It doesn’t matter much which currency or cryptocurrency grants are disbursed in. If the grantees want an “upside” from ZECUSD movement, along with the “downside” risk, then they can keep the funds in ZEC (or convet then to ZEC). If they’re risk averse, they can keep it in the currency they use to pay salaries. Their call, as long as they deliver on their plans.
But if you want the ongoing revenue stream to anyone (be it ECC, Zfnd or Major Grantees) to be fixed ZEC amounts… Then you need to give up on USD caps and the mandatory Volatility Reserve as currently designed. The two are incompatible.
A distinction should definitely be made between disbursed in ZEC versus denominated in ZEC. I think the distinction is likely significant under US tax laws related to nonprofits.
If a grant is denominated in USD–for example, $10,000 USD–I doubt that it matters whether it’s disbursed in USD or ZEC at its USD market value at the time of disbursement.
But if a grant is denominated fully or partially in ZEC, it starts to look like equity, and I’d suggest talking to a tax lawyer who is familiar with the tax laws regarding nonprofits.
Here’s a concrete example. Let’s say the fair market value of a given project is $10,000, but it’s denominated in ZEC. The grantee is to be paid upon completion of the project, at the end of 6 months. In the intervening six months, the USD price of ZEC goes 10x. The grantee is now set to be paid $100,000 for a project that has a fair market value of $10,000. Such a payment would likely be deemed unreasonable under US tax laws related to nonprofits.
Hi, foundation board member here. It is interesting people are arguing over whether the board should get to approve grants ourselves or have a committee since we are always free to delegate to a committee. I really appreciate the vote of confidence in our credibility.
One major advantage of the committee is precisely that it does not spend all the foundation/board’s credibility on every grant decision. Instead, there’s a major committee with an election and a way to replace them and invoking this mechanism isn’t as costly as changing the foundation/board. This means we will have a functioning foundation and their dev work even in the unlikely case of growing pains for the major grant committee. It separates the two to a degree.
Finally, I think we, the cryptocurrency community, spend too much time worrying about the worst case. In the unlikely event the major grant committee is a total failure and the community sees it as such, things can be changed. Nothing is set in stone. In the even more unlikely event the foundation, ECC, and third parties are a failure or become greedy, everyone can take their money and leave. The fact that as a worst case, people can vote with their feet or fork, means we don’t need as many in depth safeguards as you get in traditional governance mechanisms. What we need is to set norms around whats supposed to happen. The exceptional cases aren’t as major a concern.
Personally, my biggest worry about the committee isn’t that it goes rogue, its that getting a qualified committee will take time and so for a while it may be that the committee has some overlap with other roles.
I think these options are a bad idea, a 50:25:25 would seem unworkable and not inline with the proposals. the 35:40:25 seems a really good split and probably the only one that would work as intended. I don’t think having this level of option in the voting structure is anything but confusing. (like the way that sentence was worded)
@aristarchus do you think the extra options are worth it? can you see a benefit to 50:25:25?
I missed the word airdrop the times I read this before. I thought airdrops were a bad thing (legally speaking). Can the word be removed? it is pretty ambiguous - I think this needs to be worked out a little more before writing something in.
That paragraph is meant just to help readers appreciate the breadth of the possibilities that could be on the table, as part of the negotiation. It’s not meant to be prescriptive for what will or should be done. If we reach the point where a huge reserve builds up, then there will be a community discussion, polls, etc. on how to proceed, and we can debate the merit then.
(Airdrops are indeed problematic, especially because of tax implications. Burning coins is theoretically equivalent to pro rata airdrops, but has other regulatory difficulties… We’ll probably know a lot more if and when we need to make such decisions.)
Hey folks! Here’s our latest statement about the impacts of various dev fund proposals on ECC’s operations: “Dev Funds Should Be in Zcash, Not United States Dollars”. Please let me know what you think! And thank you for making this collective decision process so thoughtful and constructive. You have become leaders within the cryptocurrency industry.
Hi Zooko - I am a simple ZEC community vested hodler who believes that privacy is inherent to the most fundamental yet highly essential human right from which all other of our basic rights flow, freedom of conscience.
Thus far, I have enjoyed the spirited discussions of this community. Having read the ECC’s proposal I second the nod to remove the fixed fiat denominated cap for not only ECC but also for the Zcash Foundation and other funded organization. I can’t pass on the idea of both the Zcash community and all working parties having a vested interest in the future value of Zcash.
@zooko what didn’t ECC publish this before dev fund discussion? Seems like new concerns and constraints keep popping up for community.
“ECC is open to converting to a non-profit if the community asserts that this would be best for incentive-alignment and accountability”
Can ECC attract talent if it converts to non-profit as long as payment is made in ZEC?
“A simple way to align incentives might be to remove a fixed, fiat-denominated cap for ECC, and to enforce accountability for the use of funds, which is what five out of the six community-supported proposals specify”
Why can’t employees at ECC elect to get payment in ZEC, even though ECC gets payment in USD equivalents. That way, employees are still aligned with ZEC.
Fixed percentage going to any party with no USD cap, means when bear market comes after a potential bull market, ZEC holders need to provide even more funding for development with access to no reserves, as we won’t be optimizing for that if we denominate directly in ZEC to dev teams.
I like the idea of it too but like Howard said I think this is going to depend largely on tax law, it would be nice to have that cake and eat it too but I don’t think that not happening is a deal-breaker
The cap limits value & therefore excesses should ZEC/FIAT go bat-shit crazy - ie: x10, x100, x1000 - or put another way, turning $700k into $7m, $70m, or $700m.
Is it the concept of a cap that’s the problem, which prevents unlimited upside? Or the capped amount that’s the problem? At what level does an excess become excessive?
I’m slowly coming around to the idea of removing the cap – I like that it allows for direct payments from the chain rather than inserting the ZF into each payment.
Rather than converting to a non-profit (messy, won’t work for all MG) maybe setting min / max margins would be more acceptable? Max margins make the business investment case worse (but not nearly as bad as requiring non-profit status!).
The company would not be able to use rights to future monthly Zcash coins as part of a package to attract and retain top talent.
It would disconnect the incentives of Zcash coin holders and employees.
It encodes the supremacy of a fiat currency (specifically the United States dollar) in the document that is effectively the Zcash community’s Constitution.
With respect to the first bullet, ECC cannot commit to an employee that they will receive X amount of ZEC over a period of 4 years if under a US Dollar denominated cap.
@joshs can we stop regurgitating bad marketing points.
[Moderation edit by @daira: “regurgitating” is derogatory. Please refrain from such language.]
It isn’t the Zcash constitution, it’s a proposal to change how a piece of software funds two US based institutions. Totally reasonable for it to be in USD. You tried the same trick with the title of the blog too, talking about removing the USD cap and implicitly implying there was some other cap. Of course there isn’t, the entire thing has nothing to do with USD.
Second, nothing prevents ECC from taking whatever share of coins they get and paying some to employees as an incentive. That would still connect employees with coin holders.
What you are really saying is you don’t think it’s enough of an upside for the company and doesn’t allow you to offer enough of an upside to employees. Thats a reasonable point to make, so what is enough of an upside?
It’s a long way to $7M. It’d mean that the coin is averaging in excess of $1k. Here’s the breakdown of the funding per ZIP 1012 as written today with the exception of the cap.
Ouch. I like candor. I take issue with the insult.
Ian, it’s really up to the community on what it is willing to do. We are simply explaining our position and whether we would accept funding. We stated that we would not under the current proposal but open to conversations about how to achieve alignment.
Does ECC expect to get funding beyond next 4 years? Community’s expectation is it would be use up funds from reserve as ZEC appreciates with the current funding for development.
ZEC holders like to get maximum benefit for the funding, if there is no way to save stuff for reserves, dev teams will end up spending all of it, again with an ask for more funding.
We have no expectation. That is up to the community. But I think the second bullet misses the point we are trying to make and so I’ll think about a better way to frame it.
