Community Sentiment Polling Results (NU4) and draft ZIP 1014

Frankly I would prefer to see measured responses on the part of the ZFND so the community (and voting members) can reflect on what they feel is best. Their recent actions only reinforce my positive perception of them.

However, I personally continue to express skepticism towards the reasons stated by the ECC for no USD cap. Having an unlimited slice can provide a proper alignment of incentives but definitely does not ensure it. When the ECC attempts to hire new talent I’m assuming that potential employees are going to value the future ZEC they may receive (given the vesting schedule) in terms of future USD. And if these individuals see a cold cryptocurrency market they will require more ZEC to compensate them for the additional risk they are taking on. The same principle can apply in the opposite direction.

This is precisely why I asked @joshs whether the ECC put itself in a position where they would not be able to meet these future obligations under a cap. He responded that it is not an issue which I am glad to hear.

And as a final side note, it would be very nice to see more discussion and feasibility of the ECC becoming a non-profit so we can be prepared for that possibility. I recall there being some discussion on the forums about that but I don’t know how stale that information is.


Daira posted some pretty good reasons, always good at shredding logic so worth re-reading. Worth reading the whole thread again before voting if you ask me…


Josh’s answer to your question is one of the things I take into account because the reciprocal version I presented to the ZF ND could no other version of this accountability measure work technically goes unanswered however given how the poll is constructed with the bold font I’d say yep that’s pretty much answered
Both sides have an ultimatum here and I believe wholeheartedly that the ECC continuing work on Zcash is best period


Imagine that there would be a monthly profit cap for every Zcash holder. The
drastic consequences of a cap are easy to see in this case.

Any form of a Monthly Funding Cap weakens heavily the development of Zcash.
Don’t forget - Zcash is in tough competition in a very fast moving environment.
All available resources should be used - that’s what the competitors do.

The ZFND is acting very harmful in this particular case. Why would you try
to weaken the talent that brought zero knowledge proofs to blockchains
in an incredibly short time?


Because it is the choice of the community in the first vote! Everyone forgets the fact that both the fund and the company agreed that the future will be determined in the elections, now the fund is defending this position and ECC decided to change its mind.


Hi @dontbeevil,

Thanks for your question:

Since the question of non-profit status was raised by the Zcash Foundation last August, and frequently mentioned by various community members ever since, ECC has been researching pros and cons as well as consulting with legal counsel about the legal implications, and with the owners (shareholders or “units holders”) of ECC about whether they would support it.

It’s crucial to understand that such a change is not up to the management of ECC (me and my leadership team and the ECC Board of Directors), it is up to the owners of ECC. Any change like this is effectively the owners of ECC donating their property (their share of the ECC company) to the community, so it requires their approval. As part of our research we’ve spoken with a number of them about this possibility, and the ones we’ve talked to have been very encouraging about it. Based on what they’ve said, they believe in the mission and in the value of Zcash, so if there are good reasons why this change would support those, then the units holders we’ve talked to have said they will support it.

The particular model we’ve been focusing our research on is the “corporate/non-profit hybrid” model in which there is a company (Electric Coin Co) which is the wholly-owned subsidiary of a new non-profit org. That model means that the management and organization of ECC doesn’t change, but the ownership is donated by the current owners to a new non-profit charity which serves the public interest. This structure seems to mitigate some of the risks and downsides listed in the Cons section below. Crucially, an uncapped (ZEC-denominated, not USD-denominated) Dev Fund would be necessary to mitigate some of the Cons.

As it stands, we see the following potential pros and cons of ECC converting from a for-profit company to a non-profit organization.


Incentive alignment: Moving to this structure would better align Zcash holder and ECC incentives by eliminating the potential for the owners and the community to start competing with each other for the ECC’s resources — including the time and attention of the ECC employees. Throughout the Dev Fund process, the community has clearly articulated a desire to ensure that ECC shareholders are not able to extract any of the Dev Funds for their own profit. The transparency that ECC has always practiced, combined with the transparency and accountability requirements in ZIP 1014, plus the ability for the community to update the consensus rules would — we think — prove sufficient to ensure that. However, donating ECC to a new non-profit would add a layer of legal enforcement, making it so that the (former) owners do not have any remaining legal standing to claim a portion of the Dev Fund. In addition, donating ECC to a new non-profit would go above and beyond simply ensuring that Dev Fund money cannot be redirected, by additionally ensuring that no other misalignment between owners and community could potentially arise in the future. The incentives of ECC would — in that scenario — be solely aligned with the community and with all coin-holders.

A clean slate: Donating ECC to the community would be an act of charitable contribution by the owners to the public good, after which they would no longer be owners. This would eliminate a lot of legal ties between the owners and ECC (think tax reporting and compliance, as just one example). It would disentangle the reputation of ECC from the reputations of the owners. Most of all it would make it clear to all that the (now former) owners do not have any ongoing control over or any responsibility for the future actions of ECC under its new ownership.

Optics: A lot of people around the world — including people who know almost nothing about Zcash or its history and are hearing about it for the first time — may assume that a company means greed and exploitation and that a non-profit means virtue and public service. It is unfortunately not true that a legal structure can guarantee good behavior. If you look closely you’ll find out that in practice non-profits succumb to corruption and mismanagement at least as often as for-profits do, and that strong transparency and accountability mechanisms are still essential, regardless of the legal status of the organization. But by converting ECC to a non-profit we would at least be accurately signaling to people who have a simplistic understanding of these things (which is most people) that the intent of ECC is to serve the mission and the public good.

Tax improvements: ECC and/or its owners currently pay taxes to the U.S. government as a for-profit company. While converting to a non-profit wouldn’t eliminate tax requirements, it may lessen the burden, leaving more ZEC available to fuel the mission. (It could also radically simplify the process of complying with tax requirements, which is currently very complex and is a major time-suck.)


Time and money and our execution bandwidth: Changing the structure would take time and money to accomplish, and during the transition process it would detract from our capacity to push forward other initiatives in support of Zcash. We have already been paying a cost in this way since last August, in order to determine what the options are and what the legal, taxation, and organizational consequences would be. If we continue down this path it will continue to use some of our organizational bandwidth. We are unsure if it would be possible to complete the transition before NU4, which is when the next dev fund would activate. We think there’s a good chance it could be completed by then, which would simplify matters if the transition were already complete before any new dev fund kicks in.

Potential for inefficiency: Often non-profits do not perform as well as for-profit entities. This may be due to their funding relying on donors and all that entails, but there could be a number of factors involved. The “corporate/non-profit hybrid” structure in which there is a traditional execution-oriented company (the wholly-owned subsidiary) could potentially mitigate this risk.

Recruiting and retention: The competition for top talent is fierce and we need to be able to recruit and retain top talent. Normally startups will use equity incentives, something not available to us in a non-profit model. An uncapped (ZEC-denominated) dev fund would potentially mitigate this risk by allowing ECC to use ZEC as a substitute for equity incentives.

Optics: Just as there are a lot of people who think “non-profit” inherently means “virtuous and trustworthy”, there are a lot of people who think “non-profit” inherently means “inefficient and doomed to stagnation”. Hearing that “ECC is a non-profit” could make people incorrectly think that ECC is incapable of generating revenue from its own products or services, or of entering into commercial partnerships in pursuit of its mission. These would be misunderstandings that would inhibit ECC’s ability to execute. These misunderstandings may be mitigated by the “corporate/non-profit hybrid” model, in which the wholly-owned corporate subsidiary could present a traditional corporate face to the world, can generate revenue through its own products and services, and can enter into revenue-generating commercial agreements with business partners. It’s just that none of the revenue generated by such activities can be fed back to any profit-taking owners, because there are no owners, just the non-profit charity, which directs all funds to the furtherance of the mission in the service of the public.

Conclusion: We are still actively exploring a non-profit structure. Further work may reveal that some of what we’ve already learned (above) turns out to be wrong, or might turn up other important considerations. I hope this helps.


That’s not right.
The future will still be determined by elections.

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Catching up here @Autotunafish — in our first post-sentiment collection blog post we wrote about our first edits to ZIP 1012 where we did not think the cap was necessary for the ECC:

A major difference between ZIP 1012 and ZIP 1013 is the presence of a dollar-denominated cap in ZIP 1012. We’re in favor of this cap for the Foundation, but we don’t think such a cap is necessary for the ECC if we add ZIP 1010’s strict accountability requirements.

However, because of community feedback we scaled back our changes and reintroduced the cap for everyone to minimize our changes to ZIP 1012, believing it to be the community’s intent that the cap remain. This thread clearly demonstrated that such an assumption was misplaced, and that’s why I agreed (upthread a while ago) that we should poll beyond just yay/nay of our modified ZIP to gauge community sentiment around a cap before assembling a final ZIP. This final poll is the result. To be clear: the Foundation intends to honor the community’s choice; if the majority of the community disapprove then we will support removing it. Our only desire here is to accurately reflect the community’s will.

The Foundation believes that Zcash could be successful with or without cap, while the ECC disagrees. We will accept the community’s decision whatever the outcome. I continue to be personally indifferent to the cap, but I have specifically challenged the ECC in this thread to explain their rationale as I thought the community deserved a better explanation…and I view it as my (and the Foundation’s) duty to act as a check/balance on the ECC’s power.

Can you reiterate which questions haven’t been answered and I will seek to rectify the Foundation’s omissions? I’ve been doing my best to answer questions directed at the Foundation but this thread is honestly getting difficult to navigate.


Why is it wrong?
Can you clarify why the second election is taking place? Where it was voiced initially, why in the elections they consider only a new proposal and a proposal that won last time and which does not accept ECC?
The future has already been chosen, but because ECC said that this proposal will not work, everything is done in order to give the community a second chance to do everything “right.”
Moreover, the success of the fact that everything will be normally absent.

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These ones specifically though I would consider some of them answered, thank you but the fact remains that the poll could be summarized to “ECC? Yay nay” at this point and for me the answer is yay I really wish some kind of middle ground could have been found here


@zooko :pray:t2::pray:t2::pray:t2: I can’t say more but I love your elaborate response and what you and others are doing to ensure our mission will succeed.

@everyone: please read @zooko’s response before you make a decision!!


I think it might be worthwhile to publish a blog post about the things ECC evaluating so it doesn’t come as a surprise to everyone, when ECC decides to get into hybrid structure. cc @joshs


As the author of ZIP 1012, I’m happy that it’s not just implemented verbatim. Clearly, more discussion and honing were needed, once the community could focus its attention on a single proposal. And consequently, a second round is needed to express approval on these changes.

I suggested something very much like this back in November:

What ZF ended up doing is even better, with a single “framework” proposal to read (ZIP 1014), plus a menu of focused changes.


The second election takes place because a monthly funding cap like described in ZIP-1012 is extremely harmful.
It there to clarify this point.

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Reading your statement the following question arises:

Why are you personally indifferent to the cap?
It implies your personal indifference to ECC’s role in future development
of Zcash - especially given the fact that you are fully aware about ECC’s
statement on this topic.

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Thanks much for highlighting them! I’ll try to answer them all explicitly even if they’ve been answered partially elsewhere.

I believe the intent is to require financial restraint, best summarized here by @mlphresearch after responding to @Dodger :

To which your next question is relevant:

My perspective is that they do not serve a legal purpose, but they could prevent certain kinds of abuse from happening compared to the other accountability requirements. The current requirements without a cap only require publishing past spending on a quarterly basis while these caps prevent future excessive spending. Of course many have argued that the current cap is not close to “excessive”…but the point is that the Zcash Foundation and/or the ECC would have to justify that position to the community proactively (e.g. “ECC would like a higher cap in order to support 5 more top-tier engineering hires, therefor we’d like to request the cap be raised”), rather than reactively. (e.g. “ZF spent $10mm last quarter to outbid Justin Sun in Warren Buffet’s latest charity lunch auction; it did not drive shielded adoption as much as we hoped, sorry”)

However, the downside here is if a legitimate, time-sensitive opportunity for large spending appears, it may be slow or difficult to raise the cap rapidly enough to spend money on that opportunity. So it’s a “more accountability vs flexibility/speed” trade-off. The Foundation is fine with either side of that trade-off (cap or no cap) but the ECC is not (although their rationale is less about this trade-off and more about how the cap prevents them from their preferred method of employee incentive alignment). I think that also answers your third question but let me know if not.


That’s not the reason the poll takes place. Just look at the discussion above: @acityinohio’s first draft of the poll did not even include the USD cap question. Making some choices, and approving changes, were needed in any case.

Of course, given ECC’s analysis and position, the USD cap question needed to be added.


Thanks for clarification.

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I’m personally indifferent to a cap because I see merit in both approaches, independent of ECC’s plans to decline their slice if it has a cap. I certainly do have a strong preference for the ECC continuing to work on Zcash, but I also want to hold them accountable and have them back up their rationales rigorously.


A USD based cap is a very bad instrument “to hold them accountable”.
There is already a fair cap in ZEC - it’s fair because it directly reflects whether
something was done wrong or right - this is judged by all the involved participants.

However a USD based cap weakens the development of Zcash it’s infrastructure and so on.
It does it even if every participant is uber-accountable.
It will enormously harm Zcash since it’s has to compete in order to survive.