Dev Fund Proposal: 20% to a 2-of-3 multisig with community-involved governance

I like this proposal’s attempt to increase decentralization. However, the way it sets up the incentive, control of the whole Dev Fund is essentially put in the hand of the majority of a “Third Entity” committee that is yet be determined. So this proposal really says is: let’s find a committee of outsiders who will have effectively ultimate control over the whole Dev Fund. Let me elaborate:

  1. The proposal does not set a specific split of funds between ECC vs. Zfnd. The coins can go either way, by 2-out-of-3 decision. Thus, ECC and Zfnd compete for the same funds, and each is incentivized to block and deny the others’ funding request. But each of Zfnd or ECC could take coins for itself from the Dev Fund with approval by the Third Entity. Thus, in terms of cold short-term economic incentives (ignoring good intents and effect on coin price), the Third Entity is the only one with true power.

  2. In particular, either of Zfnd or ECC, in collusion with a majority of the Third Entity committee, could usurp the whole Dev Fund. The other party is powerless. The usupring party is even explicitly allowed to give the colluding Third Entity a share of the spoils; they just need to agree on a plausible excuse.

  3. This structure disincentivizes keeping reserves. Both ECC and Zfnd would know that any coins left unused in the Dev Fund may be requested and received by the other party. This incentivizes imprudent spending of funds, or even busywork on nonessential tasks. Cryptocurrencies’ volatility makes a large reserve very desirable, but this only works if the parties affecting the building of reserve know it cannot be usurped by others.

  4. It is unclear how the Third Entity committee can be effectively formed, to mitigate all of the above. Its members, effectively entrusted with potentially hundreds of millions of dollars, must exhibit a rare combination of financial acumen, technical expertise, familiarity with the Zcash ecosystem, moral character, and mission-alignment. Moreover, they must be independent of ECC and Zfnd (including, presumably: shareholders, employees, advisors, contractors, students and other associates). All of this, under an apparently informal arrangement with little recourse to law if things go awry.

These are grave concerns that must be answered for the proposal to be viable.

(Disclosure: I’m a founding scientist of ECC and a technical advisor to Zfnd. This is my personal opinion.)