I really like the “diversified portfolio” approach of this proposal. It breaks the Dev Fund into 5 different portions, each with a different recipient or mechanism, that complement each other. In particular, the first 2 fifths ensure a stable baseline, while the last 3 create specific incentives and reduce centralization.
The Trust approach is promising. Indeed, if we cam make the disbursement rules simple, requiring little discretion and expertise, then it becomes easier to find a legal entity that can be trusted to execute them. A couple of notes, here:
- Some fixed USD amount should be reserved to compensate this entity.
- The funds earmarked for each funded entity can be locked under 2-out-of-2 multisig between that entity and the Trust, to mitigate the risk of the Trust absconding with the funds.
Regarding the two fifths tied to shielded adoption: I think the calibration of the parameters (making this be just 40% of the Dev Fund and defining 80% shielded as the target) is reasonable. It is fortunate that a major goal, shielded adoption, happens to have a simple and difficult-to-game metric… Some drawbacks are mentioned in my proposal and the later discussion, but this being just part of the Dev Fund mitigates those.
The release of a (potentially very large) lump sum of delayed funds, in the momen that “fully shielded” level has been sustained for a month, worries me a bit. I don’t immediately see how this can be gamed, but in general, large non-continuous payments tend to cause incentive distortions and tax issues.
More generally, tax issues need to be carefully considered. Receipt of dev fund ZEC, or its sale in order to create a USD reserve (matching USD liabilities), may be taxed – both at the level of the Trust or of the funded entities.
The Grants fifth is the most complex one, and may require the Trust to exercise considerable discretion, taking us partially back towards the “enigmatic” (dare I say “mythological”?) third-party. But at least it’s just a fifth of the total dev fund, so imperfection is less consequential. In any case this needs more fleshing out.
Using the “restricted donation” mechanism is a neat hack. It invokes a well-established legal mechanism, enforced by the Internal Revenue Service, to ensure proper custody of these funds by the Zcash Foundation, while relieving the Trust of the need to be cognizant of the technical particulars of individual grants.
As discussed elsewhere, I suggest to specify 2-out-of-2 control of the Zcash trademark as a condition for funding.