Hello! I am Pacu and
I support Alternative 2 “Hybrid Deferred Dev Fund: Transitioning to a Non-Direct Funding Model”
tl;dr1: I believe that ZCG should continue to receive funding as it is by design a Non-Direct Funding Model of its own which is currently in functions distributing grants to independent contributors those being teams, DAOs or individuals. A 20% lockbox will be disruptive for these community members which are also ZCG grantees.
I celebrate that the community as a whole has decided two things:
- Recognizing the importance of continuing to look for ways to fund Zcash development from a portion of the “Miner’s reward” to keep Zcash autonomous.
- Move out from a funding model that was not meeting the community’s expectations.
That being said, I repeat: I’m writing this wall-of-text In support of Alternative 2 “Hybrid Deferred Dev Fund: Transitioning to a Non-Direct Funding Model”
What are we moving away from?
The previous Development funding model allowed the Zcash ecosystem to continue innovating and sustaining its own development. Under it, important breakthroughs in ZK proofs and its applications were developed, such as HALO 2 and Orchard. The Zcash community will be able to “Press F for Respect” to Zcashd and move away from the bitcoind legacy code towards a 100% Zebra-powered node. Moreover, one of the most advanced Threshold signature schemes was developed (FROST) which will be a crucial gear within the new system to be developed and it’s getting more and more adopted as we “speak” (read and write in the case of the forum). All of this is great.
But in my modest opinion, there were two HUGE problems with the “Good ol’ Dev Fund”
-
motivation and incentives (lack of): for some, ZIP-1014 felt like a 4 year blank check. And that lack of accountability was detrimental to the ecosystem orgs. It generated the wrong incentives to the orgs receiving the funds directly from the protocol. It detached the Zcash leadership from the reality of the common zodlers. Deadlines were not “deadly” anymore. release dates would slip by far. Risks were not assessed properly. There was little incentive for the funded orgs be highly cohesive and collaborative with each other; drama and rivalry between the orgs had “zero cost” because at the end of the day, blocks would be mined, ZEC would flow into addresses anyway.
-
High regulatory risks, liabilities and fear to generate ZEC appreciation: Instead of Zcash being able to be on par with its neighbors and competitors with the “To the moon!!!
” vibe and being able generate excitement, growth, adoption and why not (this is a currency folks!) a price rise. Orgs receiving funds from the protocol had their hands and feet tied and mouth duct taped when it came to promoting Zcash during “bull runs”. I’m not a lawyer but it was pretty clear to me that any directly funding org could be accused of “inside trading” if their actions directly affected ZEC’s price in favorable terms to them. Why? because there a DIRECT link (hardcoded public address) between money influx and asset appreciation. It would be too risky to blatantly promote ZEC as other crypto orgs would do with their own coins. So instead of Zcash main Orgs being able to ride the bull runs and create excitement, ZEC Twitter was kind of “Yes!! you go to the moon folks!! And if you get there, we swear that we didn’t have anything to do with it whatsoever! but we are very supportive and happy for you by the way!” not very appealing isn’t it? All of this also had a very high “lawyer up!” budget which was something mentioned by Dodger and Josh during ZconV.
Where are we going to?
Z-OMG, the spark that led the Non Direct Funding Model
Retrospectively, ZIP-1014 aka “the dev fund” does not seem to have many friends. But honestly, it had one true innovation in it, that in my belief, is what it gave birth to this new NDFM: The Zcash Community Grants committee aka ZCG
Not without its fair amount of problems, ZCG (formerly ZOMG) was created in the light of the “new” ZIP-1014 dev fund. During its first year, very distinguished community members ran for election, won their seats and… well… ZIP meets the real world. Sure enough there were some problems and some drama of course! 
. But in the end grants started flowing, Committee members were finding better resources, tools and experiences. ZCG became a place where Zodlers could be elected to influence the path of the ecosystem through the grants that were approved (or not). We can argue the elections were not fully democratic because ZCAP would be the corpus of people with the ability to vote. Yet, candidates to ZCG would have to “prove their merit” to the general public, win the election and then “prove their real on-the-job contributions to Zcash” if running for a re-election. If we compare it to ZF or ECC, that’s way more public scrutiny and accountability than any “transparency report” could ensure.
The real value of a NDFM: The grantees
There is no forest without the trees. The only way a Non-direct funding model can succeed is through its grantees. What is the real value of ZCG? Is it the reputation of being among the “5 chairs”? Is it its treasury? It it “the committee” itself?
Zcash Community Grants is the most basic and granular form of “non-direct funding” we have available at the moment. The value of ZCG comes out from its constant feedback loop. It is a Flywheel constituted by the committee, its support staff, the grant candidates, grantees and the Zcash community members overseeing it all.
Grantees either generate new resources, or make use of the existing technical and non-technical resources created by ZF and ECC enhancing their capabilities and revealing their short-comings.
To name a few examples
- @ZecHub has been exponentially grown all kinds of Zcash related contents from existing resources that were practically abandoned and put them to good use.
- For both of his fans and detractors @hanh’s Ywallet was the only wallet that was not being bricked by the sandblasting;
- followed by the huge effort of ZingoLabs that took over ZecWallet’s wreckage, poorly maintained forks of everything and brought that source code back to life. Zingo took the effort of doing the right thing, double down on testing (which I helped them a bit with that) and now are almost using all the official libraries and servers built by ECC that ZecWallet’s creator had forked away from with not so good motives other than short-term goals. Moreover, Zingo created a whole community in central and South America.
- @emersonian, who stepped up to keep the zcash infrastructure alive.
- You know that I don’t like to be self-referential, but I may have done a thing or two here and there
as ZWCD creating tools, libraries, fixing bugs, contributing code, testing, hosting dev calls among others. - @earthrise and Least Authority within their Zcash Ecosystem Security Lead role have audited several projects that wouldn’t be otherwise and mitigated different security threats.
- QEDIT’s vanilla ZSA and shielded swaps that are waiting the NU7 Train to get them to their destination.
- ZGO and Zenith by @pitmutt
- Zcash Brasil and their whole crew of amazing people spreading the Zcash word in the most wealthy and powerful country of Latin America with more than 180 million potential Zcashers.
- Nym integration (with Zingo labs as well)
- ChainSafe’s Zcash JS SDK R+D that is complementary of what Brave is doing on their Browser (in a more closed way).
- Red Dev’s ZavaX / Red Bridge which will be using FROST and has already found improvement points for it while on design phase.
Diminishing the resources of grantees, endangers the ability of those contributors to keep building on this ecosystem. Contributions from ZCG grantees have proven to make the ecosystem more robust and resilient.
TL;DR2: DON’T LOCKBOX THE GRANTEES
Let’s say this straight: most grantees don’t have a “runway”.
The 20% Lockbox alternative defunds ZCG, which is the only entity that at the moment is funding development and security capabilities in a Non-direct manner as it is the evident choice of funding of the whole community across all the different polls. ZCG Grants are already divided in milestones that mark progress and payments. Additionally, Large or long-running grants have been split in smaller and subsequent grants because of lack of resources due to the ATL coin price. This means that many grantees have already made compromises to meet ZCG and the community half way. Many Grants may just be living milestone-to-milestone and have no runway to endure a “lockbox” period.
Grantees don’t need a “lockbox” to be incentivized:
ZCG grantees are already (and were always) accountable for their milestones and subject to scrutiny from the committee and the community. They don’t need to be “lockboxed” into better “alignment” or to have “better incentives”. They are already aligned with the projects they proposed and the community supported as necessary. Also, every granted proposal is “lockboxed” already. Unless they can convince ZCG to hand a substantial initial funding request, it’s very simple: no milestone, no funds.
Grants with no upfront payment are just “milestone retroactive”
There has been an appraisal on “retroactive grants” and “lending”. People that haven’t applied to grants don’t need to know it but, essentially, grants that don’t ask for “Initial payments” are basically “Retroactive” grants but on a milestone basis. ZCG won’t approve a payment of a milestone that can’t be proved to have been delivered. So there is not the case that grantees can sit down on milestone funds because they always get paid after delivering the milestone (unless they had overpriced the grant).
Alternative 2 creates a better, sanction-free ZCG
- Mitigating Regulatory Risks: The Financial Privacy Foundation (FPF) is a non-profit organization incorporated and based in the Cayman Islands. By minimizing direct funding of US-based organizations, this proposal helps to reduce potential regulatory scrutiny and legal risks.
Nowadays, any grantee is subject to US Sanctions restrictions. This means that whenever someone KYCs with the Zcash Foundation to be eligible to ZCG grant payment, they need to be “clean” from the PoV of US Sanctions and Embargos. This entails that many people affected by this sanctions will either need to secretly use unsanctioned intermediaries (and probably be in contradiction with US Law if caught) or abstain from engaging in community grants.
According to the aggregation of the alternative dev fund sentiment polls, the community sentiment was highly interested in ZCG independence (81% in favor). I think that this is a good start towards that path. It’s something that can be done while the NDFM development takes place. More so, a non-us-based ZCG will be able to attract other contributors that until now were literally sanctioned and left out of being part of the community of Zcash grantees.
Other remarks
I disagree. Grants have a purpose and scope and, by their nature, are inherently aligned with community interests. Given than grantees don’t have a “runway” of funds at their disposal “while the system is built” then what the outcome for them is doubly uncertain because: (a) grantees don’t have money runways; (b) they don’t have a guarantee that once the NDFM is created, if they make it, they will be granted any funds. ZF and ECC do have runways and clear incentives to release the lockbox, because it is highly probable that they will be granted funds since they are the main developers of the system.
Counter example: Zcash Ecosystem Security Lead is a grant that renews every 3 months. Given that the grantee is a highly respected firm with probably lots of other projects and a for-profit nature. What makes you think that if they grant funds are lockboxed they will stick continue to contribute to the funding mechanism?
Will the lockbox be removed before or after the NDFM code is audited? Who will pay for the audit then?
I agree with the “impartial” argument, but I believe it is incorrect to call it “fair”, given that funds being lockboxed would not affect ZF, ECC and ZCG the same way.
I think you have a good point here. Given that ZCG had to pull the hand brake on most recent QEDIT’s grant they had approved, it is reasonable that its processes are revised for certain kind of grants or all of them. Although, it is fair to say that ZSAs had shown great community support and mostly the Stablecoin demand was at the time of approval rather high (and probably overrepresented). Finally ZURE surveys showed little demand for ZSAs in contrast from what it could be appreciated from the forum posts.
PS: Although it is public information, I shall remind the reader that ZWCD 2024 had originally requested funds for 12 monthly milestones, but was only granted 3 months with subsequent “renewals” upon repeatedly creating new grant request due to low coin price and low budget. This affected the possibility to plan larger and more useful developments and had to be restructured to accommodate to the market conditions and the alleged ZCG treasury constraints. ZWCD 2024 has no runway whatsoever unless ZCG decides otherwise.
PS2: I should have been drafting my 2024 Q3 grant request, but instead I wall-texted this post.
PS3: in case it is not clear, when I’m saying “grantees don’t have a runway”, I’m referring mostly to grantees that are not companies / organizations. It can be the case that these orgs do have a runway. But given that (unlike ECC or ZF) they are not 100% dedicated to Zcash that they might decide they can’t make use of their own resources to keep working on Zcash while the NDFM is built.