Reaching Consensus

How community leadership rallied, vetted and established a new Zcash development fund


Everyone knew it was coming.

In November 2020, funding for Zcash development would expire with no built-in replacement. Since 2016, a sometimes-controversial “Founders Reward” has been routing 20 percent of block rewards to Electric Coin Co. (ECC), the Zcash Foundation, and founders and investors who helped create the Zcash digital currency.

This looming sunset was not unexpected, but with an end to funding in sight, the future of Zcash was uncertain. If ECC and the Zcash Foundation were no longer subsidized, would community volunteers pick up the development torch? Would anyone be incented to advocate for Zcash at exchanges, wallets and regulating bodies? Would the digital currency with the strongest privacy protections survive at a time when breaches of freedom, security, dignity and consent were becoming more and more common?

In other industries and sectors, this may have been a non-problem. Any other parent organization would simply propose a new model to be adopted by its board, and that would be that. But this, of course, isn’t a typical industry and Zcash doesn’t have a typical governance model.

In this case, a solution was conceived in the only place it could be: the Zcash community.

On Jan. 3, 2019, community forum member mineZcash raised their hand and set off a year-plus-long discussion that would result in a multi-channel, community-sentiment-gathering apparatus; a unique trademark agreement to go along with increased decentralization within an all-new governance model; and consensus from the community on a plan to continue funding of Zcash development.



The future of Zcash development and governance

After a series of proposals, forum conversations and a number of polls, the solution to the problem of ongoing Zcash development support was ratified and approved — not by the Zcash Foundation or ECC — by the community. And the consensus was this: In November 2020 (and for the next four years), 80 percent of Zcash issuance will continue to be distributed to miners, while 20 percent will be devoted to Zcash development funding. Importantly, 8 percent of the total block reward (or about 35 percent of the new dev fund) will go into a grant program that will exclusively fund independent third-party developers. ECC will receive 7 percent of the total rewards, and the remaining 5 percent of rewards will go to support the work of the Zcash Foundation.

This keeps ECC intact and focused on Zcash, and it ensures the continued support of the Zcash Foundation, as well.

Importantly, 8 percent of the total block reward (or about 35 percent of the new dev fund) will go into a grant program that will exclusively fund independent third-party developers.

The introduction of the grant program is massively important, as community leaders have pushed for more decentralization of the currency. And even though the breakdown may lead to a budget shortfall at ECC (depending on coin price), CEO Zooko Wilcox and others have said that inviting other teams into the Zcash development ecosystem is paramount to the integrity and growth of the protocol.

Importantly, 8 percent of the total block reward (or about 35 percent of the new dev fund) will go into a grant program that will exclusively fund independent third-party developers.

Community-driven process

The outcome — a continued funding model for Zcash development — is the critical result of this process, but in many ways, the process itself is as important a story.

When mineZcash kicked off the public conversation in January 2019, it was an open invitation to Zcash users and the crypto community at large. As Zcash community forum users began to contribute their ideas and concerns over the following months, personnel from ECC and ZF began helping to organize the discussions, with the Zcash Foundation offering formal proposal guidelines in July of that year. From this point on, any community member could submit a proposal to be considered on the forum.

And submit they did. All told, community members contributed more than 20 proposals. While there were some outliers, and this number was eventually narrowed to 13, the majority of proposals supported a continuation of the 80-20 miners’ rewards split in order to support ongoing development. The differences in proposals were most commonly found in how to distribute the 20 percent pool amongst development stakeholders.

By Q4, the community was giving feedback on proposals, participating in polling exercises, and preparing for a final vote. By January 2020, the current solution (as described above) was articulated in a final proposal. Having been vetted by all stakeholders, the proposal went to a vote in late January, and on January 28, the current proposal was approved by the Zcash community at large. In November 2020, the new funding model will be implemented.

Furthering decentralized governance

In the midst of this community-led dev fund process, leaders from ECC and ZF worked out a new trademark agreement that essentially sees a donation of the Zcash trademark from ECC to the Zcash Foundation. Under this novel — and unprecedented — agreement both organizations must approve all uses of the trademark. From the ECC announcement:

In essence, the contract transfers ownership of the trademark to the foundation — at no cost — and stipulates rights, obligations and limitations.

It’s a novel agreement, for which there appears to be no precedent, containing unique stipulations such as this: No party has independent authority to declare that a specific chain of Zcash can actually be called Zcash. There must be agreement from both parties, and neither party can unilaterally override the will of the community.

The move strengthens the Zcash brand, fortifies legal protections and enhances the power of the community’s voice.

A Timeline of Consensus

Community ECC Zcash Foundation

2019

January 3, 2019

Zcash community member mineZcash opens conversation about long-term funding on Zcash Community Forum

“So then that leaves it up to us (the community) to debate not knowing one way or the other what ECC’s plans are.”

Shawn
Zcash Foundation Moderator

May 30, 2019

Initial meeting between Josh Cincinnati, Josh Swihart and Zooko Wilcox to review the suggested terms of a trademark agreement

Zooko Wilcox

@zooko

Josh Swihart

@jswihart

Josh Cincinnati

@acityinohio

June 17, 2019

Paige Peterson (former ECC) creates thread to start aggregating proposal ideas into a single location.

June 22, 2019

Zcon1: ECC announces it is all in on ZEC.

Jul 11, 2019

Zcash Foundation takes a more active role on the Zcash Community Forum.

Aug 2, 2019

ECC Statement on Sustainability — Our approach, advocacy for coarse-grained funding mechanisms, and call for Foundation leadership with the community

Aug 6, 2019

Foundation offers its guidance on dev fund proposals.

Aug 12, 2019

ECC response to Zcash Foundation guidance

Aug 26, 2019

ECC initial assessment of proposals

“Our assessment framework is simple:
Could ECC accept jobs from this fund while remaining true to our mission?

Zooko Wilcox | August 26, 2019

Sept 2, 2019

Proposal assessment stalls due to ECC and Zcash Foundation disagreement over the Zcash trademark

Sep 26, 2019

ECC offers an updated assessment of proposals.

Nov 6, 2019

Trademark resolution announced

Nov 8, 2019

Zcash Foundation announces approach and timeline for gathering community sentiment on proposals.

Dec 3, 2019

Zcash Foundation announces results from polling.

Dec 5, 2019

ECC announces its summary of results
from polling.

Dec 8, 2019

Zcash Foundation recommends a path forward.

Dec 11, 2019

Zcash Foundation presents modified ZIP 1012, which incorporates ideas from multiple ZIPs, including a funding cap.

Dec. 17, 2019

ECC announces it will not accept funds if they are capped at a dollar amount.

Jan. 15, 2020

Zcash Foundation announces second poll to vote on support of a single ZIP (1014, a modified version of 1012) plus additional questions.

Jan 28, 2020

Zcash Foundation announces results (and overall consensus) from second round of polling.

Jan 28, 2020

ECC responds to second round of polling, accepts role.

Feb 14, 2020

ECC and Zcash Foundation approve a modified ZIP 1014, which funds Zcash development for another 4 years

April 15, 2020

Zcash Foundation opens application period for Major Grant Review Committee (MGRC) candidates

Sept 1, 2020

Candidate submissions for MGRC are due

Sept 4, 2020

Open community video call with MGRC candidates

Sept 7-18, 2020

Zcash Foundation Helios poll with the current Community Advisory Panel to select five member MGRC

November 2020
Canopy
NU4 activation