Dev Fund Proposal - ZCG Slice (Draft ZIP Section)

Governance
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Below is a draft ZIP for the Zcash Community Grants (ZCG) slice of the Dev Fund. This draft represents the Committee’s collective perspective and our recommendation for how ZCG should be structured after the next halving. While we do not specify a particular allocation percentage, we advocate for ZCG to continue to receive the largest portion of the Dev Fund to maintain its role in advancing the decentralization of the Zcash ecosystem.

Summary Points

  1. Name Change: The committee’s formal name has transitioned from Major Grants Review Committee (MGRC) to Zcash Community Grants (ZCG).
  2. Funding Discretion: The ZCG Committee has broader discretion to allocate funds to grants of various sizes, community programs, and dedicated resources, while retaining priority for major grants.
  3. Staggered Elections: To ensure committee continuity, elections must be staggered.
  4. Committee Compensation: Committee members, currently compensated for 15 hours per month by ZF, may use a portion of the Discretionary Budget for reasonable compensation that aligns with their roles. Compensation rates are determined by the ZF’s Community Advisory Panel.
  5. Towards Independence: ECC and ZF will conduct periodic reviews of the ZCG program.
    Exploring transitioning ZCG into an independent organization, with a focus on enhancing decentralization and geographic diversity, is a key consideration.

A redline version of the original ZIP 1014 section is available here: ZCG Slice (Redline).pdf (67.4 KB)

The draft ZIP is below with material changes in bold.

Thank you to @gguy for organizing discussions and drafting an earlier version of this ZIP.

Zcash Community Grants (ZCG)

This slice of the Dev Fund is intended to fund independent teams entering the Zcash ecosystem, to perform major ongoing development (or other work) for the public good of the Zcash ecosystem, to the extent that such teams are available and effective. The Zcash Community Grants (ZCG) Committee is given the discretion to allocate funds not only to major grants, but also to a diverse range of projects that advance the usability, security, privacy, and adoption of Zcash, including community programs, dedicated resources, and other projects of varying sizes.

The funds SHALL be received and administered by ZF. ZF MUST disburse them for grants and expenses reasonably related to the administration of the ZCG program, but subject to the following additional constraints:

  1. These funds MUST only be used to issue grants to external parties that are independent of ZF, and to pay for expenses reasonably related to the administration of the ZCG program. They MUST NOT be used by ZF for its internal operations and direct expenses not related to the administration of grants or the grants program. Additionally, BP, ECC, and ZF are ineligible to receive grant funding from the ZCG program.

  2. ZCG SHOULD support well-specified work proposed by the grantee, at reasonable market-rate costs. They can be of any duration or ongoing without a duration limit. Grants of indefinite duration SHOULD have semiannual review points for continuation of funding.

  3. Priority SHOULD be given to major grants that bolster teams with substantial (current or prospective) continual existence, and set them up for long-term success, subject to the usual grant award considerations (impact, ability, risks, team, cost-effectiveness, etc.). Priority SHOULD be given to major grants that support ecosystem growth, for example through mentorship, coaching, technical resources, creating entrepreneurial opportunities, etc. If one proposal substantially duplicates another’s plans, priority SHOULD be given to the originator of the plans.

  4. The ZCG committee SHOULD be restricted to funding projects that further the Zcash cryptocurrency and its ecosystem (which is more specific than furthering financial privacy in general) as permitted under Section 501(c)(3).

  5. ZCG awards are subject to approval by a five-seat ZCG Committee. The ZCG Committee SHALL be selected by the ZF’s Community Advisory Panel or successor process. Elections SHALL be staggered to ensure continuity within the Committee.

  6. The ZCG w Committee’s funding decisions will be final, requiring no approval from the ZF Board, but are subject to veto if the Foundation judges them to violate U.S. law or the ZF’s reporting requirements and other (current or future) obligations under U.S. IRS 501(c)(3).

  7. ZCG Committee members SHALL have a one-year term and MAY sit for reelection. The ZCG Committee is subject to the same conflict of interest policy that governs the ZF Board of Directors (i.e. they MUST recuse themselves when voting on proposals where they have a financial interest). At most one person with association with the BP/ECC, and at most one person with association with the ZF, are allowed to sit on the ZCG Committee. “Association” here means: having a financial interest, full-time employment, being an officer, being a director, or having an immediate family relationship with any of the above. The ZF SHALL continue to operate the Community Advisory Panel and SHOULD work toward making it more representative and independent (more on that below).

  8. A portion of the ZCG Slice shall be allocated to a Discretionary Budget, which may be disbursed for expenses reasonably related to the administration of the ZCG program. The amount of funds allocated to the Discretionary Budget SHALL be decided by the ZF’s Community Advisory Panel or successor process. Any disbursement of funds from the Discretionary Budget MUST be approved by the ZCG Committee. Expenses related to the administration of the ZCG program include, without limitation the following:

    • Paying third party vendors for services related to domain name registration, or the design, website hosting and administration of websites for the ZCG Committee.
    • Paying independent consultants to develop requests for proposals that align with the ZCG program.
    • Paying independent consultants for expert review of grant applications.
    • Paying for sales and marketing services to promote the ZCG program.
    • Paying third party consultants to undertake activities that support the purpose of the ZCG program.
    • Reimbursement to members of the ZCG Committee for reasonable travel expenses, including transportation, hotel and meals allowance.

  9. A portion of the Discretionary Budget MAY be allocated to provide reasonable compensation to members of the ZCG Committee. Committee member compensation SHALL be limited to the hours needed to successfully perform their positions and MUST align with the scope and responsibilities of their roles. The allocation and distribution of compensation to committee members SHALL be administered by the ZF. The compensation rate and hours for committee members SHALL be determined by the ZF’s Community Advisory Panel or successor process.

  10. The ZCG Committee’s decisions relating to the allocation and disbursement of funds from the Discretionary Budget will be final, requiring no approval from the ZF Board, but are subject to veto if the Foundation judges them to violate U.S. law or the ZF’s reporting requirements and other (current or future) obligations under U.S. IRS 501(c)(3).

ZF SHALL recognize the ZCG slice of the Dev Fund as a Restricted Fund donation under the above constraints (suitably formalized), and keep separate accounting of its balance and usage under its Transparency and Accountability obligations defined below.

ZF SHALL strive to define target metrics and key performance indicators, and the ZCG Committee SHOULD utilize these in its funding decisions.

Direct-grant option

It may be deemed better, operationally or legally, if ZCG funds are not accepted and disbursed by ZF, but rather directly assigned to the grantees. Thus, the following mechanism MAY be used in perpetuity for some or all grantees:

Prior to each network upgrade, based on the ZCG Committee’s recommendation, the Foundation SHALL publish a list of grantees’ addresses and the total number of Dev Fund ZEC per block they should receive. ECC and ZF SHALL implement this list in any implementations of the Zcash consensus rules they maintain. This decision will then be, effectively, ratified by the miners as the network upgrade activates.

Furthering Zcash Decentralization

BP/ECC and ZF SHALL conduct periodic (e.g. semiannual or annual) reviews of the organizational structure, performance, and effectiveness of the ZCG program and committee, taking into consideration the input and recommendations of the ZCG Committee. As part of these periodic reviews, ECC and ZF MUST commit to exploring the possibility of transitioning ZCG into an independent organization if it is economically viable and it aligns with the interests of the Zcash ecosystem and prevailing community sentiment.

In any transition toward independence, priority SHALL be given to maintaining or enhancing the decentralization of the Zcash ecosystem. The newly formed independent organization MUST ensure that decision-making processes remain community-driven, transparent, and responsive to the evolving needs of the Zcash community and ecosystem. In order to promote geographic decentralization, the new organization SHOULD establish its domicile outside of the United States.

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instead of “blank check” funding, why can’t we take the top 5 major projects as priority funding so that they are not impacted by declining zec price.

  1. more assets on the blockchain to achieve scale. namely stable coins/zsa etc
  2. programmability
  3. fee structure → best path to decentralized development
  4. POS
  5. wallets/ledger/trezor

these major projects should get the lions share of funding. everything else seems like it’s putting the cart before the horse.

implement a crowdsourcing platform to enable the broader community to help fund small grants as well.

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A portion of the Discretionary Budget MAY be allocated to provide reasonable compensation to members of the ZCG Committee. Committee member compensation SHALL be limited to the hours needed to successfully perform their positions and MUST align with the scope and responsibilities of their roles. The allocation and distribution of compensation to committee members SHALL be administered by the ZF. The compensation rate and hours for committee members SHALL be determined by the ZF’s Community Advisory Panel or successor process.

Questions:
Why not have ZCG committee member compensation come from the ZCG administration budget which is approved by ZCAP?
Why not state that a quarterly financial statement of the administrative budget be published for the community and ZCAP?
With the objective that it is not ZF distributing the funds, its ZCG self-funding with ZCAP approving?

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Hi @kworks. Thank you for the questions.

If this proposed ZIP is adopted, committee member compensation would be allocated from the ZCG discretionary budget, which would need to be approved by ZCAP. Currently, ZCG receives compensation from ZF’s slice of the Dev Fund.

Since ZCG is a committee under the Foundation, our financial reporting is incorporated into ZF’s Quarterly Reports. ZCG can work with ZF to ensure the amount allocated for compensation is clearly reflected in the Quarterly Reports.

ZF would retain its role in administering and disbursing funds on behalf of ZCG. The primary change being proposed in the language you cited is that committee member compensation would be funded from ZCG’s share of the Dev Fund, rather than from ZF’s allocation.

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Great answers!

If ZCG codifies that it will independently publish financial reports it builds internal capacity to understand the operational expenses moving forward such as:
" ZF continues to provide administrative, logistical, and operational support, including the [grants platform, required KYC and OFAC compliance, payment processing, funds administration, record-keeping (including meeting minutes, and maintaining the [ZCG Dashboard, and providing a point of contact for grant applicants and recipients"

Question:
Does the first paragraph below, intent to replace or expand paragraph 4 ?

" The Zcash Community Grants (ZCG) Committee is given the discretion to allocate funds not only to major grants, but also to a diverse range of projects that advance the usability, security, privacy, and adoption of Zcash, including community programs, dedicated resources, and other projects of varying sizes."

" 4. The ZCG committee SHOULD be restricted to funding projects that further the Zcash cryptocurrency and its ecosystem (which is more specific than furthering financial privacy in general) as permitted under Section 501(c)(3)."

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Paragraph 1 is not intended to replace or expand Paragraph 4; but rather, it is consistent with it. The purpose of Paragraph 1 is to formally broaden ZCG’s focus beyond issuing major grants. All ZCG funds, with the exception of those allocated for the Discretionary Budget, should be used to advance Zcash. An example of this broader scope is funding the Global Ambassador Program, which is a community program. We’ve also funded Dedicated Resources, including the Ecosystem Security Lead and the Ecosystem Wallet Developer. Our intention in Paragraph 1 is to make it clear that ZCG is not limited to major grants.

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As part of these periodic reviews, ECC and ZF MUST commit to exploring the possibility of transitioning ZCG into an independent organization if it is economically viable and it aligns with the interests of the Zcash ecosystem and prevailing community sentiment.

Has ECC or ZF ever done a periodic review and published its contents of ZCG?
You have served ZCG for some time (thanks!), in your judgement is there community sentiment to make ZCG independent?
What would be the benefits of making ZCG independent?
What would be the lost if ZCG would become independent?
What organizational structure would you recommend & where should it be legally located?
What do you think it would cost for ZCG to operate independently?

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For some perspective, here’s the ZF budget from the past two quarterly reports

Q1 2023

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Q2 2023

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If anything, the ZF spent more money than before while keeping their team compensation at more than 250 000 USD per month.

I hardly think the cut in ZCG expenses will have any significant effect on their expenditure.

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ZF Mafia needs to be disbanded. Disable the gravy train!

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Hi @kworks. Thank you for the great questions!

As far as I am aware, neither ZF nor ECC has conducted a public review of ZCG. The closest event resembling such a review was the ZOMG-ZIP 1014 Independent Review Committee that I organized in 2021 in response to concerns raised by Chris Burniske and ML when they left ZOMG. The Review Committee discussions resulted in an amendment to ZIP 1014.

I believe there is overwhelming community support for making ZCG independent. My opinion is based on conversations I’ve had with community members and ecosystem leaders over the years, as well as two forum polls I conducted in 2021 and 2023.

With that being said, even with overwhelming community support, I think if ZCG were to become independent it makes sense to have a slow transition because a gradual shift allows for careful planning and adjustment, minimizing potential disruptions to ZCG’s core function. In addition, I personally believe it is not currently economically feasible for ZCG to become an independent organization given the impact the bear market has had on ZCG’s treasury. As such, the conditions outlined in the ZIP amendment, which consider economic viability and alignment with the interests of the Zcash ecosystem and community sentiment, provide a sensible approach to independence.

Sources

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There are three key benefits to making ZCG independent. First, an independent ZCG would enhance the decentralization of the Zcash ecosystem by promoting the presence of additional independent organizations that actively contribute to Zcash.

Second, an independent ZCG would contribute to decentralization of the Dev Fund. Currently, all Dev Fund recipients are US entities, creating a potential single point of failure for Zcash. By having an independent ZCG located outside the US, there’s a safeguard ensuring continued funding for Zcash development even in the event of US regulatory actions.

Lastly, independence allows ZCG to have more control over its decisions and determine its direction and shape as an organization. As a committee under the Zcash Foundation, ZCG’s decision-making is subject to certain limitations. Becoming an independent entity provides ZCG with more autonomy to tailor its strategies to better serve the Zcash ecosystem.

If ZCG were to become independent, it would no longer benefit from the operational and administrative support provided by the Zcash Foundation. Currently, ZF covers the associated costs of administering the ZCG program, including maintaining the grants platform, disbursing funds, tracking open grants, financial reporting, KYC and OFAC compliance, and other administrative tasks related to supporting the grant process. The Zcash Foundation has provided excellent support in these areas. Transitioning to an independent organization would require ZCG to establish its own administrative infrastructure and cover these expenses internally, resulting in increased operational costs and administrative burdens.

Considering that both ECC and ZF are domiciled in the US, if the grants program were to become an independent organization, the ZCG committee believes it should be established in a jurisdiction outside the US in order to encourage geographic decentralization. The specific location would depend on various factors, including legal and regulatory considerations, as well as practical operational requirements. Ideally, it would be based in a country that is crypto friendly and has a strong history of protecting privacy rights.

Regardless of its domicile, the organization should be structured as a non-profit entity with tax exempt status, subject to legally-enforceable governance requirements similar to those required of 501(c)(3) organizations. This ensures strict transparency and accountability standards, and that the organization operates in a manner consistent with its stated mission.

Unfortunately, I don’t have a definitive answer for this question. Currently, administration and support of the ZCG program is integrated into the Zcash Foundation’s operational expenses. The cost for ZCG to operate independently would depend on several factors, including the organization’s domicile, the level of support staff required, and various operational expenses such as administrative, legal, and marketing costs. Providing a precise cost estimate would require a detailed assessment of these factors.

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we shouldn’t be doing anything that is funded by zec holders without a coin weighted vote.

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Why? eCC wand ZFND own a huge portion anyway. It’s all moot.

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This is an example of governance problems. It has the appearance of in fighting and trying to “carve out” direct funding for control. It’s not real decentralization as it’s all funded by zec holders. real decentralization reduces risk and costs for zec holders. If we ask ourselves this question, does adding another organization reduce risk and cost, i think the answer is no in this case.

I do think adding qedit as direct funding could reduce risk because ECC/Foundation have already said they don’t want to or don’t have the expertise for stablecoins/zsa. adding this to blockchain reduces risk to me. it’s critical to get transaction volumes up, improve sync times dramatically, and increase thoughput (TPS). we should be talking about adding qedit for a well defined scope of work not more blank check funding.

More organizations does not mean decentralization when it’s all funded by zec holders. it’s still one central source of funding. so from a zec holder perspective it’s actually adding to the risk because now we have to try and govern three blank check funded entities instead of two. i’m for carving out well defined scoped out projects to fund directly. no more blank checks.

The ideal solution is to get governance fixed at ECC/Foundation and if they are not doing a what we want, we can vote them out. We have no governance in place currently. it’s based on a small groups perspective of consensus.

More organizations funded by zec holders is a bad thing in my view. it’s more overhead, more blank checks, and based on past, more wasteful spending. we have a 400m market cap and two boards. that’s already too many. the world class entities with trillion dollar market caps are managed by one board. we don’t need more orgs unaccountable to anyone, we need product vision,

I’m 100% for decentralization, but that includes a framework for decentralized funding. Apple, google, Etheruem and others have this part of the model right, we don’t.

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How exactly do you “vote them out” when both organizations are controlled by boards of directors? If this was any other organization, the continuing delays, unmet promises and lack of real growth would have resulted in leadership changes.

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the way it’s “supposed” to work is zec holders would vote for board members. and the board would be responsible for hiring and firing the CEO.

so we need the existing orgs to fix governance, adding more orgs just adds to the governance problem

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The more i look at the results of the dev fund, the in fighting for control, and the rush to create
more blank check funding orgs,
the more it looks like disintermediation and not decentralization. It’s not decentralization because zec holders fund it all no matter if it’s one org or 20 orgs.
the more orgs the harder to manage and hold orgs accountable from a zec holder perspective. The zec holders (the funders) are being disintermediated from the orgs (the spenders). so as we create more orgs, it becomes impossible for zec holders to have influence over spending. yet, cost over runs, wasteful spending are all still paid by zec holders. so the risk, costs and funding are not decentralized at all (maybe it’s counter intuitive; but the risk of malfeasance likely increases as more orgs are created).

We need a simple org structure. All zec funding should go through one entity. And we need to be able to vote.

  1. 50% in number and
  2. 50% in dollar value.

both of the above methods are needed to give both the small guys a voice and the people with real money on the line and paying for devolopment a voice as well. It would help a lot to have a very clear timeline with expected costs, status and payments made for critical development including UDAs/stsblecoins, POS, Fees, and programmability (is programmability feasible?) and to ensure these projects are prioritized and funded above all else (alongside one wallet).

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I agree with the addition of more orgs just creates more obfuscation, which is what the current powers that be flourish by.

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:grimacing:

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Anyone that has been on the internet and has been building websites before Apple launched the app store knew they were trying to co-opt the web with their walled garden.

DHH just uses his network to post the most obvious takes.

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