Future of Zcash dev funding — megathread / everything in one place

Nathan’s quick-and-dirty guide to the ZIP process: Proposal authors, please read: Help making ZIPs

@mistfpga @jj6 @amiller @dontbeevil @boxalex @SydneyPete @anon16456014 @aristarchus @Autotunafish @Shawn @cburniske @mlphresearch @ChileBob: You don’t strictly have to decide right now, but the sooner you make a decision about whether you’re going to steward your proposal toward becoming a ZIP, either on your own or in collaboration with others, the more time there will be to make it a strong ZIP and work on getting buy-in.

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I will do mine, but as pointed out by Daira, I don’t think @jj6 uses the forums much. Can this be message be replicated on GitHub please.

We might be able to come to consensus on what each one of us is trying to get across, that being said. I have noted some potential differences in a response to Nathan. I will edit my zips and then edit this with either the link to the thread about mine and @jj6’s proposals.

If people want help with their zips, or feel they want someone to follow through on their zip, message me and we can sort something out. I will champion zips I disagree with to the best of my ability.

Basically anything I can do to make this happen, I will. just ask.

EDIT: Done.
@sonya - These are the differences I see, - Dev Fund Proposal: No dev dund, let FR expire, market decides

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I think my proposal fits better as a component of others. Its not even close to a complete proposal, its just an attempt to add time based parameters for block funding that others may find useful.

If anyone would like to merge my idea I’d be happy to explain it further.

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Do you think it fits with my ideas? I am open to all suggestions. but core values cannot be broken.

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Not really.

Mine assumes a continued funding stream from block rewards (with some extra parameters), whereas yours are the ‘status quo’ or on a ‘voluntary’ basis.

Differing ‘core values’, so we’ll just have to agree to disagree :wink:

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Sure, but I will try to work it in either as an objection or maybe as a mechanism for getting that funding from transaction fees.

constructive disagreement is the way forward. but probably not in this thread. when I have typed up my proposals I will ping you if that’s okay, and see what objections or adjustments I can do.

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Any selection/voting/polling process defined yet?
I mean bevor we all put more efford, time & thoughts into proposals wouldn’t it make sense to have first a decision on what the process is and how a the final proposal gets decided/elected/voted/whatever?

Or what’s the deal with having 10 proposals but not final decision design? Or do i miss something somewhere? Just asking bevor i even consider any further work on the proposal…

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Do you mind pinging @jj6 on GitHub yourself, to see if they’re interested in working with you on a ZIP?

I want to do targeted outreach beyond the forum in general — for example, what does Grayscale think? can we get Bitmain to weigh in on how they’d react to various scenarios? — but I’m worried that y’all would see it as a conflict of interest, or an attempt to push institutional interests over other Zcash stakeholders’ interests.

What if I drafted an outreach message, used the same one on every recipient, and told all of you exactly who I contacted? We could even crowdsource a list of people and organizations to contact. I’d love to know what @__tm3k (very active Zcash enthusiast on Twitter) thinks, for example.

I’m not sure about sharing people’s answers, though. Maybe give them several options, like 1) public answer with attribution, 2) public answer without attribution, 3) shared privately with the Zcash Foundation, etc.? I’m open to suggestions, and I’ll run ideas by Josh C.


@acityinohio is working on it. Ultimately the decision will come down to the ZIP process, as defined in ZIP 0. The open question is how to synthesize and interpret what the Zcash community wants, in a legible and reasonably accurate way. Especially since the community is not restricted to the set of people who speak up publicly, either on this forum or elsewhere. This is particularly hard because there’s no unanimous position.

A reason to push on turning these proposals into ZIPs is that willingness to do so = skin in the game via time investment. Which proposals gain champions is a signal in-and-of itself.

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I decided, based on feedback, that my proposal was not secure enough to be used as a voting mechanism. So I won’t be putting it forward for a ZIP.

But I still think a 9-10% development fund (from mining rewards) for a set period of time (not indefinite) is worth looking at. I will have to re-read the proposals to see if any of them are close to that, that I could help support.

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I agree. Somewhere between 5-10% I would support for the next 4 years.

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-20% dev fee
-Mandatory 8% dev fee to ECC and about half of which goes to the ZFND depending on the public support test (4%/4%)
-Choice/burn 12%
The only part of the specification where I believe that I’m flexible is the 12% choice and in the thread I asked for input on whether or not that is an appropriate amount and received no feedback so nows your chance
(The large Choice portion complements the public support test because receiving a large portion of funds from a single entity could cause the ZFND to lose its 501 c 3 status, this is also why it is about half, the amount must be adjustable to accommodate this requirement)

  • 4 year timeline with
  • the choice recipients being decided in the same manner as these proposals (will be decided like the ones before)
  • the timeline for selecting these recipients should be an increment of 6 months to coincide with regular upgrades (as an upgrade may be required)

The rest was technical aspects of the choice Dev fee for the individual Miner but that’s it

This proposal will be proclaimed in a zip “as is” unless input necessitates it changing

It seems slightly absurd to me that any future changes to the Zcash protocol should be concerned with the vagaries of US tax law. Surely if this is an issue then change the structure or simply move the Foundation to a different jurisdiction?

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I don’t think 501 c 3 Charities exist outside of the United States probably other types but I guess that’s up to the foundation
Maybe someone with more knowledge could help specify but to my understanding this is how it works

It is kind of a new issue, the way it is now as many different contributors donate and it’s not a problem, but the ECC a single entity contributing a large quantity of funding to the ZFND is a new problem
(You know I’m not going to lie the thought did cross my mind about whether or not anybody ever questioned the founders would or were actually paying their promised amounts…
Could be a literal 100% no-op and leave all the founders addresses and just ask them to nicely pay you know half here and half there, they always did before right? It’s either that or we got to go around the tax law and/or allocate a large amount of a choice quantity to ensure that enough people actually choose to donate so that it can receive it’s full of appropriated amount)
This is why I advocate for a 12% choice but am open to suggestions specifying otherwise

The only people that this proposal could even potentially affect negatively, financially are miners, everyone else benefits
(And you know what they probably benefit too because it very much stands to reason that at the having the value of zcash will increase and even though the miners are doing more devfee work their profitability will still be higher)

Zcash miners are the reason we have nice things, they choose to mine zcash and in doing so perform a great service for the community and I don’t believe it a disservice to alot them a choice in the matter of where their fee goes even though it’s asking a greater portion because ultimately it only goes to increase the value of what they mine which is what they want anyways
I hobby mine with a z-9 mini but I would gladly choose to fork🍴 over another couple of minutes every round to ensure the future of Zcash and of the mission

I don’t really understand what the benefit is of funneling through ECC versus funds going directly to ZF from block rewards? (Within the internal logic of this proposal, please no one assume that I’m endorsing rather than asking a question)

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Think its because it allows ZF to be ‘defunded’ as they don’t have control of their income - which means they pass the ‘public support test’ required for 501c3 (which seems horribly complicated & daft)

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I don’t think any proposals on a possible development fund need to be concerned about the Zcash Foundations 501c status.

Being a 501c is a tax advantage for contributors and has other benefits. However, if for some reason the IRS designation had to change in the future that would not prevent it from distributing funds it received to development efforts as agreed by the community.

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It all hinges on whether or not a mandatory devfee for the foundation would be considered a charitable act though it was mandatory i.e does the choice to mine zcash also represent the choice to donate? I suppose it should and maybe yall are right but it doesn’t seem like something you should just leave to chance

I don’t remember anybody mentioning being able to claim the zcash development fee on their taxes because if it was a charitable donation (especially to a 501c3) you absolutely could do that

Not saying it’s a problem, that would make things a lot easier, I’m just not sure about how that works
If the mandatory devfee constitutes a charitable donation then yes we don’t have to funnel it through the ECC but if it doesn’t then you got to somehow ( there’s nothing really beneficial about it it’s just required or maybe it’s not)

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I just readed a bit into the Foundation 501 c3 requirements, possibilities and such with my morning tea.
Here some (maybe) interesting things to have in mind that could answer some of the questions/concerns raised in the last post. Of course an expert lawyer may be the best advice but i think we get a good picture allready with this:

==>

In order for a payment to be a tax-deductible charitable contribution, the payment must be a voluntary transfer of money or other property that is made with no expectation of procuring a financial benefit equal to the amount of the transfer.

A public charity, identified by the Internal Revenue Service (IRS) as “not a private foundation”, normally receives a substantial part of its income, directly or indirectly, from the general public or from the government. The public support must be fairly broad, not limited to a few individuals or families.

Thoughts: Funneling through the ECC might be an even worse design if we read the above. A public charity should receive it’s funds from the broad public not from a few individuals. This could be even now a concern as the foundation gets their funds from a few founders. Of course i’am assuming here that the Zcash Foundation is a public charity and not a private foundation.

I tried to check what exactly the Zcash foundaton is upfront but unfortunatly none of the links of the Incorporation Secion on the Foundations page is working for me and all seem broken!

However, in the about section of the Foundations page it’s stated: our 501©3 application, the Zcash Foundation’s mission is to be a public charity… so i assume it’s a public charity.

Here some other interesting articles i found that might be related to to the ongoing discussion:

Public Charities …Another restriction is the 33% of revenue raised for the organization must come from diverse individual donors, other public charities or the government (ie. one organization cannot entirely fund a nonprofit organization). This helps to eliminate a corporate or personal influence over the work that the nonprofit is doing.

The exact percentage of revenue that must come from the public has to meet IRS standards, either by a 33 1/3% test or a facts and circumstances 10% test.

==> This means 2 things in my opinion:
1.) The solution of funneling funds through the ECC might not be an option.
2.) The current funding might as well be border line. While technically several founders fund the foundation the real source is only 1, the Founders Reward (which to my knowledge gets just splitted afterwards to the founders). This might be safe and up to interpretation but i could imagine it’s not the optimal design either.

The “public” in “public charity” refers to the solicitation of periodic donations from the community. The amount of these donations is used to determine a quantifiable intensity of public support, which is necessary in order to achieve status as a “public charity.”

An organization will be classified by the IRS as a public charity if it
receives a certain percentage of its total support from government
sources, other public charities, or from a broad base of individual donors.
Nonprofits should be aware that achieving public charity status based on
public donations is a complex calculation and early consultation with a tax
professional is recommended.

==> In my opinion the foundations own proposal with opt-out could be problematic here and opt-in might be the more safe method/design. I thought a lot about the differences of opt-in and opt-out in relation to a donor and i have concerns that opt-out is not safe enough to qualify it as a real donation:
Reason: With opt-in the truely and only will of the donor is to benefit the foundation or whoever the donation receiver is. With opt-out and especially with the foundations proposal of opt-out or burn the donar has only 2 mandatory options that anyway will deduct his earnings. Either way he will lose part of his earnings, that’s not true volunatary donating in my opinion and could be a legal problem.

Do you remember the donation options you had on ebay with the possibility to mark an organization and donate a dollar or so? How would it look like if at checkout you get confronted with it with the options a.) Donate to Charity A, b.) Donate to Charity B, c.) Let us throw away your $1. Means either way mandatory the client, in our case the miner, has to pay $1, there is no longer a voluntary and donation principe granted in my opinion. At least something to consider and or to consult a lawyer.

Just reading a bit more into foundations in the US.

This could as well play a role when deciding from where the funding is coming:

UNRELATED BUSINESS INCOME IS TAXED
… Business activities do not become “related” to the charitable purpose just because
the proceeds are used for the exempt purpose. The IRS defines an
organization’s activity as unrelated business, and hence subject to
income taxes, if it meets three requirements:

  1. It is a trade or business;
  2. It is regularly carried on; and
  3. It is not substantially related to furthering the exempt purpose of
    the organization.

Not sure if mandatory mining rewards would fall into this category. Just something to consider maybe???

I think there is a valid reason that at least the portion of funding that is dedicated for the foundation should be a concern to US tax law IF the foundation IS in the US jurisdiction. The most important factor here is NOT to lose the tax exemption status which should be a more than valid argument to take it into consideration when discussing different proposals that could or might hurt this status.

There are for sure foundation types very similar to the 501 c3 available across the world. But many countries may have restrictions as well for if foreigners (i guess all foundation board memebers are US citiziens) can just register a foundation like that. This would even begin with the adress you need to have ouside the US somewhere and for sure not limited and possibily to other language, other tax regulation, other anything. It would even result in a replacement of the current foundation as a new foundation anywhere would be a new legal entinity. I’am not sure this should be wishable and optimal and not raise other more important concerns and drawbacks than it would eventually give benefits.

In my opinion the US tax law leaves enough room for the foundation to operate absolutly as it should, enough you follow the logical restrictions the IRS has in such cases, many of which i just posted above.

Just some thoughts regarding the discussion.

Then the development fee should be tax deductible, I provide information in exchange for zcash and I claim that on my taxes as income
If I perform work and contribute to the founders reward of which there is no reasonable expectation of a return, then it should be tax deductible ( I’ll have to look into this)
The question is whether or not opting in to mine zcash also constitutes the choice to contribute ie I choose to mine zcash and there are no further choices
or are they two separate choices with which the latter you just don’t have a say in

The only reason this isn’t a problem now is because the multiple founders constitute that “funnel”, there’s nothing written or holding them to contribute nor could there be

(if you think I’m going on about all this for my own benefit you’re wrong, I got better things to do with my time pull your leg about taxes)

Correct me if I’m wrong but dont contributions to a 501 3 C all require reporting correct? So you have to know where it’s all coming from in some way?

I suppose this could work but only if all of the miners submitted their personal information to the zcash foundation for the zcash foundation to do their own taxes, it wouldn’t matter if they were American or not the foundation just has to prove where its money comes from
So without a “funnel” all the miners would have to report information to the zcash foundation and the protocol would have to disallow mining unless that were true