Create a Zcash Stablecoin

Applicant background

The ICHI team has built businesses and products for large multinational businesses as well as early crypto start ups including:

  • Lending services for sellers in the Amazon marketplace
  • Enterprise blockchain as a service at IBM
  • Artificial intelligence offerings at
  • Public cryptocurrency software at Hedera Hashgraph

The team’s expertise covers smart contract architecture and security, distributed application development, front end development, and product management.

The core team formed as a community to create ICHI, a protocol for issuing stable and secure stablecoins for any cryptocurrency community. V2 of the platform was rewritten for scale and stability in under 6 months including audits by Quantstamp and Solidified. Since its launch, it has supported the launch of about one community stablecoin a week while empowering each community to fully govern its own community.

Description of Problem or Opportunity

Today, the stablecoin market is dominated by tokens managed by financial institutions. This requires (1) users to sell their crypto to get a stablecoin and (2) the financial institution to centrally manage collateral behind the stablecoin. As a result, value continues to accrue in large centralized institutions responsible for managing their balance sheets while putting the entire crypto economy at risk.

The current stablecoin market now exceeds $100 billion as traders turn to USDC and Tether as a way to reduce exposure amid declines in the prices of Bitcoin, Ethereum and other cryptocurrencies. Yet, these stablecoins actually put the crypto economy at greater risk by independently governing their collateral with their own profit motives in mind.

We believe that each community should be able to fully govern their own currency: both a long term store of value and a stable medium of exchange. The demand is evidenced in the financial and launch support received from projects including:

  • Bancor
  • Balancer
  • Susiswap
  • 1inch
  • Filecoin
  • Ren
  • Perl
  • 88mph
  • Fuse
  • Loopring
  • Moonbeam
  • Solana

Proposed Solution

ICHI’s Decentralized Monetary Authority (DMA) protocol solves this parasitic stablecoin relationship for the first time by enabling any crypto community to create a stablecoin, oneZEC, that is backed by a blend of fiat-backed stablecoins and ZEC. This increases the demand for ZEC and increases value locked in the community treasury.

In addition to enabling any crypto project to create an in-house stablecoin, ICHI’s protocol, audited by Quantstamp and Solidified, provides Zcash with the tools needed to operate their own economy by managing the collateral in the oneZEC treasury. The treasury backing oneZEC ensures a stable offramp fo fiat, generates yield for the community through use in DeFi, and can incentivize usage across payments and any other community prioritized use case.

Solution Format

ICHI would deploy a Decentralized Monetary Authority (DMA), a DAO-like set of smart contracts customized for the purpose of managing community currency, to create. oneZEC on Ethereum. The oneZEC asset would be accessible by any Ethereum wallet or application, including the ICHI Application (

ICHI would incentivize the initial minting of oneZEC, and create AMM pools to support liquidity for the stablecoin.

Technical approach

The ICHI platform:

  1. Allows third party projects to issue their own collateralized stable currency (oneToken) for any cryptocurrency community.
  2. Applies market forces to set level of reserves backing the stablecoin between 0-100% to provide stability that is just as good as fiat-backed stablecoins, which a user can redeem for exactly 1 USDC.
  3. Locks up existing native project tokens to collateralize oneToken, and is fully on-chain creating more demand for said project token backing oneTokens.
  4. Gives oneToken holders the ability to govern their own individual project’s Treasury.

Additionally, ICHI introduces a Decentralized Monetary Authority (DMA) as an innovative DAO-like governance model for managing each oneToken. The DMA ensures minting and redemption at $1, governance of community treasuries by oneToken holders, and autonomous execution of any yield or incentive strategies chosen by the community.

Decentralized Monetary Authority:

oneTokens are ICHI designed stablecoins built for cryptocurrency communities. oneTokens keep their value at $1, are purely on-chain, and are supported by a community treasury in each oneToken’s native project tokens. They provide the hard peg of centralized stablecoins without sacrificing on decentralization.

Table 1: Feature Comparison by Category of Stablecoin

Feature Algorithmic Fiat Backed Crypto Backed ICHI Stablecoins
Mint for Exactly $1 No Yes No Yes
Redeem for Exactly $1 No Yes No Yes
100% On-Chain Reserves Yes No Yes Yes
Community Treasury No No No Yes
Liquidation Risk No No Yes No

Core Technical Concepts:


A key principle of ICHI’s architectural design is Modularity. The ICHI platform allows for components to be modular (similar to a microservices architecture) in order to allow for simplified and safe updates/upgrades when certain logic within contracts need to be changed. Additionally, the platform has certain components that are meant to be permanent, yet can be upgraded through a Proxy process. This allows ICHI to be simple and safe to upgrade as well as customizable (as it pertains to oneToken implementations). It increases separation of concerns, enables code reuse, and gives clarity into which jurisdiction applies to each guarded function.

Architectural Components

The figure below provides a view of how each of the components in the oneToken system are deployed and what contract owns/admits each component.

The function of each component in the oneToken Component Interaction Diagram is shown here.

How big of a problem would it be to not solve this problem?

One of biggest risks to the crypto economy is the mismanagement of collateral backing fiat stablecoins managed by centralized financial institutions. Billions of dollars in value could be destroyed through institutional failure without true audibility or community governance of how collateral is used. This could prevent mainstream adoption, hinder value exchange on decentralized applications, and ultimately harm crypto communities.

Execution risks

When minting stable coins, you are exposed to some risks:

  1. Smart contract issues, bugs, or economic loopholes/exploits with the protocol

  2. Risks with the digital assets used as collateral, typically stable coins:

  • Maker Dao risks
  • USDC risks
  • USDT risks
  1. Market, trading, liquidity, and exchange risks associated with non-collateral, cryptocurrency assets

  2. Governance risks: Governance could make poor decisions on treasury management or important stable coin parameters, such as minimum reserve percentage

When providing liquidity to the exchange, you are exposed to many risks:

  • Smart contract issues
  • Impermanent loss
  • Market, trading, liquidity, and exchange risks

When staking liquidity pool tokens to get ICHI, the governance token, you are exposed to many risks:

  • Smart contract issues
  • Market, trading, liquidity, and exchange risk

Unintended Consequences

Success of oneZEC could have two unintended consequences:

  • Users will require additional education and awareness of this new asset and the use cases for which it is best suited.
  • Activity could continue to grow on Ethereum where the asset will first be issued.

Evaluation plan

All success metrics are publicly verifiable and shared between ICHI and the community who is creating their stablecoin. The following are those metrics we find most indicative of usage of any ICHI stablecoin:

  • Minted onZEC
  • Treasury ratio
  • Total Value Locked in oneZEC
  • oneZEC holders
  • oneZEC transaction volume
  • renZEC price

Schedule and Milestones

Launching oneZEC does not have any dependencies from a technical perspective. oneZEC can be deployed in a matter of hours with sufficient liquidity of renZEC in an AMM.

The core dependencies center on the community governance processes to incentivize the initial minting ond usage of oneZEC.

Step 1: Receive feedback on oneZEC proposal

Step 2: Define shared incentive amounts to provide users of oneZEC

Step 3: Deploy oneZEC DMA

Step 4: Announce

Step 5: Start liquidity rewards


Budget request: $250,000 in the form of renZEC or ZEC.


  • $50,000 to mint the initial oneZEC.
  • $200,000 deposit to the oneZEC community treasury (governed by oneZEC holders).

This will be matched by at least $200,000 in liquidity rewards from the ICHI community distributed to oneZEC users.


The general concept of a stable coin on ZEC is something I’ve been advocating for incessantly, so I’m behind you in concept & happy to see this proposal.

The timing seems too early for this grant.

The name oneZec … its confusing. People will mistake it for a single unit of ZEC verbally & in written form it may not translate well in all major languages. From a marketing perspective the name must be changed.

“backed by a blend of fiat-backed stablecoins and ZEC”
Can you elaborate on this please?

“oneZEC on Ethereum”
Why? Ethereum is slow, expensive transaction fees & transparent transactions. All antithetical to ZEC itself.
Why not a ZSA stablecoin on ZEC ?

“oneTokens keep their value at $1”
I’m concerned about the value of the dollar at this point in history. Maybe its best to see what happens with ZSAs generally & devaluation of USD in the current economic climate before undertaking such a project.

How would a ZEC move to PoS affect this proposed work?


I couldn’t read the word shielded anywhere in the proposal. Is it going to be shielded?


$1 worth of shielded zcash is an OZ, an ounce?

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Wow, this is super cool!


What does this do that cannot be achieved by using renZEC to issue USDP on Unit Protocol?

Also, what you are describing in this proposal is so generic that I don’t see any specific benefit for Zcash users.



Nice writeup @farmerdon and thanks for the interest in working with Zcash. Good luck with the grant!

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Shouldn’t importing a stablecoin become much more straightforward after the next upgrade seeing that it enables wrapped assets on zCash?


This grant will issue stablecoin on Ethereum that is backed by Zcash through something like renZec.


Thanks for the feedback and questions! Let me try to respond to each in order:

  1. Timing
    The grant is designed to bootstrap the oneZEC treasury while the stablecoin is just getting off the ground. This can help ensure sufficient collateral and drives demand for Zcash as a larger part of the minting ratio.

  2. Naming
    Tend to agree with you here! We haven’t been able to come up with a better alternative yet. Recently the 1inch team started to refer to their stablecoin as stable 1inch so something like this could be used.

  3. Backing
    Each oneZEC is minted for exactly $1 in value. This is provided with $0.80 in $USDC and $0.20 in $renZEC. This collateral can then generate yield through ICHI strategies. More info can be found here:

  4. Ethereum choice
    Agreed on the speed and cost. ICHI will deploy the Decentralized Monetary Authority (DMA), a set of smart contracts customized for managing currency, to Ethereum to mange the minting and redemption of oneZEC. This is critical because the majority of DeFi applications, including AMMs and deep liquidity, and yield opportunities remains on Ethereum.

That being said the stablecoin could be bridged back to Zcash with the help of Ren.

  1. Dollar peg
    Dollar pegging remans the best mechanism to pay expenses and enable easy on ramps and off ramps to fiat.

  2. Move to PoS
    Could you expand on this question?

Thanks again!


@den we haven’t explored this yet but certainly could.


Great initiative, my only feedback is that the Execution Risks & Unintended Consequences can be vastly reduced if the stablecoin minting/bridging work is initiated after Zcash ZSA spec is finalized.


@aiyadt this is a great suggestion. We could do the initial launch on Ethereum as described and then bridge back the stablecoin.


Shared with my Canadian banking friends, they will probably laugh at me, but maybe they will come to their senses when i do a traditional Supply vs Demand pitch to them. Stable coins are in high demand, you are very right about that.

I agree with @tokidoki, I don’t see any advantage of this proposal compared to what can already be done on Unit Protocol. I already tried that out and it is sort of complicate and not worth it, here are the steps required:

  1. Send your ZEC to REN bridge protocol to mint renZEC with an approximate 0.15% fee
  2. Deposit renZEC to Unit protocol as collateral and mint USDP.
  3. You have now a collateralized position and some USDP.

This kind of collateralized stablecoin is the same system used by MakerDAO to mint DAI. It is very good for certain aspects in DeFi, but has a lot of disadvantages and drawbacks:

  • You have a debt position that can be liquidated if the collateral value goes below a certain treshold;
  • If you get liquidated you keep your USDP but you loose all your renZEC;
  • Therefore you must keep under control your debt. For many people this might represent a stress factor or just feel too complicate;
  • It is a highly inefficient capital utilization since to be on the safe side you can mint 30% of your collateral value, and leave the resting 70% “sleeping” in the protocol;
  • transaction with such stablecoin would be expensive since you are on Ethereum blockchain;
  • Last but not least this stablecoin would not be not private at all, leaving out the best of Zcash protocol.

(@zooko how can you say this proposal is very cool? Please argument … )

If we want to push the usage of Zcash, IMO it must be first of all a system implemented natively on ZCash blockchain. One stablecoin minting model that I like a lot (and that is gaining a lot of traction) is Terra, where the cost of minting is equal to the face value of the minted stablecoins. This system uses LUNA, Terra’s native cryptocurrency, as a reserve asset: to mint one TerraUSD (UST), $1 worth of Terra’s LUNA token is burned out of the system. The demand for UST is driven by its ecosystem made by a saving protocol and a synthetic stock market (in this post a more detailed explication). Still UST and Terra ecosystem have no shielding and the blockchain is completely transparent.

Zcash is by far the best cryptocurrency out there but let’s be frank, its volatility is not helping adoption. Who want to use a cryptocurrency which value is fluctuating every day so wildly? If it would represent instead the reserve currency for a decentralized algorithmic stablecoin (like in Terra) there would be:

  • a increasing demand for Zcash, since to mint 1 zUSD you need to burn the equivalent value of ZEC (here a detailed explanation of the peg mechanism)
  • a fully private stablecoin as a shielded asset running on top of Zcash blockchain, fully decentralized and shielded by default.
  • no risk / hassle of collateral liquidation
  • the possibility to expand the ecosystem with more and more application

I don’t have the technical knowledge but I presume that the actual ZCash blockchain is not capable of doing something like that. And for sure building a payment network on zUSD would not be easy. But if we want to see our beloved zebra running everywhere this could be the way!


Exactly, this sounds super cool, but where is the advantage over say a Zcash Shielded USDC?

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But do we know any digital USD issuers that are interested yet to issue a private USD on Zcash ?

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I guess the point is mute since most of the ZOMG are stepping down & the org is in limbo, but essentially …

Would the impending ETH move to POS or the proposed ZEC move to POS cause your project more work for which you will be seeking more grant money?

More importantly, I still don’t see how using ZOMG money to fund a transparent expensive slow stablecoin on ETH in a market flooded with stablecoins on ETH promotes privacy & financial freedom. This proposed project moves ZEC further from its stated purposes, not closer to private cheap fast transactions for everyone.


Because I think that anything that adds utility to the ZEC coin — ie adds more things that owners of ZEC as a financial asset can do with their asset — advances our mission of empowering everyone in the world with economic freedom, because ZEC is the source of the sustainable growth of our mission. The more people use ZEC for things and demand it, the more resources flow to the miners, the Dev Fund recipients, and all of the ZEC holders who make up the community. And that in turn leads to decentralized, independent orgs creating things that add more utility to ZEC! It’s a virtuous positive feedback loop.

So, my immediate thought when I hear about any idea is, “Is this adding utility to the ZEC asset? Because if so that’s supports our mission since ZEC is the source of the sustainable growth of our mission.”


Great discussion! I captured two questions I wanted to address below:

  1. Unit protocol and MakerDAO comparison

There are a number of differences to the Unit Protocol and MakerDAO models mentioned:

  • oneZEC is capital efficient (minted and redeemed for exactly $1 in value)
  • There is no liquidation risk for oneZEC since it is not a debt position like DAI.
  • It is governed by oneZEC holders, and does not create a competing relationship between DAI and MKR holders.
  • It is collateralized with renZEC, not a large basket of other token, limiting risk.
  1. Native issuance on Zcash

As mentioned above, we could bridge oneZEC to Zcash for use natively.

Looking forward to progressing to next steps.

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