Final text of ZIP 1014

Dear friends:

Pursuant to the Zcash “2-of-2” trademark agreement, ECC and ZF have come to a mutual agreement to approve Zcash Improvement Proposal (ZIP) 1014, with a few modifications, for the “Network Upgrade 4” of Zcash, which will activate on approximately November 16, 2020.

ZIP 1014 is the result of an intensive year-long process, initiated by the Zcash community, in which a variety of proposals were introduced, refined, and selected. ZIP 1014 was the most widely-supported proposal, and has received strong expressions of support from the Zcash community as a whole. Under ZIP 1014, Zcash issuance for the next four years after the halvening will go 80% to miners, 5% to the Zcash Foundation for core support functions, 7% to the Electric Coin Company for core support functions, and 8% for “Major Grants” to support independent third parties to improve Zcash.

In deciding whether to sign off on this final revised ZIP 1014, ECC took into account many sources of information about the intentions of the multifaceted Zcash community, including the results of the Community Advisory Panel polling that the Zcash Foundation organized, the thoughtful and substantive discussions on the community forum and elsewhere over the last year, public and private feedback from Zcashers on Twitter, Telegram and the Zcash community rocketchat, conversations during livestreams and face-to-face at conferences, the (controversial) petitioning in which some anonymous coin-holders proved their collective ownership of about three million dollars worth of ZEC along with their petitions, consultations with Zcash investors, miners, companies that support Zcash or that are considering supporting Zcash, and so on.

Our goals were to honor the community’s collective intention, to serve the Zcash community and the Zcash mission as a whole, and to act as a responsible co-steward of the trademark, in checks-and-balances with our ally, the Zcash Foundation.

ECC’s and ZF’s unanimous signoff on the revised ZIP 1014 means that once Network Upgrade 4 activates, the name “Zcash” and the golden-Z-logo

can be used only to refer to the blockchain that implements ZIP 1014 in its consensus rules.

If you are a Zcash miner, you should be aware that at the first halvening in November of this year, the miners reward will change from 5 to 2.5 coins per block.

There are several modifications that we have agreed to make to the final text of ZIP 1014, based on the text of ZIP 1014 that was approved by the Community Advisory Panel, the changes to that text that were supported by the Community Advisory Panel poll results, and our own judgment about how best to serve the Zcash mission in light of diverse inputs that we’ve received.

First, the Monthly Funding Cap and Volatility Reserve is removed, having been solidly rejected by the Community Advisory Panel and the other sources of feedback that ECC received.

Second, ECC and ZF will both be ineligible for receiving funds from the “Major Grants” slice — the largest slice of dev funds, at 8%, and the one ear-marked for supporting independent third parties. This exclusion could potentially introduce a funding shortfall for ECC after Network Upgrade 4 kicks in at the end of this year, unless the price of ZEC has risen substantially by then. Nonetheless, ECC believes that it is important for the success of the greater Zcash ecosystem to send a clear message to the world that Zcash is an open and decentralized system, and that it is supported by multiple independent organizations, and therefore we’ve agreed that ECC and ZF will both be ineligible to receive funds from the Major Grants slice.

Third, ECC and ZF will each be eligible for one seat of the five seats on the Major Grants Review Committee that will decide how to allocate the Major Grants funding. ECC and ZF are not guaranteed a seat on the MGRC by the final text of ZIP 1014, it is just that they are eligible for up to one seat each. All five MGRC seats will be selected by the Community Advisory Panel.

ECC believes that allowing ECC and ZF representatives to serve on the MGRC is necessary to support transparency, accountability, and good governance over the Major Grants, because ECC and ZF are the two organizations that have the legal authority to ensure that the Major Grants Review Committee works faithfully and effectively to fulfill its mandate.

Including a representative from ECC present on the Committee would help protect the Major Grants Review Committee’s independence from ZF even though the Major Grants relies upon ZF as a fiscal sponsor and a legal and administrative home. Additionally, including a representative from ZF on the Committee in addition to an ECC representative would protect the MGRC’s independence by serving as checks-and-balances upon one another. Three out of five Committee members being independent means that ECC and ZF — whether alone or together — would not have control over the Major Grants Review Committee’s decisions.

The fourth and final change to the text of ZIP 1014 is to remove the requirement that Major Grants Review Committee use Zcash Foundation governing documents, processes, and tools. ECC supported this change in order to ensure that the Major Grants Review Committee is independent of the Zcash Foundation and can set its own policies and procedures. However, the Major Grants Review Committee still has the option to use the Zcash Foundation’s processes and tools if it so chooses.

Here is a document which shows the text of ZIP 1014 as it existed during the Community Advisory Panel polling, the changes that ECC and ZF have agreed to make, and for each change, ECC’s rationale for that change: https://docs.google.com/document/d/1qKWY35dyNepSMU_mIk3uR8c4rjox1CH4NAGKvHRS-gQ

The next steps in the process are that the Electric Coin Company will implement the necessary consensus protocol changes in its zcashd software. The final ratification and activation of this change will come in November of this year, when every user of the network chooses whether to enforce the new consensus rules including ZIP 1014 or to reject ZIP 1014 and adhere to the previous consensus rules. Based on the inputs we’ve heard from the community over the last year, we expect that an overwhelming majority of the users and economic weight of the network will support ZIP 1014 and that the result will be a regular “Network Upgrade” in which the new consensus rules go into effect and everyone follows the same blockchain.

ECC will also be monitoring and providing security support to help protect all users, whether this change goes through smoothly as a Network Upgrade or instead turns into a chain fork. Our zcashd is designed to protect users in either case, and ECC will continue to perform its security and support function, which we do all the time, including in every Network Upgrade.

The final ratification and activation of ZIP 1014 in November of this year will be the conclusion of this iteration of the process. But governance is dynamic and I expect continual improvement and innovation, just as we continually innovate in science, in software, and in the consensus protocol. I fully expect that after these changes are implemented, the Zcash community will learn from the results and will come together again to continue to improve and evolve Zcash.

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Hi,

Thanks for posting this, really curious about this though.

Who is the “we” in this statement? Was the community involved? (no i am not asking for another helios poll)

A key point of the zip, for me at least, was that the ECC would apply for MG’s. It was spoken about at length and it was never an issue until about a month ago, it was not then raised in the poll. I really would appreciate further explanation as to how this was decided upon and by who. @acityinohio can you help?

I have no issue with the zfnd not getting them, it wasn’t the intent that they would apply.

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@zooko, @acityinohio, thank you for your work and thoughts on this revision!

I have a few questions:

MG criteria omitted?

Can you please clarify what are now the criteria for awarding MGs, that should guide the MG review committee and even inform the election of its members?

The original ZIP 1014 text specifies the top-level considerations as:

Major Grants SHOULD be awarded based on ZF’s mission and values, restricted to furthering of the Zcash cryptocurrency and its ecosystem (which is more specific than furthering financial privacy in general).

(emphasis mine), but your revision removed the bold text, leaving just the vague “furthering of the Zcash cryptocurrency and its ecosystem”. That was originally a restriction applied to something much more detailed.

You’ve left the secondary considerations (well-specified work, reasonable budget review points, continual existence, ecosystem support, time priority, etc.), but these were supposed to fine-tune the high-level principles.

MG not subject to ZF constraints?

The fourth and final change to the text of ZIP 1014 is to remove the requirement that Major Grants Review Committee use Zcash Foundation governing documents, processes,

and indeed you made this change in the ZIP:

  1. The Major Grant Review 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 the ZF’s reporting requirements under U.S. IRS 501(c​)(3) operating documents or U.S. law.

But does this work? For example, if the MG review committee decides to award all of the MG budget to (say) lobbyists, which would conflict with ZF’s 501(c​)3 status, how would ZF proceed? Just execute the payment, report it and give up its 501(c​)3 status?

Remove the “maintain the existing teams and capabilities” requirement

I suggest removing the following text from the Requirements section, since it’s inconsistent with ECC no longer being eligible to apply for Major Grants, even if (due to ZEC price) this is needed to maintain its capabilities.

The Dev Fund should maintain the existing teams and capabilities in the Zcash ecosystem, unless and until concrete opportunities arise to create even greater value for the Zcash ecosystem.

BTW, like @mistfpga above, I found this change surprising and contradictory to the spirit of ZIP 1014. But of course it’s within ECC’s right to bind itself, and if chooses to do so, then I agree that it’s fine for an ECC associate to serve on the MG committee.

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I agree with @mistfpga point. I was also under the impression that in the case of a shortfall that ECC would be able to apply for a Grant to make up the difference.

If this is not to be the case, then my concern would be that the ECCs stance of “All in ZEC” will become “All in ZEC* … *depending on ZEC prices”.

I understand the spirit and the desire to get other parties involved with Zcash development via MG but adding the exclusion of the (currently) most qualified group of people who know Zcash to not be even able to apply seems to potentially be counter productive.

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Speaking for myself/from the Foundation’s perspective. Both changes you reference @tromer made were to reduce the adverse effect of some kind of negative capture of the Foundation.

Regarding the removal of the mission and values section:

From the Zcash Foundation about page:

Per our 501©(3) application, the Zcash Foundation’s mission is to be a public charity dedicated to building internet payment and privacy infrastructure for the public good, primarily serving the users of the Zcash protocol and blockchain.

This is indeed a great mission statement, but it’s not really that much more detailed than “furthering the Zcash cryptocurrency and its ecosystem.” The values section presents a great number of characteristics of the Foundation that I feel are naturally reinforced by our interaction with the community and would wind up finding themselves enforced by social consensus within the MG committee.

Meanwhile, consider the case where a future Foundation board decides to change the mission or values into something contradictory or orthogonal to furthering Zcash (well within their power to do so). Rather than deal with that contradiction, or force its will onto the MG slice, it seems better to stipulate — definitively — that the MG slice is for furthering Zcash and its ecosystem.

Regarding the change from “operating documents” to US IRS 501(c)(3) reporting requirements, this is again to prevent a contradiction if the Foundation decides to make their primary purpose orthogonal or against the Zcash ecosystem. (e.g., imagine a very captured board writing a bylaw that says “all grants must benefit Tron”).

I think this would fall under the “against US law veto” so I could imagine the Foundation vetoing in this case. (unless the Foundation decided to proactively lose its 501(c)3 status?)

I view all of these changes as supplying more independence to the MG committee, while still providing the Foundation legal/logistical umbrella.

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Thanks, @acityinohio. This makes sense: I was thinking of the values statement and operating documents as they are now, but hedging a hypothetical future corruption is an important point.

None the less, I would feel much better if the MG committee had a detailed list of guiding principles to which they are obliged, and which they can use to make and justify their decisions.

So how about just referring to (or including verbatim) a snapshot of the current ZF values? That would solve the problem, and be closer to ZIP 1014 as voted on.

As for the “against US law veto”, I’m not a lawyer but this strikes me as fuzzy: I think the ZF isn’t legally forbidden from lobbying, it would just lose its tax-exempt status if it does…

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Sure, one of the main points the ECC brought up about the MG committee structure was that they wanted the opportunity to provide a voice to the selection process. But ZIP-1014 as written prevented that, because the community/Foundation was worried about the ECC having a say on a committee where they could award themselves additional grants. On this point brought up by @Shawn:

I may not be accurately representing the ECC’s view here, but my understanding is that they thought it was more important for them — as the most qualified party — to have a voice in selecting the MG recipients (if not a majority voice), even if that meant they would be disqualified from receiving MG funds themselves. It also meant that we could apply the same restriction to the ZF — making both organizations more equal in responsibilities and restrictions, while ensuring that the committee remains independent.

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Hi Steve. The “we” in the statement is the ECC and ZF, who under the trademark agreement have to collectively sign off on what can legally be called “Zcash” under the trademark. As I said in my statement, ECC used extensive inputs and discussions with the community to make up its mind, but the final decision about the use of ECC’s half of the trademark rights was made by ECC, for the reasons given above. Your specific question about how this was decided and by who is shown in my post above: “ECC believes that it is important for the success of the greater Zcash ecosystem to send a clear message to the world that Zcash is an open and decentralized system, and that it is supported by multiple independent organizations, and therefore we’ve agreed that ECC and ZF will both be ineligible to receive funds from the Major Grants slice.”, and in my “rationale notes” document: https://docs.google.com/document/d/1qKWY35dyNepSMU_mIk3uR8c4rjox1CH4NAGKvHRS-gQ, screenshot below:

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We have three reasons we have for supporting these changes. From my post above:

All of these reasons were important to ECC’s support of these changes. For each change to the ZIP text, I put a concise rationale in the margins of the document (https://docs.google.com/document/d/1qKWY35dyNepSMU_mIk3uR8c4rjox1CH4NAGKvHRS-gQ/edit). For these two changes, the rationale text is as follows:

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Note that @daira raised several additional points in hir GitHub comment.

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I’m very pleased with this result.

Huge congrats to ECC and ZF for making some amazing governance breakthroughs!

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It looks well balanced to me. Congratulations.

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@tromer’s proposal at https://github.com/zcash/zips/pull/324#issuecomment-586553020 is to copy the existing values, stripped of references to ZF. So, any changes by ZF would not affect the values applied to the MGRC. Speaking for myself, I support this change. Speaking as ZIP editor, it appears to address the responses on this point made so far, and it reduces the semantic delta from ZIP 1014.

However IRS 501( c)(3) imposes obligations other than reporting requirements. I’ve attempted to address this here.

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Hi Zooko,

That is a shame. I don’t think the risk outweighs any of the benefits, but I have said that before. so I don’t really see the point of going over it again in detail.

The reason you have given for the ECC’s decision feels like distribution virtue signalling/theatre. (not meaning to sound harsh, I genuinely don’t have the vocabulary to express what I am trying to say in a better way.)

I deleted the post I was going to write about alternative verticals for the ECC through MG recipients. I guess I should start it again.

As a community member that was pretty heavily involved and voted in all the helios polls, had I known this earlier in the process, I would have changed my votes in various different polls. (I thought I had more of a grasp of the situation.)

  • I would have voted for giving the ECC 50% had I known for certain that they would not apply for major grants. (I voted for 35% on the basis that you would apply for grants, because you cant afford not to without a price spike.)

  • I probably wouldn’t have supported the zip in the initial helios poll. (back in nov?)

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It’s a bold move, a strong message and surprising. After years of crap regarding FR it will be great to leave that behind, hopefully the market gods will ensure there’s enough to keep ECC on track.

The ‘one seat each’ on MG Committee is elegant, really like that.

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I would have liked to see ECC get a higher percentage, but if the Major grants committee does a good job with the extra funds it may increase the price of zec so much that it offsets the reduced percentage.

Personally I’d also like the committee to be as open with the community as possible.

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Congrats, can’t wait to see how Zcash improves and evolves.

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I updated the brief history of Zcash decentralization post with the new timeline and structure. It’s now shorter, so we must be doing something right. :smile:

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Congrats all, it’s great to see the progress that has been made in this community. I voted in all of the polls and was involved in the Powers of Tau ceremony, but have been largely silent (publicly) in this process.

Like others, if I knew ECC would not have access to major grants I would have voted for them to have a larger slice. But onwards and upwards, I think “governance fatigue” hits the nail on the head and I’m looking forward to seeing the focus shift back to other areas.

Finally I’d like to say thank you to tromer for all of your efforts, I believe you were instrumental in understanding and articulating the mood and desires of the community (speaking for myself in any case!).

Anyway, back to the shadows, carry on!

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Hi folks, I’ve just caught up with this thread (as of today).

There’s a substantial technical issue I’m seeing: the google doc link to here in Zooko’s post described as a rationale does not have the rationale for the edits!

I asked Zooko about this, and he said it was a technical snafu. His intent was to show Google Doc’s “suggested edits and comments” mode, but that seems lost in the public link. Below the original post in this thread he fortunately includes some screenshots.

Do we know if those screenshots capture all of the rationale text? Does anyone have access to the rationale text they could repost directly here (rather than in screenshot form)? (Edit: I noticed that there’s a history widget, but I cannot view that. “You must be an editor to see this document’s view history”)

I consider this important enough to post about, because rationales remain valuable over long time spans.

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