Future of Zcash

[zydeco1]

I am sorry I will not be able to be with this community during Zcon4. There are some hard discussions ahead.

The halving nears, at the same time as founder’s reward renewal discussion, and what I expect is a likely outcome that in some way results in an outcome where the number of recipients grows, and should be expected in a network that aggressively aims at increasing decentralization.

If the community decides to renew the dev fund, then half the dev fund reward from before is then distributed among a bigger group of recipients. In a bear market. How about that.

So now what.

We need people to use Zcash. We need them to use it in a way that looks like salmon running up a river in spawn season.

If our thesis is that we are only private money, better than the vastly more popular bitcoin thesis as private money, and better than the vastly more used Monero as private money, and we hold onto a hope that this idea is our only focus, I don’t see a future.

If our sales pitch is instead that we offer privacy to DeFi (which is the best defined use case for crypto thus far) whether through ZSAs or through programability, we can win that on-boarding thesis.

We can pitch the world on why we are superior to Railgun and why we are superior to Secret Network and why we are superior to DarkFi. Those are easy to win.

Let’s stop focusing our tradeoff decisions with an obsession that we will convince the world we are the next bitcoin.

[GGuy]

Thanks for your thoughts. I agree with much of what you said. I’m supportive of a continuation of the dev fund, more recipients, and more features/instruments.

But I think there are a few questions we need to ask ourselves as a community.

Is a continuation of the 20% dev fund enough?

Undoubtedly no. Especially if we want to continue innovating not only with more features but also core work like scalability.

@GGuy

For lack of a better value I’ve started at $30 with an increase in ZEC price of 30% per year.

+------+-------------------+--------------------+------------------+------------------------+--------------+
| Year | Total ZEC Reward  | Miner ZEC Reward   | Dev Fund ZEC     | Projected ZECUSD Price | Dev Fund USD |
+------+-------------------+--------------------+------------------+------------------------+--------------+
| 2024 | 1244107.5         | 995286             | 248821.5         | $30                    | $7,464,645   |
| 2025 | 655948.8          | 524759.04          | 131189.76        | $39                    | $5,116,400   |
| 2026 | 655948.8          | 524759.04          | 131189.76        | $50.7                  | $6,651,320   |
| 2027 | 655948.8          | 524759.04          | 131189.76        | $65.91                 | $8,646,717   |
| 2028 | 584368.2208       | 524759.04          | 116873.64416     | $85.683                | $10,014,084  |
+------+-------------------+--------------------+------------------+------------------------+--------------+
|                                                                                     Total | $37,893,166  |

That’s not even enough to fund ECC and ZF let alone ZCG. If we truely want any sort of innovation I believe we need to increase the dev fund.

We want a smarter Zcash, but to what end, and for which users?

I personally believe the smart contract movement has shown some patterns around what contracts they want… 2 of the main ones are financial instruments, and governance instruments. I don’t think my specific predictions will be helpful to anyone, but I believe if we take note of early trends like these we can better target Zcash for the users of today, and tomorrow.

Who/how/what/when should we build a smarter Zcash?

Personally I think we should build for the users stated above. Those who need financial instruments, and those who need governance instruments. I haven’t looked myself but a huge portion of contract development must be a subset of the well known financial and governance instruments.

For example, if we look at finance specifically we can see many features built out with smart contracts.

• Options
• Collateral, Lending, and Borrowing
• Insurance
• Derivatives
• Stablecoins
• Decentralized Exchanges (DEXs)
• Asset Management

So there are of course 2 ways to achieve these feature. Programmable smart contracts, or implement specific and targeted Zcash financial instruments. I’m going to look at the second.

I hope many of us already assume implementing specific instruments is a good idea. We funded QEDIT to do this very thing with atomic swaps! I haven’t quite got my head around their high level description but it does appear, in terms of financial instruments listed above, they are thinking about (on-chain) locked collateral against an option a recipient can execute. It’s not yet clear to me how QEDIT intend to implement this and if users will have access to these low level locking and option features .

For example, could we, in the future, allow for large time locks and options that allow for long term hedging/investment opportunities? How cool would that be ?!?! What about conditional options so there can be native Zcash insurance providers ?!?! What about synthetics (think makerDAO) that allow users to claim the underlying collateral ?!?!

Anyways, that’s my dream . Who’s ready to dream with me?

[noamchom]

@zydeco1

We can pitch the world on why we are superior to Railgun and why we are superior to Secret Network and why we are superior to DarkFi. Those are easy to win.

The world doesn’t know or care about Railgun, Secret, or DarkFi, so I don’t see any value in hypothetically trying to corner the hyper-niche markets that those projects are theoretically building to serve. Zcash is an enhancement to Bitcoin with cryptographic features that are the leading edge of that mathematical realm. The pitch is simple, Zcash provides users with anything that they love from Bitcoin (with Store of Value being the only major exception) and more by way of encrypted messages and fully private wallet assets/ transactions.

[Beth]

This is a super interesting thread to me so I wanted to jump in with some thoughts of my own.

From my perspective, what drives the most value for communities is utility and extensibility because these things naturally drive engagement. Keeping users engaged is critical for longevity. Zcash falls short in both of these realms right now. These are the two specific things that we all should be focused on solving for.

I think that Bitcoin is great as a store of value but the notion that Zcash can survive just off having similar functionality to BTC with encryption is a fallacy. All technology advances and evolves. This industry is advancing and we aren’t keeping up, the explosive growth of Defi and the funneling of VC funding into DeFi tech really proves this.

I think that we must absolutely continue the dev fund because there is no one waiting in the wings to take up the torch if ECC and ZF lose funding. I am opposed to increasing the % because I think we risk alienating miners and would only feel comfortable enough with this if the mining pools signed off on it, which feels unlikely.

I think upon the dev fund renewal we as a community need to take a hard look at the governance structure, how we allocate funds, and how we hold recipients accountable. Any organization that is taking ‘public funding’ (which is exactly what the dev fund is) has an obligation to deliver to the community and should be replaced if they fail to execute to a reasonable industry standard. I think some of the things we should consider for dev recipients are:

1. Creation of a community board of directors OR a minimum of two seats on the current board of directors for ZF and ECC that are community elected. I see this a valuable way of ensuring direct accountability to the community because it grants them direct oversight into the runnings of recipient orgs.

2. The community should retain the right to vote the leadership teams of recipient organizations in or out of their positions if they fail to deliver on timelines and strategy. if folks are uncomfortable with the idea of replacing leadership we could also implement a monetary clawback for failing to meet expectations. For example, if an org misses the delivery deadlines for releases, their funding could be paused or reallocated to others.

3. Finally, there needs to be line item transparency into how public funds are allocated and spent within organizations. Similar to how publically traded companies have made executive salaries public - leadership at these orgs that receive public funding should be the same. I am hesitant to extend that to individual contributors as well, but that is potentially another option as well. Additionally, the accounting of financials should be more detailed in general. What is spent and how it aligns with strategy is important.

One thing I really appreciate about the Zcash community is how thoughtful and solutions-oriented everyone is. I think we have folks with great ideas and making sure that resources are funneled appropriately to make the most of those ideas is crucial for continued growth.

[GGuy]

@Beth

I am opposed to increasing the % because I think we risk alienating miners and would only feel comfortable enough with this if the mining pools signed off on it, which feels unlikely.

Hey Beth just wanted to touch on this point because you have far more insight into this then I do having talked to so many people. It’s my understanding that ZEC being $30 instead of $300 is far more alienating for miners then wether the % of reward is 80% or 70%.

It’s also my understanding that there is a strong correlation that the more total intelligence working on a project often correlate with the success of a project.

• More money = more intelligence working on Zcash
• More intelligence working on Zcash increases the chances that Zcash will be successful.
• Zcash being successful = higher ZEC price.
• Higher ZEC price = more total mining power.

I think keeping the dev fund at 20% risk another resource action, this time for both parties. This would basically halve the total intelligence working on Zcash which I believe would be a really bad sign for Zcash . It’s my belief the dev fund is in the best interests of miners .

But on this topic I’m very open to the idea of us reaching out to miners, giving them the heads up a dev fund increase could happen if the community votes on it, and asking if they have opinions on what is the best use of the ZEC . Letting them know we are committed to making sure ZEC doesn’t go to $0 might be seen as a good thing .

[joshs]

I tend to agree with these thoughts @GGuy

We encouraged miners to submit feedback on the last dev fund, with minimal engagement. It’s been my experience over the years, that the ASICs mining community that came in after GPU miners in 2018 has been far less engaged and consistently communicated that they sell their ZEC for fiat and/or BTC. They are quite literally “coin operated,” due to near term financial interests.

I have heard some concern about PoS (mostly from Bitmain, who sells Zcash ASICs) but was told by one large miner that they don’t see it happening in the short term, and therefor not concerned. They were most interested in any near term forthcoming announcements that might impact the coin price.

Perhaps a question for the community to answer is how much should be allocated to securing the network (also considering the cost to do so and miner alternatives/incentives) and how much allocated to fund development and support. If someone has any good analysis, I’d love to see it!

To your other post @GGuy, I believe the current 20% dev fund was arbitrary and anchored to the previous founder’s reward.

[earthrise]

@zydeco1 you make a good case for supporting private DeFi. I think it would be awesome if Zcash brought privacy to that kind of functionality.

A key reason smart contract platforms like Ethereum have been so good at attracting developers is that they have great tooling and libraries. You can write and deploy a simple contract on Ethereum in like 30 minutes because the tooling and docs are so good.

So, to replicate that success in Zcash, I think we’d need equally good tooling and docs. We don’t yet have good tooling, libraries, and docs for the protocol features Zcash already supports, so I’d recommend starting there—make it really fun to build stuff on the current protocol. Then we can spin up a feedback loop between Zcash-user devs and Zcash’s protocol developers, and feature requests like performance improvements and DeFi will emerge naturally out of that feedback.

Protocol upgrades are really costly (there are only a handful of people in the world with the skills to do it), so the tighter we can make that feedback loop between Zcash-user-devs and Zcash-protocol-devs, the more cost-effective our core protocol upgrades will be.

[zkcroc]

I agree with @zydeco1 in that programmability is important for the future of zcash, bitcoin was a completely stale blockchain until recently with the wave of ordinals, therefore zcash should strive for more than to be a better version of bitcoin, as that won’t cut it in terms of getting people engaged. I imagine it would allow for easier blockchain interoperability

Having a look around at other projects token allocations, it’s not unusual to see 50% of the total supply allocated to development, so I would also like to see an increase in the development reward, the trade off in POW is how much hash power are you willing to sacrifice to get that income and what happens when POS is built…

If I had my way I would

• Increase the dev fund to x% (after consideration to security etc)
• Re-jig the ZCG scheme, turn it more of a fund manager of the entire dev fund, but still allow outsiders to apply for funding of ideas, possibly with a mandate of this body to use between 50% - 80% of the treasury per year (saving some ZEC for the transition to POS)
• Create a 2 or 3 extra development teams outside of the US
• Ramp up development of POS and programmability
• Create Zcash DAO
• Let stake holders determine what is important and vote on outcomes of where funding is spent

[aarnott]

The Zcash ecosystem provides a lousy experience for currency today. And I say that as a lover of Zcash. I’m a software engineer and understand many of the intricacies of cryptocurrency and yet the best Zcash wallets still have behavior that can sometimes puzzle and alarm me.
I occasionally press upon family to the point where one of them will humor me and pay me or accept payment in Zcash. But as I hand-hold them through crypto-exchanges, the odd and sometimes terrifying behavior of wallets, and later tell them what this means for their tax reporting, I feel I’ve done them a great disservice by asking them to humor me.

The greatest success for Zcash or virtually any cryptocurrency IMO would be for folks to be able to keep and spend it regularly, and for it to calm people’s minds when they might be afraid of inflation or banking discrimination. IMO Zcash should nail this use case, in all respects.

1. Make fast syncing (e.g. YWallet warp-sync), user friendly (e.g. no one) wallets. And these must automate and track virtually everything required to help the user fill their tax obligations on their tax return. This means actually storing more than what the blockchain stores, and allowing sync/export of this data to other devices like full PCs for import into tax prep or other accounting software.
2. Make POS software that actually work for merchants. Actually interview merchants as customers and build something they’re willing to use. It would have to handle returns, discounts, irate customers, liquidating ZEC at a configurable interval. It should display a QR code that makes payment as easy as touchless credit cards. It would have to include documentation for training the POS clerks… just to get started. The existing cryptocurrency POS solutions tend to omit Zcash, or don’t support shielded receiving addresses, and they erode the draw of avoiding credit card fees on merchants by imposing their own.
3. Pay lobbyists if we have to, to push for regulation and legislation that makes using Zcash in reasonable and easy ways lawful for both customers and merchants. This may mean removing the requirement to track every single acquisition and dispensing of ZEC for capital gains/loss reporting (in the US, at least).
4. Have a confident, clear and concise answer to the scaling problem for when we have 1000s of transactions per second.

All these other use cases like ZSAs, contracts, etc., should be deferred to later. If we succeed at placing Zcash front and center as the best and most used (crypto)currency, its coin price will be so high that the dev fund could easily subsidize development of these additional use cases.

[noamchom]

@GGuy

It’s my understanding that ZEC being $30 instead of $300 is far more alienating for miners then wether the % of reward is 80% or 70%.

100% second this notion. The borderline existential crisis of today has everything to do with how lowly ZEC is being valued by the markets.

Increasing the % per block would be an exercise of rewarding the undesirable outcome(s) of the past 4 years under the current protocol. It feels to me like common sense that as a majority, neither the miners, markets, or even Zcash coin holders would support that path for the future. This ecosystem will serve itself best, and communicate positive ideals, by embracing meritocratic aims and actions.

As an intelligent community, we understand that not all problems can be solved by throwing more money at them

@Beth

I think that we must absolutely continue the dev fund because there is no one waiting in the wings to take up the torch if ECC and ZF lose funding.

Ending the block reward protocol in November 2024 doesn’t end the ECC or ZF or ZCG funding instantaneously (particularly speaking, if Zcash arrives at Proof of Stake within the next 2-3 years).

In November 2024, all three of those organizations will have conservatively speaking 5-10 million dollars of treasury (65% ZEC, 35% cash) even if they keep current operating expense levels. Supposing only that ZEC could reach $100 per coin in the future, those treasury values jump to the 10-15 million dollar level (which is an additional ~2-3 years worth of opex coverage).

The debate about ending the block reward in November of 2024 is not the same as snapping our fingers and making all three groups and their treasuries vanish tomorrow, I feel like I’ll be debating against this over exaggerated black-white framing for the next year

To your other points Beth, about accountability and transparency - also I 100% agree

[GGuy]

@aarnott You made some awesome points and I agree with most of them. I think Zcash’s adoption for payments is by far the most important thing we should all advocate for. I really hope @zancas is listening in as he loves good feedback about what we should prioritise in a wallet .

@aarnott

All these other use cases like ZSAs, contracts, etc., should be deferred to later.

Unfortunately while I agree with most of your post I don’t understand why we have to defer these other things till later?

We don’t have enough funds?

Increase the dev fund . Problem solved.

ZSAs, contracts, etc are a distraction?

ZSAs and other smarter features are currently being developed primarily by QEDIT. While there is and will be involvement and collaboration with the ECC and ZF node/protocol development teams it doesn’t impact on the core work you mentioned above (e.g. wallet dev).

We don’t need ZSAs yet anyways?

I believe we definitely do need ZSAs for the issues you raise above. When I attempted to drive adoption of a drinks fridge within my workplace many issues were raised. Acquisition and disposal of ZEC, tax implications, and price volatility came up. Unfortunately while I am an advocate for using ZEC the hard reality is fiat is used to purchase the drinks to restock the fridge. I believe stablecoins could be a really good answer to these concerns. It’ll depend on your local tax laws. But if we can squash the tax and volatility concerns, and make acquisition of stablecoins easier then ZEC I believe everyone is a winner .

[zancas]

I am biased by my commitment to the Zingo Labs communities, but I strongly agree with this analysis. Hopefully the efforts we have aligned with these points will be publicly available soon!

I published a link to @aarnott 's post here:

You're invited to talk on Matrix

That room is bridged to a few different chat protocols. Let me know if it does(n’t) work for anyone!

[zancas]

If there’s a fast intuitive wallet soon, then we’ll no longer have an unknown around resource allocation for that necessary component of our community.

I think that the community’ll have such a thing that is satisfactory for more users, soon. I doubt that more resources (particularly resources which won’t actually disburse until after some lag time) will accelerate the production of those features.

TL;DR If someone’s trying to figure out how to allocate resources 3-6 months out, I’d bet on a fast-intuitive wallet existing by then.

[noamchom]

As a Gemini app user, I would strongly encourage all wallet builders to consider how far ahead Zcash could be if Gemini alone could build in support for fully shielded transactions and their memos.

Gemini app on iOs gives me everything i need but fully shielded features. I can send fiat and buy more ZEC, I can spend/ send my ZEC to third parties. I can review crypto industry news, I can buy other altcoins. Everything that a user or even a merchant needs for a typical experience is available.

I’m still stumped about why the Zcash ecosystem has so many disparate wallet building activities happening, yet to my understanding none of them have a direct fiat-market-ZEC feature in sight.

Global Zcash users would be much better served if we were able to ask nicely and support Coinbase, Kucoin, Kraken, and Binance to also upgrade their app wallet services to support Shielded Zcash. If the 5 major crypto broker applications picked up shielded support, then we would instantly give coverage to more than 90% of all Zcash owners.

If we want Zcash to go mainstream it needs a mobile app with 3 core features

1. digital fiat deposit
2. a market for turning fiat into ZEC
3. all shielded and unshielded ZEC features

If those 3 features aren’t on the roadmap ahead, then it might be time to ask the tough questions.

[aarnott]

Unfortunately while I agree with most of your post I don’t understand why we have to defer these other things till later?

Two possible reasons:

1. Limited dev fund means we should focus on fewer things. If folks can do it with the limited resources, then fine.
2. Increasing the use cases for a block chain that cannot yet scale is a recipe for driving transaction fees higher, thereby throttling the use cases that we should excel at. For example, I’ll never pay with Bitcoin on their L1 blockchain because fees are too high and confirmations too slow. I’d hate to see that happen to Zcash. Once we solve the scaling problem, adding use cases that may flood the chain may be fine.

I believe stablecoins could be a really good answer to these concerns. It’ll depend on your local tax laws

That’s a really good point for ZSAs I hadn’t thought of.

[noamchom]

If I understand the technical presentation well enough, Recursion for proof(s) at the protocol layer is our scaling solution. But the problem right now is that the work of actually building in the technical infrastructure for recursive proof/ proving isn’t on the ECC roadmap for the next 4-5 years (if at all, somebody correct me if this is wrong).

I’m talking about Sean Bowe and others’ work:
You Can Now Prove a Whole Blockchain With One Math Problem – Really - CoinDesk
Explaining Halo 2 - Electric Coin Company

[aarnott]

Yes, that’s “the solution” I’ve heard of as well. But its deferred schedule is concerning. As is the practical implementation of that problem. What would the user experience mean? Does this mean that it looks and behaves like Bitcoin LN? If so, that’s (IMO) a terrible user experience. Do we have a disorganized set of L2 chains, each with their own scaling problems, but periodically confirm against the L1 chain? I’d really like to see a coherent, complete presentation of what the UX might be for this, even if the code won’t happen for a long time.

[joshs]

@noamchom

In November 2024, all three of those organizations will have conservatively speaking 5-10 million dollars of treasury (65% ZEC, 35% cash) even if they keep current operating expense levels. Supposing only that ZEC could reach $100 per coin in the future, those treasury values jump to the 10-15 million dollar level (which is an additional ~2-3 years worth of opex coverage).

Unfortunately this is not the case for ECC at today’s ZEC price. At current price and spend levels, I believe we’ll be under $1M.

[joshs]

@earthrise

So, to replicate that success in Zcash, I think we’d need equally good tooling and docs. We don’t yet have good tooling, libraries, and docs for the protocol features Zcash already supports, so I’d recommend starting there—make it really fun to build stuff on the current protocol. Then we can spin up a feedback loop between Zcash-user devs and Zcash’s protocol developers, and feature requests like performance improvements and DeFi will emerge naturally out of that feedback.

Protocol upgrades are really costly (there are only a handful of people in the world with the skills to do it), so the tighter we can make that feedback loop between Zcash-user-devs and Zcash-protocol-devs, the more cost-effective our core protocol upgrades will be.

This resonates. We ran a hackathon with Gitcoin in 2020 but were challenged to find many participants because of the difficulty and deficiencies highlighted here. Good tooling and docs would be a good step forward, and it’s one of the reasons we’re continuing to focus on delivering world-class SDKs.

[joshs]

@noamchom

As a Gemini app user, I would strongly encourage all wallet builders to consider how far ahead Zcash could be if Gemini alone could build in support for fully shielded transactions and their memos.

Curious, in the case of Gemini, you get a lot of privacy, except from Gemini itself as you can send and receive shielded ZEC and no one is able to observe the source or destination. Are you looking for something more from them?

I hear you on the others. This is different for a non-custodial wallet, Coinbase’s non-custodial wallet for example. For Coinbase’s custodial/exchange app and the others, the most significant challenge has been the engineering resources / HSM integration required. In the case of Binance recently, I believe they were able to keep ZEC listed in some of the EU countries because they only natively support taddrs.