilizer through majority* vote rule.

*Alternatively, if it is determined that network participation is insufficient to ensure a fair and statistically significant voting body, it can be decided that a ‘voting committee’ should be appointed by the Zcash network for the purpose of managing Zertilizer funding.

To apply for Zertilizer developers (individuals or teams) must submit a 3-minute (max) voice memo describing:

1. The team or the individual

2. The intended development

3. The value-proposition of the development

4. The alignment of the project with the ZEC strategic roadmap (see #3 in the Recommendations Section)

Voting Rules to Consider

1. Should there be a blended approach which includes a Bounty system?

2. How much money should be awarded per project?

3. Should developers be able to submit multiple proposals per day, or should there be a waiting period before resubmission?

4. Should each development proposal each have their own 3-minute voice memo, even if it’s authored by the same developer/team? (I’m leaning towards having only 1 suggested project per proposal so that the community can reject one project and approve another project submitted by the same team).

5. Should teams be allowed to re-submit a rejected proposal for a re-vote? (Yes but…) If so, should there be a stipulation of significant change or time-in-between? (there should definitely be some rule around change, inclusion of community feedback, or time-in-between submission of similar proposals).

6. Should there be a ‘staking’ mechanism whereby members have the option to stake more ZEC in order to have greater influence on the voting decision? How much ZEC should be required to vote? (something akin to Dash’s masternodes)

Nullification

Any vote is subject to nullification if:

1. If there is a statistically insignificant number of voters participating in any vote.

2. If there is any tampering or hacking of the voting mechanism.

3. If there is detection of malpractice- like the use of bots, multiple team-members submitting many proposals under different team names, use of funds for other projects, etc.

Technology

Ideally the voting mechanism is simple and easy to use, preferably through a smart contract. There should be a way to ensure that there’s no double-voting, or use of bots, hence the smart contract suggestion. There should be a way to comment/ give feedback to developers. Ideally, there should be an opt-in notification mechanism that alerts network members when a Zertilizer vote is live (and ideally) another notification when one is expiring. Ideally, notifications would be pushed through the much-anticipated ZEC Wallet.

Zcash Developer’s Endowment Fund (Seed Funding)

The Zcash Foundation will have a fund called the Zcash Developers’ Endowment Fund. This fund will be initially financed* through a crowd-funding campaign and will then invest a %* of capital-raised into traditional market assets which will generate a pre-defined return. This will allow the Fund to exist in perpetuity without necessitating crowdfunding beyond the initial financing campaign.

The portfolio will be managed by an experienced fund manager with investment expertise. This fund manager will be employed by the Zcash Foundation, and will be mandated to draft the fund’s investment criteria and manage investments on behalf of the Zcash Foundation. The criteria for investment should be voted on and approved by the Zcash network (meaning all ZEC-holders, inclusive of Electric Coin Company and Zcash Foundation employees).

The remaining capital held within the Zcash Developers’ Endowment Fund will be leveraged to provide up-front capital (Zertilizer) and project-based grants (seed funding) to external developers. The approval process will be handled by the Zcash Foundation (see Recommendation #5 below).

*Decision of fundraising goals and % distribution is subject to network vote and consensus. Fundraising goals should be based on financial metrics which account for cost of OpEx, fund manager(s), legal fees, avg. Zertilizer grant size, and avg. project grant size.

Equity Funding (Long-term Funding)

To incentivize and provide an entry-point for external developers to work on the protocol over a longer-term than a seed grant can provide, a % (equity) of the original Dev Fund/Strategic Reserve (not the new Zcash Developers’ Endowment Fund) should be awarded to developer(s) whose work achieves certain key milestones. These milestones need to be linked to the value that the developer creates, through auditable and community agreed-upon metrics.

In addition, where a developer earns a % of the original Dev Fund/Strategic Reserve, a set % of the developer’s reward is returned back to the Zcash Foundation. These funds are to be used by the Zcash Foundation to “top up” the Developers’ Endowment Fund, thus allowing the Zcash Foundation to continue to award Zertilizer and seed grants to external developers.

Through this top-up mechanism, the % of Miners Rewards afforded to the Electric Coin Company and its employees will transfer over to independent developers over-time* as projects and the capacity of developers become of enough quality to meet the metrics and milestones required to apply for equity funding, thus achieving a step towards financial decentralization.

In order to ensure that a minimum threshold of funding is awarded to external developers, only once a pre-determined % of equity disbursement is awarded to external developers will the ECC have permission to apply for funding from the Developers’ Endowment Fund.

*There is no stipulation of a minimum % disbursement per time period. In other words, it is perfectly possible that upon review of projects, 0 projects are awarded equity funding.

Concerns

1. Crowding out — not enough developers at the required skill-level to meaningfully contribute to ZEC technology. (addressed by the structure of the Equity Disbursement- see above)

2. Barriers to Entry & Bureaucracy — Developers need to be compensated for the up-front cost of learning the code base and bidding for grants (addressed by Zertilizer capital- see above)

3. Stewardship — without proper stewardship of the Equity Fund, the fund can be rendered useless. (addressed by Recommendations #3, #4, #6- see below)

Recommendations

· Recommended, especially if there is concern that existing developer talent is not mature enough to develop on the Zcash Blockchain, that a meaningful percentage of the Developers’ Endowment Fund is attributed to Zertilizer capital for the first 1–2 years of the Fund’s lifespan.

· Recommended that a ZEC t-shirt be awarded as a crowdfunding incentive of a minimum $5 donation (+ shipping). It is also recommended that all profit from the sale of t-shirts be directed to the Developers’ Endowment Fund. It’s also cheap word-of-mouth marketing for ZEC.

· Strongly recommended that the Electric Coin Company issue a memo per external developer project proposal for equity funding with a go/no-go decision.

· Recommended that the Zcash Foundation choose to withhold the disbursement of Equity funding prior to the development of an on-chain voting mechanism whereby the Zcash network may have a vote in the selection of project proposals for equity funding.

· Strongly recommended that the Zcash Foundation, the Electric Coin Company, and the Zcash network develop and achieve consensus on a strategic roadmap for ZEC, inclusive of both on-chain developments, protocol upgrades, decentralized governance proposals, and regulatory collaboration, by which the decision-making on go/no-go for equity funding are based upon.

· Strongly Recommended that it be decided that the Zcash Foundation must create a Due Diligence and Investment Criteria Framework prior to the disbursement of any equity funding and that this framework be shared publicly and achieve community consensus.

· Recommended that the Electric Coin Company offer support, guidance, and expertise on the development of this Due Diligence and Investment Criteria framework.

· Recommended that, eventually, a mechanism is built-in to the protocol which prescribes, similar to an income tax, a fluctuating tax rate for miners which is dependent on the amount of active miners, nodes being run, coins generated, etc.