End ZCG and send its funds to the NSM

Governance
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TL;DR
End Zcash Community Grants at NU8. Its 8% share of the block reward goes to the Network Sustainability Mechanism (NSM) instead. ZCG pays the milestones it has already approved, then sends the rest of its treasury to the NSM.

The proposal

  1. At NU8, the 8% that goes to ZCG goes to the NSM reserve instead.

  2. ZCG approves no new grants after this proposal passes.

  3. Milestones already approved are paid as planned.

  4. Everything left in the ZCG treasury after that goes to the NSM.

Why

1. It’s coinholder money, and coinholders don’t control it.

Every block, coinholders are diluted to fund ZCG. But ZCG is elected by ZCAP, a ~200-person panel whose membership is decided by the Zcash Foundation. You can join by posting on the forum regularly or by receiving a ZCG grant. 72 ZCAP members (36%) have received ZCG grants. ZCAP members are behind about 75% of all the money ZCG has paid out. The people who pay have no say, the people who get paid do. This needs to change.

2. ZCG spends against what coinholders want.

In February 2026, coinholders voted 98.6% against Zcash Shielded Assets. ZCAP voted 70.4% for. In June, ZCG approved another $455K for ZSAs.

3. Committees can’t know what to fund.

This isn’t about the people on ZCG. Any five people would face the same problem. The knowledge needed to allocate well is spread across thousands of users, builders and businesses. It shows up in what people actually choose to pay for, not in grant applications. F.A. Hayek called this the “Knowledge Problem”.

Why the NSM
The NSM holds ZEC in a reserve that later funds block rewards. No committee, no elections, no capture risk. The reserve starts paying out in February 2031, based on the latest governance vote.

What about funding development?
Funding doesn’t disappear:

  • Coinholder Grants (12%) continue regardless.

  • Private funding is already carrying the ecosystem’s biggest work, none of Tachyon, Valar, ZODL, etc. have raised from ZCG.

  • Donors, companies and crowdfunding can fill gaps, as they do in Linux, Bitcoin, etc.

  • Smaller initiatives that are actually worth funding can borrow the necessary amount from individuals / companies, then reimburse the funds through a retroactive coinholder grant.

Next steps
Let’s have a discussion in the open! We can move forward from there.

Disclosure
Through my work I’m actively involved with Cypherpunk, the world’s largest Zcash miner. This is a personal initiative and independent of my employment ties.

Separately, I raised a ZCG grant earlier this year and cancelled it before any payment (while having already incurred a lot of costs) because I didn’t think I should argue against ZCG while holding a ZCG grant.

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Every block, coinholders are diluted to fund miners.

Coinholders being diluted and that funding going somewhere the coinholders don’t control, is already par for the course for 88% of the block subsidy. The point of funding streams is that when it comes to chain security, development and maintenance is no less important than mining (see: all the security work done by Zcash devs this year).

Something not pointed out anywhere above: ending ZCG without replacing its 8% with a different development-oriented funding stream (either managed by some other entity, or to Coinholder Grants), is a decision to explicitly give more money to miners by decreasing the funding available for development and maintenance of the chain. Maybe that’s a trade-off people are happy with, but it should be spelled out and discussed.

I think suggesting that it be directed to NSM is better than ending it outright, but note that with the NSM start date being in 2031, and all current funding streams ending before then, it still amounts to (for now) directing funds to miners and away from development.

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Full support of the proposal.

By not keeping ZCG accountable to coinholders, a moral hazard is embedded into the core of Zcash itself.

It is important that we keep Zcash decentralized and censorship resistant, which means moving away from capture-able legacy structures that were created as stop gaps for lack of tech.

The Coinholder Voting tech has now reached a maturity beyond the ZCG/ZCAP structure, so it is time this is deprecated.

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Strong support from me. Recent grant decisions have made it clear that ZCG’s priorities don’t always reflect those of coinholders, and the current structure gives coinholders no real way to correct that. A protocol built on censorship resistance shouldn’t depend on a small committee that can be captured. Coinholder voting has proven it works, so it’s time to retire the interim governance model and let those with skin in the game decide.

Strong support from me. Recent grant decisions have made it clear that ZCG’s priorities don’t always reflect those of coinholders, and the current structure gives coinholders no real way to correct that. A protocol built on censorship resistance shouldn’t depend on a small committee that can be captured. Coinholder voting has proven it works, so it’s time to retire the interim governance model and let those with skin in the game decide.

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Full support for the proposal, and I am quite confident that if there was a coinholder vote, it would be another near unanimous victory similar to the ZSAs.

But I tell you what, as a holder and someone who keeps the majority of their networth shielded, I fear this proposal and ensuing battle will not be so easy, regardless of my above statement. The first obvious counter argument will be oh of course the groups closer to miners want miners in control, but to that I’ll say: fine. The people with skin in the game should have the control. I see nothing wrong with miners and coinholders having the power. In fact, I like that. But others won’t like it, namely, people who pioneered Zcash in its early days, and now hold high end reputations but very low end coin amounts. I just don’t know how that divide gets solved respectfully.

So all that to say- yes, I support the proposal. I would love to have it brought to a vote. Whatever the result would be, (and I’m confident it would be a win for ending), I think it will only be the beginning of a conflict and I hope that there can be a diplomatic solution beforehand that does not end in a fork.

So I would love to suggest a single change! I would like to see some kind of discussion and deal made where ZCG and members can get something out of it rather than an abrupt dismissal that will in my mind undoubtedly cause a revolt. I think thats the best way to go forward diplomatically. We all want zcash to succeed in its adoption and its core mission, it’s very very important.

I’ll let everyone speculate on the best way to do that, but I wanted to throw out the idea.

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I have drafted a ZIP that I’ll share soon. It would end the entire development fund, not limited to ZCG. This is the current iteration of abstract:

  • The FS_FPF_ZCG_H3 and FS_CCF_H3 funding streams end at the NU8 activation height on each network.
  • The balance of the Deferred Dev Fund Lockbox is transferred to the NSM Value Balance in the NU8 activation block.
  • From the Multisig-held Fund, after reserved obligations, a one-time endowment is paid to a Legal Defense Fund for Zcash developers. Organizations apply to steward the Fund, each proposing an amount, and coinholders select the Steward and its amount by vote. Everything not disbursed to the selected Steward is removed from circulation into the NSM Value Balance.
  • ZCG stops approving new grants at the Cutoff, retains funds sufficient to honor approved grants and wind down, and publishes a final accounting.
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Definitely a good proposal for everyone, except for ZCG members :slight_smile:

Nothing much to say or to add. I think it’s already clear what we all manifested when we voted and we will do it again.

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This could be interesting, but devil is in the details. Look forward to the full proposal.

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I agree with your point 100%

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I’ve submitted a draft ZIP that would shut down the ZCG funding stream.

This is orthogonal to any other proposals that might actually strip ZCG’s existing treasury in some manner, which I would also personally support. Josh alludes to one above that might do this, in addition to some other things. But I firmly believe these should be broken up into separate proposals for consideration.

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Cross posting from X: Josh Swihart 🛡 on X: "It'd be a mistake to kill only one part of the dev fund. If dissolved, then no half measures, dissolve it all, both the ZCG and coinholder streams. The coinholder stream accrues ~216 ZEC a day until the halving. Same problem. Part of the reason for ZCG funding until the cu… / X

It’d be a mistake to kill only one part of the dev fund.

If dissolved, then no half measures, dissolve it all, both the ZCG and coinholder streams. The coinholder stream accrues ~216 ZEC a day until the halving. Same problem.

Part of the reason for ZCG funding until the current ZIP was a governance balance. Part of it was to provide speculative funding for ideas that needed incubation.

Coinholder grants were a bridge away from direct funding when funding was scarce. It served its purpose.

If dev funding is no longer needed, a better market signal is the retirement of the entire fund. A half measure leaves the door open to ongoing debate and politics. Markets like certainty.

Redirect both streams to the NSM through the halving, as Sean’s draft does for ZCG. ZCG honors every approved grant, then sends the rest to the NSM.

One proposed exception is a one-time endowment for a legal defense fund for Zcash developers, decided by coinholders.

Note: ZODL recently received a retroactive coin holder grant (non ZCG) for core protocol work and will apply for future grants if the fund still exists. My argument for a full, rather than partial retirement would eliminate that potential source of funding

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Happy almost 10-year Zcash anniversary, everyone.

By all means, let’s cap how much any one entity can get from the dev fund at some fixed dollar amount. The dev fund was never designed with money at these amounts in mind, so capping what orgs get is a very good idea. Maybe we should even get rid of the dev fund. It certainly causes governance headaches.

But there are several problems with putting it into the Network Sustainability Mechanism (NSM).

  1. There’s a major risk the current put-it-in-the-nsm proposal becomes a dev-fund-in-waiting, where the reserve gets redirected later.
  2. The NSM sets aside a chunk that pays miners starting around something like 2031. It’s a somewhat difficult-to-explain second issuance curve that seems to complicate both the economics and the story of Zcash. One of the best choices early Zcash ever made was, mostly, not messing with things beyond what was needed for fast privacy.
  3. If the argument is “we shouldn’t just pay miners,” we look like clowns: this just pays miners with more steps. Ultimately the money mostly goes to miners for making blocks, unless of course it gets changed.

By the way, if your curious on the broader context on the dev fund, there some lesses on optionality, decentralization, and resilience going forwardcI posted on twitter.

(edit: whoever moderates this forum should probably take of the ZFND tag, I haven’t been on the zcash foundation board since COVID)

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These are just two of the many ways to be eligible to volunteer as part of ZCAP.

Be sure to make it clear that these are not the only means of becoming eligible.

The eligibility criteria are quite extensive, and reducing them to just the options mentioned is dishonest and deliberately misleading to prospective readers.

Do better.

The Dev fund should stop totally

Not that this should continue.

If one is going, all must and should go.

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My assumption is that NSM already exists and is the location of least resistance. Not issuing to miners wasn’t really the goal here; the payout and conditions of the NSM are subject to change anyway. My assumption is just that the issuance has to happen anyway, so it needs to go somewhere.

Even if the ZCG funding stream is not redirected to it, the NSM will continue to exist.

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Thank you so much for tackling the moral hazard that is ZCG @maxime It hurts the fairness proposition of money to taxation without representation

This has been by far the biggest criticism from the bitcoin maxis and others outside of crypto, but familiar with the origins of Zcash. (and no - being ‘elected’ by some opaque process and Zcash Foundation isn’t coinholder representation).

The recent boiling over of funding sex workers to do big sex party events is representative of how out of touch the org is.

Part of selling money is fairness and ZCG has put us in a terrible position with many of its choices. Another is choosing to put people on ZCAP or ZCG who have been funded - you can’t have self dealing (this is just ethics 101).

It needs to be wound down.

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While I agree with killing both - they are fundamentally (both philisophically and in delivery) very different things. This should not be omnibus, it should be

  • Move ZCG funds to NSM
  • Move Retroactive Grants to NSM

Retroactive grants are voted on by coin holders. ZCG is some weird org the foundation puts people on. Very very different philosophies & practical outcomes. People should be able to choose to end one, both or neither.

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Sean’s proposal gets it right, and here’s why the 12% coinholder fund must stay.

ZCG holds $125M+, has 12+ years of runway, and too often decides against what coinholders actually want. Five people decide for everyone.

The coinholder fund is the opposite. Holders vote on every grant. Last round: $8.39M, 86% to protocol and security, including Tachyon, ZODL and Valar.

Cut the committee, not the builders.

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I support this proposal as long as the existing ZCG runway is allowed to be converted to a runway to sustain it for years as a fiat trust instead. That way ZCG gets to support years of development while still not accruing hundreds of thousands of dollars every few days.

I still argue you have a major conflict of interest, and so do every other developers, because I would like to point THIS out, that Zcash has already paid a very significant reward to its founders years ago, amounting to tens of thousands or even hundreds of thousands of ZEC, separate from the Dev Fund, to founders:

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Can you confirm that you were not a part of it? @ebfull, @joshs?

Because if you were, just because you claimed your own portion of rewards that easily outnumber an individual ZCG grant by tens or hundreds of times doesn’t mean it is fair to deny everyone else the privilege, ESPECIALLY considering that the ZCG has NEVER invested in something that would be detrimental to the protocol, has NEVER voted on anything that would be detrimental or useless solely because of the value of ZEC, and has NEVER been hasty to approve a proposal regardless of the relative amount. Even today, valued in the 9 figures, they routinely deny 5 figure proposals due to amount, making their utilisation rate lower than the most conservative hedge funds.

Again, they can always be converted to a fiat trust, where the interest on the current value will be enough to sustain the ZCG indefinitely. I have already talked about this.

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Kill both.

Zcash is money and must be pristine.