Dev Fund Supplemental Proposal: Align Governing Council Incentives AKA the "Councilor's Block Fund" (CBF)

This proposal is intended to supplement:

Dev Fund Proposal: 5-Entity Strategic Council Approach

Each member of the “Strategic Council” MUST have an explicit and direct interest in the future value of Zcash.

A mechanism that might help to achieve this:

(1) Council membership comes with a grant from the block reward, such that the Councillor receives a fraction of each block reward.

2 Likes

Just 2 thoughts if you don’t mind:

  • Problem 1: How big must this stake be? 1, 10, 100, 1000, 10000, 100000 ZEC?
  • Problem 2: There could be eventually a conflict of interest or better formulated. How or should this even prevent a large ECC share/stake holder to join the Strategic Council?
  • Problem 3: Everybody, at least in theory could lend or be given ZEC from the ECC or ZF or even a given very large investor/holder could put forward several of his own men to join such council.

This in my opinion, i could of course be totally wrong, is a conflict of interest.

2 Likes

I don’t think you are. it is a catch 22. :confused:

I don’t understand. What’s the conflict? Isn’t the future value of ZEC exactly what the councilor’s should be “interested” in?

1 Like

I understand what you’re aiming for in terms of aligning incentives… but there is also value in disinterested oversight.

1 Like

What exactly is the benefit that derives from disinterested oversight, in this case?

1 Like

What if there’s an opportunity to pump the price that doesn’t otherwise benefit users, or even harms them? Idk how realistic of a worry this is.

It should be like that, but as said, i see potential for an conflict of interest. Just fictive: A large stakeholder/investor could have interest in keeping the price low for accumalation of an even bigger stake. There are more but i lack the time to go deeper into it, but reading the definition of “Conflict of interest” is pretty self explaining where such conflict could arise:

What Is a Conflict of Interest?

A conflict of interest occurs when an entity or individual becomes unreliable because of a clash between personal (or self-serving) interests and professional duties or responsibilities. Such a conflict occurs when a company or person has a vested interest, such as money, status, knowledge, relationships, or reputation, which puts into question whether their actions, judgment, and/or decision-making can be unbiased. When such a situation arises, the party is usually asked to remove themselves, and it is often legally required of them.

KEY TAKEAWAYS

  • A conflict of interest occurs when a person’s or entity’s vested interests raise a question of whether their actions, judgment, and/or decision-making can be unbiased.
  • In business, a conflict of interest arises when a person chooses personal gain over his duties to their employer, or to an organization in which they are a stakeholder, or exploits their position for personal gain in some way.
  • Conflicts of interest often have legal ramifications.

Understanding a Conflict of Interest

A conflict of interest in business normally refers to a situation in which an individual’s personal interests conflict with the professional interests owed to their employer or the company in which they are invested. A conflict of interest arises when a person chooses personal gain over the duties to an organization in which they are a stakeholder, or exploits their position for personal gain in some way.

For example they might put through something that damages the long term sustainability of the project for a short term price bump - so they can dump their zec that they got for that year.

It doesn’t have to be a problem, but you are creating a new problem in the selection process. So whilst this seems to fix an issue, it just moves it to be in another place.

To be fair I haven’t read up on this area that much. so I am not sure if it is better to fix the problem at selection or incentive level. (the problem being that there might be a misalignment between the future of zcash technology and short term finacial gain)

That was my main concern.

1 Like

So, inasmuch as councilors hold futures (i.e. are entitled to as-yet-unrealized block rewards) this misalignment doesn’t exist?

So, perhaps once an agent is elected as a councilor they start receiving block-rewards, and that continues until some point beyond their term of councilorship?

I think it’s worth noting that a councilor without block reward incentives will still have some motivation… some incentives shaping and directing their actions. To me the word “disinterested” is a bit misleading… all actors have interests.

I’ve “struck out” the “proof of stake” option, mostly because I don’t see an obvious advantage to it over the simple block-reward approach, and it’s clear how to implement the block-reward approach.

2 Likes

I agree, which is why I said it just moves the problem to selection of the panel members.

In this context it referes to anyone that has a direct benefit from the value. So a disinterested party wouldn’t be a VC company. Its a financial language think afaik.

But my understanding of the proposal that this one is modification of I still haven’t fully worked through.

I am a bit out of my depth in this conversation. I am asking questions to learn, not to challenge. I did come in with preconceived ideas, but they seem wrong. and I am open. Thank you for continuing to explain things.

1 Like

I haven’t thought carefully about how significant/likely etc. each of the potential problems you mention might be, but they all seem to me like they might be important.

I think all of problems 1-3, would be completely solved if The Mechanism were not an existing stake, but instead were futures algorithmically defined as a portion of the block reward.

So, in short, I’m only advocating block reward Councillor Incentives. For conciseness I’ll call this the “Councilor’s Block Fund” (CBF) meta-proposal from here on out.

1 Like

I think it should be “The Councilors’ Block Fund”.

“(1) Eligibility for membership in the council requires a proof-of-stake in the Zcash.”

this could be easily exploited by entities that might not have ZEC’s longterm success as their top priority.

“(2) Council membership comes with a grant from the block reward, such that the Councillor receives a fraction of each block reward”

i’d be totally against this.

imo, community governance panel should eventually be given the role as 3rd entity/strategic council. CGP needs plenty of work to become that solid 3rd party, but the skeleton’s already in place.

imo, strategic council would be starting from square one, and introduces more risk than rewards.

another reason i like the CGP as 3rd party - people at ECC/ZF can vote as individuals, rather than 1 organization = 1 vote

1 Like

I completely deleted option (1), since the strikethrough didn’t seem to be adequate.

good idea. i noticed the “and/or” in between option 1-2. assumed that 1 was still an option.

@ariannasimpson @JacobPPhillips I read your proposal with interest. I believe my proposal (see above) is synergistic with yours.

I believe your analysis of the pros-and-cons of individuals versus institutions as Councilors is insightful.

You specifically cite individual accountability as a desirable feature of a Councilor, and I agree. In a similar vein I believe that each Councilor should receive a “Councilors’ Block Fund” (CBF) payment. This recurring payment would align the Councilor’s incentives with the future value of ZEC, in a quantifiable, explicit, and public way.

It’s also important to note that this mechanism addresses a valid critique @ttmariemia made in her response to the ASP proposal. In my view she’s completely correct that the Council MUST be funded. I believe that this is a feature of the Council, and that said funding should be in ZEC futures as a fraction of the Block Fund.
(Not least because of the concrete well-tested mechanism for this funding.)

Thanks for your time!
–Za

P.S. – As should be obvious from the name, the proposal was originally made in reference to @avichal 's proposal. It goes without saying that I believe that TCBF is synergistic with that proposal as well.

I appreciate the sentiments here, about incentive alignment. I also think it’s appropriate to compensate people for the substantial investment of effort.

However, I would certainly hope that in any body that governs critical resources for the future of Zcash, at least some of the Councilors would be motivated primarily by principles and ideology rather than personal gain. And such people may very well have other engagements and obligations that preclude compensation or substantial personal economic interest, or may just prefer avoid the associated legal/tax risks.

To see this, we need look no further than Boards of Directors of the Zcash Foundation and of the Electric Coin Company, and the superbly qualified board members serving there. I believe that some of these would not be able to serve, if they were required to hold a personal financial stake.

5 Likes

The inherent issue with the proposals that include a new Council is that we have no good voting mechanism for electing Councilors. We can’t even decide who’s supposed to vote, let alone how their eligibility and vote are verified. The closest we have are ideas for privacy-preserving wealth-weighted voting (which would anyway take more time to implement than we have for the Dev Fund decision), and the Community Governance Panel (which is too loose to be binding, and which is already used by the Zcash Foundation so what’s the point of cloning it).

This difficulty is not a coincidence. It is not a failure of motivation or of execution. This is trying to solve the general problem of global decentralized governance. It’s too hard! Bitcoin managed to solve a sliver of that problem, for the specific case of consensus on just listing records in a ledger, and this is being hailed as the breakthrough of the decade. Will the Zcash community miraculously conjure a global and completely decentralized (and yet effective and manipulation-resistant!) governance mechanism for deciding arbitrary questions?

5 Likes