Dev Fund Proposal: 20% split between the ECC and the Foundation

Idea - the miner could choose which blocks to mine, even numbered blocks contain a mandatory dev fee & odd numbered ones dont.

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That’s an interesting idea. Would the reward for the blocks with no dev fee go 100% to the miner then? Why would miners want this? It doesn’t seem like it gives them any control over the dev fee and I would think most miners would just mine both even and odd numbered blocks since it would be unprofitable to turn off their machines.

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I’ve been chatting with @Autotunafish on whats considered a valid opt-in/opt-out from the miners perspective - it comes down to it being their choice to mine a block or not & thats the origin.

I think you’re right, I used to mine & ran the things 24x7, overclocked until you could make toast on them. The default setting for a miner would be ‘dont care, mine it anyway’.

Having said that, it does give them an easy way to express their displeasure. The network would prob be ok as it’d average out.

Edit - the miner wouldn’t switch off their gear, they’d use a proxy to redirect hash (thats how I would do it)

Another Edit - its the pool that would be doing the redirection, the miner wouldn’t know what they were mining.

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Ok I see your motivation here. Hmm. I will think about this some more.

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Funds allocated (recipients and possibly the %s)would be decided by a vote mechanism, my original timeframe was every 3 mo to keep more involvement and coincide with the existing upgrade schedule
The Foundations recommendations for accountability would be implemented to help in these decisions

As far as whether it would be better suited at the protocol or mining software level I cannot answer, I don’t have the technical savvy

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My reason for advocating for zec holders deciding the dev funding is really more philosophical than technical. I consider the coin holders to have the most ‘skin in the game’. You may want to make another proposal since I don’t think I will change my mind about this point of view.

By the way, my proposed voting system would not kick in until year 8 of Zcash. The idea is to stick with the ECC and the Foundation until that time when we open it up to potentially fund anyone in the world to work on Zcash.

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That’s completely okay, like I said I was going to work on a new draft anyways
(I don’t quite understand what you mean though in your last post as it relates to my suggestions)

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I want to put a mandate for accountability in this proposal. This would apply to both the company and the foundation. I agree with these accountability requirements put forward by the foundation:

  • Monthly public developer calls, detailing current technical roadmap and updates
  • Quarterly tech roadmap reports and updates
  • Quarterly financial reports, detailing spending levels/burn rate and cash/ZEC on hand
  • A yearly, audited financial report akin to the Form 990 for US-based nonprofits
  • Yearly reviews of organization performance, along the lines of our “State of the Zcash Foundation” report

I’m not sure about the question of non-profit versus for profit status for the ECC, because I am not a legal expert.

I would like to hear from the ECC about a point made in the foundation’s statement that the ECC did not respond to directly in their respond to the foundation (links here:
Foundation statement: https://www.zfnd.org/blog/dev-fund-guidance-and-timeline/
ECC response: https://electriccoin.co/blog/a-blank-slate-the-community-to-decide-its-future/)

The foundation wrote:

“At its most fundamental level, a for-profit company is beholden to its shareholders. Protocol-based development funds are meant to solve tragedies of the commons, in order to provide public goods for everyone. If a business claims that its only business model is a compulsory protocol reward, its investors could demand cost-cutting to extract maximum profit with minimal effort — particularly when other ecosystem participants are contributing to protocol development.”

I’d like to know if the ECC agrees with this statement? Or is there a way to avoid the possibility of the ECC shareholders having conflicting interests with the zec holders?

At this point I am convinced that there needs to be some legally enforceable accountability to the zcash community, but its unclear what the best legal structure would be. I do not want to mandate the ECC become a non-profit without hearing a little more about this.

Could @zooko or someone able to speak on behalf of the ECC address this? This is something that everyone writing a proposal needs to read and consider carefully.

Edit: It would also be useful for the Zcash community to hear more details about any potential advantages of ECC remaining a for-profit.

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Hi @aristarchus. We’re working together next week to respond to proposals which may include some level of legal research. We’ve already engaged with a couple attorneys to explore some of the questions raised by the foundation and have been looking at various structures including nonprofits, b-corps and/or accountability mechanisms that don’t require a change to company status.

Based on my experience prior to my engagement in this space, I (personally) do not agree with the statement from the foundation as I think it confuses multiple things. Accountability and transparency can be separated from structure. And a nonprofit is also easily corruptible by stakeholders. A for-profit company does have a fiduciary responsibility to shareholders. However, this could be in the form of a preference for long term value accretion over short term gain. For example, traditional VCs don’t think in terms of profit, they think in other terms that lead to longer term high multiples for a future exit. Shareholders generally want to see customer diversification in order to mitigate risk, however, this model is different. It may be in the best interest of an ECC shareholder to see a healthy ECC team that has delivered ground-breaking cryptography and tech, without profit, than to see the company reconstituted as a nonprofit. That team is then in a better position to capitalize on its prior work and use that as a base to grow from there. If the project is thriving and the customer (the Zcash community) is happy, ECC will be worth more. I would argue that this drives greater alignment between ECC shareholders and the Zcash community.

Note that I am not articulating a company position here. This is a personal perspective.

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Hi @joshs ,

Thanks for the thoughtful answer. Looking forward to hearing what the legal experts think. :slight_smile:

It is probably best to focus on what I suspect most zec holders want, i.e. transparency, accountability , and aligned incentives, and then find the best legal structure for those goals.

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In my opinion, of course they can be seperated but it still wouldn’t be the same, neither having the same bindings, requirements. It would be more on a voluntary level than a by law must level.

Not that easy as a for-profit in my opinion. First there is a conflict of interest in place. A non-profit at least tries to balance such possible issues. Second, there are no stakeholders that want/need to gain direct profit for their stake. As long as nobody really knows who the stake holders are at the ECC, how big their stakes are it’s logical to assume that a change will lead to less corruption possibilities and to more transparency and accountability.

Absolutly, the problematic here seems that only a few know the shareholders. Even the foundation itself (if i remember the statement correct) doesn’t know who exactly what holds at the ECC. In a case where the ECC wants, even needs funds, somehow somewhere from the community it’s logical that this gets transparent.
I fully would agree with you and the above quoted statement IF these stakeholders in the ECC ensure the ECC funding. As this doesn’t seem to be the outcome it’s again just more than logical that a non-profit change should be preferrable to account the dev fee community funding, no matter which of all proposals it is finally.

A bit provocative here, but it seems the early investors didn’t follow this principe you describe here.
I personally even disagree with the wording “don’t think in terms of profit”, but in short, they wouldn’t be good investors if this wouldn’t be the best skill they have. But i don’t want to derail the topic on this purely, but it’s pure speculation anyway.

This eventually may apply to currrent shareholders/investors, but i doubt it would apply to future investors for the remaining 2/3 of monetary base that is yet to be released.
Reasoning would be that the past/current investors/share holders did not have another option anyway. The future shareholders have such option and choice.
Of course i admit that this doesn’t take into account if shareholders get dividends or are promised such. In case shareholders are promised or get dividents from company shares they of course have ALL intention to be a for profit and get a share from the profit pie. In case there is no such divident or share interest than it would be absolutly in favour of the VC/investor to have as much as possible funding directly put into the product itself. The logical reasoning would be the more money gets into the product, the better and faster the product is released the higher its price will be, the more gain the investement will bring back, just simple formulated.

A healty team should be possible even better without a for-profit design as you take away a lot of preasure, eventually even gaining tax exemption leading to even more available funds for the team. This alone should be worth considering a non-profit design.
But than again, as long as we do not know who actually that shareholders are we have no idea what they might think. You seem to know all the shareholders of the ECC, but we don’t and it doesn’t seem we soon will know either.

That’s very optimistic formulated and i guess you actually believe what you write. My personal observation is more that the current approach of the ECC shareholders hasn’t proofed to be what you try make it look.
I personally doubt that the ECC can get closer to the wider community without changing it’s status to a non-profit. To big is the damage done by the founders reward distribution so far. Sure, i guess you guys/girls have the mechanism and power to push it through the way you like it somehow, hard or soft, but there is a huge risk that the wished closer alignment will result in a way more bigger nonalignment within the zcash community as a whole.

This thematic is really hot, it’s on thin ice, every action or non-action or attempt to avoid action will have an impact from a given group, believers, holders, someone…
In my opinion you guys/girls make so far one big mistake, you ignore the current founders reward and the whole impact it has, not only within the community but even within these that swear from outside against the founders reward, its distribution, the huge amount it has generated and what was delivered so far. I’am well aware of your position that you count only the cash that got directly into the ECC but that’s not how it’s seen by larger parts of the community and non-community. A good call would have been voluntary, upfront, without pressure to do everything possible to get trust back that got lost in the last years.
I’am well aware that you call my predictions, advices, thoughts FUD, speculation, whatever, but once in a while it could pay back to give it a thought or two. As i doubt this will happen, let’s leave it as a reference how things may turn out and/or backfire.
Just my personal opinion, observation and thoughts, i could be as always, totally be wrong :slight_smile:

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I find myself agreeing with some of what boxalex posted - which is weird & unusual :slight_smile:

The for-profit/non-profit issue may have no effect beyond how ECC and their role is perceived by those who should know better. Being for-profit has made ZEC an easy target for a long time.

Its encouraging that ECC are considering a change and giving it serious attention.

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I strongly agree with the need for transparency and substance in such essential matters. Both forward-looking detailed plans, and critical backward-looking evaluation. The State of the Zcash Foundation report sets the right tone, as do ECC’s Zcon1 presentations about Scalability. We need more of this, and in particular clear roadmaps of goals and tasks. See the related discussion starting here.

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Hi,

That is great news.

@joshs can you please push @nathan-at-least for an answer to a short extension for funding proposals only (i.e. everything str4d already covered in his stream/podcast is locked in on the 31st.)
@tromer/@amiller you both seem to be very active in this area too. could you please push from the foundation for a response from nathan to this thread. and could you also please read the whole thread. I don’t think it is asking that much.

Particularly this bit

The intent is that a new proposal can be made but it has to be based off an older one or in a really good state already incorporating the feedback so far from other relevant proposals. I imagine completely new ones without much thought wont get put in.

It is a safety net that might not even be needed.

Zooko has made some excellent points about how this might/might not work.

I just feel there should be a cushion after more detailed feedback, the landscape is changing so quickly. I still havent worked out how to make my proposal fit the legal framework (partly because we dont know it) but I might have to write another one giving funds to the ECC (even if the foundation said they would veto it. It deserves to be put on the table.)

Especially with this in mind.

Im not going to flip out if its no. I just want to know where I stand.

Thanks.

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Not necessarily. See bcorps, for example: https://bcorporation.net/certification

Studies have shown there is no measurable difference between corruption in nonprofits vs for profits. I am not saying there is no merit to nonprofit, but there shouldn’t be an assumption of virtue. See https://ssir.org/articles/entry/ethics_and_nonprofits#

Investors: https://web.archive.org/web/20161012003536/https://z.cash/team.html#investors
Founders include the founding members of the company and the seven founding scientists.

To be clear, I’m not personally advocating for or against nonprofit status. @aristarchus asked a question that I responded to because I believe there are nuances and tradeoffs not captured in the foundation’s statement.

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Investors might not be the very same as share and stake holders in a for-profit company.
I’am aware that for example Roger Ver has invested into Zcash at some time but i have no idea if he has shares in the ECC, just as to take a prominent example here.

The easiest way would be just to post an updated list of current share & stake holders of the ECC company shares. If this is not doable we have a strong argument allready for a non-profit change in my opinion.

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I added another edit with mandates for the ECC. I am targeting general requirements and not specific legal structures. Let me know if you guys think there is something important I should add/edit. . :slight_smile:

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I get your idea and i was thinking about nearly the same mechanism for voting but abandoned it because i think it’s causing more trouble than it helps. In generally the problems i see are:

  • It’s resulting in something like “Pay for vote”

  • On a POS design these might work as they get interest for it, on a POW design i doubt it’s going to work.

  • In my opinion it would lead to less voting while the target should be more voting.

  • Who takes responsibility if something happens with the wallet meanwhile, like the Komodo case where funds had to be moved in the shortest possible time out of the agama wallets for example? In my opinion “frozen” funds would be at higher risks.

  • It could be missused by groups/people that hold large stakes, hold them for longer and could that way outvote and go all-in for their agenda.

  • what if several votes have to be made within 1 year, let’s say for easyness every 3 months is a vote.
    If the voter has frozen his funds allready at first vote for 12 months on the second vote 3 months later there are 2 possibilities only:

  1. his vote now is only “worth” 9 months, decresing further with each vote.
  2. he can’t vote because he allredy voted in the first one and has no ZEC to lock again.
  • could this open doors for a strategy to buy large amounts of ZEC just for voting to gain more influence temporary and than selling these to avoid financial risk?

  • It would exclude maybe several other groups that could have interest in voting due their affilation but don’t hold ZEC or only smaller amounts.

The absolute pro argument is of course: The more you put in (freeze/lock) the more you show skin and the more voting power you should have which is a valid argument in my opinion. But there is a big chance that the negatives outweight this valid argumentation at the end. Just some thoughts and dangers i see.

This assumes that only founders, investors are shareholders of the ECC, but the truth is we don’t know who is a share holder in the ECC. I didn’t get an answer to this as well and the foundation itself has as well know idea who is a shareholder in the ECC. What if some employees are as well share holders, just as an example? It’s just logical to assume that Zooko is a shareholder too. How does your proposal adress such possible scenario?

Someone could argue if a for-profit status is the better option than a non-profit status for such task. As an european i’am absolutly sure that in europe a non-profit status has way more weight than a for-profit status, is way more thrustworthy and often choosen by the governments themself to get advice, discussion, whatever. I have no idea how it’s in the US, but i see no reason why it should be much different. A for-profit always leave the taste of “they are doing it for profit”, legitime but not as thrustworthy as a non-profit.

As said, just some thoughts …

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Hi @boxalex,

I think one solution would be to make the maximum lock time equal to/ or less than the time between elections, so that zec is never locked during an election.

I definitely wouldn’t want to discourage voting from people who are long term zec holders and care about development funding. I’m open to idea to improve the game theory here.

Regarding the for-profit/non-profit status, I don’t know which is best but I do know that I don’t want the ECC to be held back from any gov’t relations work. There are some restrictions on what type of things some U.S. non-profits can do in regard talking to regulators that do not apply to for-profits. There are also potential tax issues that apply to non-profits, where a non-profit could be vulnerable to the IRS. There issues are complicated and nuanced and I’m probably oversimplifying and not I’m definitely not a legal expert. Thats why I think we should just put what outcomes we want in our proposals and let a legal expert figure out the best solution to get that outcome.

Regarding my comment on shareholders, basically I just don’t want money from the dev fund to go to passive ECC stakeholders who are no longer involved in the Zcash community and have already been rewarded. Their exact identifies shouldn’t matter I think? I do however want to allow people working on Zcash at the ECC to be able to benefit from the potential upside of Zcash being very successful. I’m open to suggestions on rewording my mandates if these things were no clear.

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no, i didn’t yet …

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