How does ZEC fit into the Zcash Foundation's long-term strategy?

[This post was originally titled “Does the Zcash Foundation support the ZEC holders?”. I wish I had used this more specific and less upsetting title in the first place.]

Folks, here’s something that’s been bothering me for a long time, and the current discussions in which some people are advocating that ECC release Orchard under a permissive (MIT) licence, which allows anyone to do anything with it for free, is reminding me of this long-standing concern of mine.

First some context and where I’m coming from, and then I’ll get to my long-standing concern:

I’ve heard a certain argument from many different crypto investors over the years for why they don’t invest in ZEC. It goes something like this: “Well, Zcash has the best technology, but that doesn’t make it a good investment, that makes it a science project that real products will later benefit from. Eventually ETH [or whatever tokens the investor is hot about] will adopt the technology and use it to produce value for users and for ETH holders, so I’m going to just keep an eye on the Zcash technology while buying and holding ETH [or whatever] instead of ZEC.”

I think that’s a pretty good argument for an investor! It could turn out like that. If it did, it would mean the Zcash experiment would eventually wind down, as the price of ZEC declined, and other projects would have to take up the torch of providing global freedom.

The main reasons that I personally continue to invest in ZEC instead of anything else — both in my personal finances and also in committing every day of my life to it — are:

  1. The Dev Fund pays out amounts of ZEC instead of amounts of dollars-worth-of-ZEC. Since the Dev Fund pays out to support orgs an amount of ZEC — meaning that the orgs receive less funding when the price of ZEC is down and more funding when the price of ZEC is up — those orgs ought to be focused and empowered to support the price of ZEC long-term. That’s why one of the only “hard lines” that ECC took during the Dev Fund decision process was when someone (I think it was Eran Tromer?) proposed that ECC receive a certain amount of dollars-worth-of-ZEC instead of a certain amount of ZEC, and we stated that since we didn’t believe that would be a long-term successful model, that we wouldn’t take that job: Dev Funds Should Be in Zcash, Not United States Dollars.

  2. The Zcash community is a mission-driven community. All of us are here because we care about the fate of our society and the promise of freedom, safety, and prosperity for our children and grandchildren. This means the Zcash project is more long-term sustainable throughout the ups and downs of market cycles and the storms of media-driven narratives, and it produces more fundamental value (and less hype) than most crypto communities.

  3. The Zcash community has a healthy balance of openness and the practice of charitable interpretations of other people’s intentions, but also a willingness to exclude disruptive participants and saboteurs. Finding a balance of that is incredibly hard, and the Zcash community has done a fantastic job of it. I want to give a shout-out to @Shawn, for both serving as chief moderator and also for setting an example for other Zcashers to follow since the very origin of the project. In the long-term “Culture eats strategy for breakfast.”, so the Zcash community’s culture is one of the biggest reasons why I’m bullish on ZEC. (By the way, this is also the single biggest reason why I’m bearish on the Monero’s project’s long-term prospects, is because their culture is toxic.)

  4. Privacy comes from money at rest, not from money in flight. This means that the more people who want privacy in the future, the more people will buy and hold ZEC. People buying and holding is a “demand sink” that increases demand for ZEC, which puts upward pressure on the price of ZEC. In contrast, with other services that provide “privacy for money in flight for all tokens”, like Tornado Cash, there is no inherent economic reason why that project getting more and more users who use it more and more would provide any reward to the investors who support that project. (Except possibly an EIP-1559-like fee mechanism? It’s unclear if that would be enough to really reward holders without being too much that it prevents usage. I assume that all of those projects are iterating on their tokenomics by trying to find such a solution, so I would expect future upgrades of those projects to improve on this. Interestingly, deploying ZSAs on top of the Zcash network might produce a similar model as the Tornado Cash model.)

Okay that’s the context of where I’m coming from. This is why ECC states that “ZEC is the engine of the sustainable growth of our mission”, and it is this same strategy which Zcasher BlocksAdvisors recently stated as “Positive feedback loops create positive externalities.”.

Now here’s my long-standing concern:

I don’t know if the Zcash Foundation supports this strategy.

I can’t be sure — based on the Zcash Foundation’s public statements and their track record of actions taken — whether they are okay with the strategy of the Zcash technology being transferred to other tokens and the original, ZEC-fueled Zcash experiment winding down. Their mission statement and their stated values do talk about “Zcash”, but it’s unclear to me whether that means Zcash-the-technology, which could serve as a positive externality to bring benefits to the holders of other tokens by other projects copying the technology, or Zcash-the-network — which, if ZSAs get deployed on it without substantial compensation to ZEC holders — could do the same, or if they mean Zcash-the-coin: ZEC!

Now, before you jump to any conclusions about the Zcash Foundation’s intentions, let me hasten to add that there are strong political pressures from the United States federal government that might be keeping them silent about that even if their personal financial alignment and their long-term strategy does include ZEC as the engine. There are (at least) two of those political pressures: one from the Securities and Exchange Commission and one from the Internal Revenue Service.

First, with regard to the SEC, I concluded about two (I think?) years ago, based on my own observations plus very extensive (and very expensive) legal counsel that ECC has gotten, that ZEC is obviously not a security, and that there is basically zero chance the the SEC will ever attempt to — much less succeed to — claim jurisdiction over ZEC. However, if the Zcash Foundation has a different estimation, then it’s possible that fear of the SEC may be keeping them silent about supporting the ZEC holders. Their public statements give us no way to tell.

Second, with regard to the IRS, the Zcash Foundation and the Bootstrap Project — the sole owner of Electric Coin Co — are classified by the IRS as 501(c)3 non-profits. That means that money that those orgs make, from donations, from the Dev Fund (which is itself a donation), or from other sources such as selling goods and services, are not taxed by the IRS. It also means that the actions those organizations take must support the public good (and “the public good” as defined by the IRS, not as defined by you and me).

Speaking as a Director of the Bootstrap Project, I am comfortable with a very simple answer to why Bootstrap supports ZEC: it’s that ZEC is the source of our funding! Therefore in order to continue serving our public goods mission long-term, we must obviously also support ZEC.

However, it’s possible (I have no way to know), that the Zcash Foundation might have a different assessment of those legal risks, and so fear of the IRS might be deterring them from taking a clear stance in support of ZEC even though in their hearts they want to support ZEC.

This is why I believe the most important single thing that the Zcash community can do in the next couple of years is to institute a Zcash support organization that is outside of the USA jurisdiction, so that organization can be free from those — and many other — strong (and generally hidden) political pressures.

Or, maybe the Zcash Foundation’s official position really is to prioritise maximizing the public goods (positive externalities) produced, even at the cost of undermining ZEC long-term. If that were the case, I would think that it is an understandable, public-good-oriented position to take, I would just question what is the long-term game plan, and I would question if they’re being honest with their donors (the ZEC holders) about that.

I also, by the way, don’t think that every organization in the Zcash support system needs to have the exact same strategy. It can be good for different people and organizations to have different trade-offs and still to work together effectively. My long-standing concern is just that since I’m unsure of the Zcash Foundation’s long-term strategy, I’m not sure when disagreements that we’re having are merely tactical differences about how to achieve the same long-term goals, vs when they are intentions to move toward different goals.

It would help me to understand, if the Zcash Foundation is advocating for something that, in my view, would undermine the positive feedback loop of ZEC, whether they are also intending to support other actions that would strengthen that feedback loop, or whether they just don’t care about that feedback loop and would be fine with it winding down entirely.

“Positive feedback loops create positive externalities!”

In that diagram, ECC strongly supports both halves: the left half in which our work increases the price of ZEC, which in turn increases our ability to do future work, and the right half in which our work produces benefits (public goods/positive externalities) for others. My question is if the Zcash Foundation supports the left half.

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Thanks for the write-up Zooko. I agree ZF’s approach might look conservative from the outside, but from what I’ve learned while working with ZF as a grant applicant and as a ZCG member, is that they go above and beyond to help contributors in succeeding, and further the Zcash ecosystem.

And yes, I believe that the concerns in keeping the legal non-profit status in the US might be limiting ZF from unleashing, like some of my favorite crypto utility platforms spearing ahead with partnerships and collaborations with established industry giants - Algorand partnering with FIFA or Avalanche launching metaverse initiatives or Cardano furthering the PoS benefits, plantations and working with the local universities in Zurich. Additionally, all these 3 chains have taken initiatives to improve the token dynamics, help price appreciation and open up more ways for the holders to earn more coins.

I’m not sure if we can get an official stance from ZF on the question of whether the foundation supports the price appreciation of ZEC knowing about their legal risks.

I support the move of the foundation outside the U.S., all the 3 chains I’ve mentioned have foundations based in either Switzerland or Singapore which have been crypto-friendly so far. As a long-term believer in Zcash and ZEC holder, I’d be interested in brainstorming ideas and helping such a move happen.

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Hi Zooko. I appreciate the post. I’m going to say some things now on behalf of myself, not on behalf of the Zcash Foundation. And they’re not going to be particularly positive and maybe not that nice. I apologize in advance for bumming anyone out.

First, I want to be clear that I have always been very bullish on Zcash (the technology) and very bullish on ZEC. I would actually love to be able to adopt the attitude Zooko strawmans onto the Foundation — ie be agnostic about the price of the coin, while being excited about the tech — but I also recognize that all of our development efforts in this space depend on funding.

Some folks will note that I haven’t been that active posting here lately, and that’s not because I don’t support ZEC. It’s because I’m tired. I’m tired of two things:

  1. The constant pointless bickering between ECC and Zcash Foundation. This has been a source of constant poison and unhappiness in this space. Just get along and work together: stop proposing new weird governance models when the basic problem is that there aren’t enough good stewards doing work.

  2. The fact (related closely to point #1) that it is functionally impossible to bring any new user-facing features in ZEC because nobody will get behind it and let us fucking build things. And no, NFT strategies that rely on Ethereum for distribution are not “new things”, that’s just fiddling.

I spent a good part of the pandemic time encouraging the Zcash community to support ZSAs because I thought that they would make Zcash more relevant. This was shut down at every turn by ECC, even in the face of broad support from members of the community. Ok, that’s fine: surely there was another priority that ECC could get behind (not, ugh, NFTs) that would bring new users to Zcash. Maybe we could have working private ZEC on Ethereum chains? DeFi and smart contracts in Zcash? Hell: even NFTs on Zcash that didn’t rely on Ethereum to trade would be cool. Something, anything that actually changes users’ experience, beyond (admittedly wonderful) invisible improvements in the core proving technology, which do not motivate adoption at all.

At this point I can get behind anything but the fighting. I am dead tired of people referring to Monero and Tornado Cash and then mentioning Zcash as a footnote. We have the best technology: we should be doing whatever it takes to make people use it.

Instead I read this board and it’s nothing but new power plays to take control of the dev fund and power in the community, while blocking all substantial change.

Ok fine, Zooko. You win. You have exhausted me. If what you want is to have total control of a dying moribund community, then as far as I’m concerned you can have it. Good luck.

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I’m on my way to a soccer game and so I quickly read through this. Like Matthew, I’m also speaking as Winfred, and not as a representative of the Foundation.

The way this topic has been phrased is very polarizing. It’s also not in anyway an accurate depiction of the Foundation.

I for one joined the Foundation after being a years long Zcash hodler. I care tremendously about the future of Zcash, and I can say with conviction that the same applies to the rest of the team. There’s several ZF team members who actually joined the Foundation due to their love for Zcash. Dan as an example created the ZcashZeal channel and ran to stand on ZOMG in the past.

I wish that as a community, we worked together to come to solutions instead of tearing each other down. After all, who wants to invest in a project where the core teams are at war with each other?

It saddens me to see that it’s being implied that ZF does not care about Zcash hodlers. WE DO.

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Just a quick point about ZSA’s

The beauty of ZSA’s to me is that they pave the way for adoption: people get exposure to Zcash – both the technology and the asset. A cryptocurrency with strong Layer 1 privacy is ideal for zk-NFTs, including private transfers, private proofs of ownership, etc. Same for stablecoins as Zcash shielded assets - I definitely want a zkUSD for onboarding new users. Or further, imagine giving a new user a 50:50 ZEC/USD stabilized bond!

Double the community, double the fun, and more than double the strength of the feedback loops! And the latter is great for all three Zcash’s (technology, network, asset). This is exactly Balaji’s point:

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Thanks for posting on the forums @Matthewdgreen, I would like to have more background on this, didn’t the ECC/ZF conduct a poll to gauge community interest for the next goals ZSA/dApps/PoS? Also, were there any concrete plans on how the ZSAs would be possible? It is only this year that we funded QEDIT with the task of architecting and building ZSAs. Again, without concrete plans, how would ZEC get DeFi & smart contracts? Cardano had to reconstruct the eUTXO model to support scripting and smart contracts which took 3 years, ETH is made for smart contracts, for Zcash to make such heavy changes, doesn’t there need to be a proper study and efforts to implement the upgrades? Were you hoping ZSAs to be added quickly on top of ZEC?

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I’d say that ZSAs are useful even in absence of DeFi and smart contracts, so we should deploy them ASAP. Privacy for NFTs is big and a private stablecoin will be massive. Zcash is perfectly positioned for both because we have L1 privacy so, for example, don’t need to worry about privacy for paying fees (don’t need a Tornado Cash style interaction with a third party service), existing work for network-level privacy would be immediately reusable, etc. Just a few simple use-cases with intense focus will be monumental.

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We’ve been discussing ZSAs since Sapling was finalized. There have been preliminary designs since around then. What’s been lacking is the will to actually pursue them as a feature.

Saying “there are no concrete plans” for other features is identifying the exact problem. This is not a community that is generating concrete plans for user-facing features. This wasn’t always the case.

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This is sad, for any delay to prolong much-needed feature deployment in this cutthroat crypto industry. Maybe there were reasons for the delay @zooko?

The hopes now live with the Orchard & UA standard enabling a lot of new developments that only Zcash can lead first vs the competition Aleo/Penumbra/etc.

As for generating concrete plans for user-facing features, isn’t that something ZEC should aspire to be, to attract more use-cases?

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Please try to keep a bit more on topic of OP and if you wish to go deeper into ZSAs there is a thread for ZSAs

Thank you

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Definitely agree with this statement! I’d also wager zooko feels the same way, but is going about the strategy in a different way (as he has stated). Nonetheless, any decision made by one person (or a small number of people) will not last as long as a decision made by many people. “If you want to go fast, go alone. If you want to go far, go together.”

I also agree and disagree with an innumerable number of points brought up recently. One thing seems clear to me - are we kidding ourselves into thinking all governance issues can be solved by posting asynchronously on this forum? The number one factor that determines the general sentiment in the forum is the time that people have to participate. Someone may have a very insightful point but does not have time to write it out immediately and then the moment is gone and a decision is made that shifts momentum in a certain direction.

I’d propose a dedicated, synchronous discussion of all unresolved issues at this year’s ZCON with a dedicated moderator and plan of attack outlined beforehand. I, for one, just don’t see a way for different views, held by people whose job is not full time dedicated to Zcash, let alone even those who are fully dedicated to Zcash but without enough free time, to respond to every issue here.

These are big, important decisions that almost every crypto project is facing and I think they need big, transparent, and fact-based discussions. I’m not claiming that these issues haven’t been raised before, or anyone isn’t being fact-based, but clearly they are unresolved and many initial participants may have gotten tired from continual debate (can’t blame anyone there, I’ve definitely gotten burned out from many a group project, especially if volunteer based before!). Another thing we need is new blood! But it’s hard for new blood to successfully participate without the amount of study it needs to make informed decisions - another reason a synchronous, dedicated discussion at ZCON could help. A conversation with experts can replace a week’s worth of Internet searching!

Also, of course I can’t speak for if zcon discussions have been tried before and I’m just being ignorant here since I started following Zcash about 15 months ago.

Any way, case in point, that’s all I have time for before other activities intercept me.

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I can understand why Zooko finds it difficult to tell whether the Zcash Foundation supports the Electric Coin Company’s ZEC-focused strategy.

Here’s a recent Tweet from a prominent member of the Foundation’s Board of Directors:

For me and many other community members and ZEC holders, Zcash is not an academic experiment on blockchain privacy or a testnet for other cryptocurrencies. It is a highly functional protocol that has the potential to become the mainstream alternative to Bitcoin as a private store of value and medium of exchange. Usage matters and should be high on the Foundation’s list of priorities.

I can’t say for sure whether the rest of the Foundation’s leadership team shares Peter’s view because the Foundation has not published or explicitly stated their short-term and long-term strategic priorities. We know they’re working on Zebra and FROST, and as a member of the Zcash Community Grants committee, I can say they do an excellent job supporting ZCG.

But what’s their vision for Zcash? Where’s the roadmap that lays out their goals and objectives and how they plan to achieve them? If this was evident, Zooko would not need to write this post.

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To be fair to @valkenburgh, it’s not easy to be the public face of crypto while having to consider bitcoin maxis feelings.

I agree that to me ZF has been less communicative with the community compared to ECC. The Zecwallet situation is a recent example, and transition to PoS in another big one. If ZF has a plan for Zecwallet, what is it? What can the community works on to help complete the plan? What is ZF plan regarding the PoS transition? Does ZF even supports the transition? While I understand the reason why, not setting any expectation as one of them, I also want to see ZF elaborate their long-term plan for Zcash.

On ZSA, I am glad ECC didn’t pursue them. Instead we have QEDIT on board that will pursue this project. As a decentralized project, it’s unfair to criticize one team that have stated they have other priorities. If someone wants to build something on Zcash, let them do it. Nevertheless, I think ECC folks have been supportive to ZSA development (by other teams).

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No.

The point of the Zcash Foundation is to support all the “unsexy”, not-profitable upkeep of the protocol and community. It’s to listen to community feedback (but not be entirely dependent on anyone!) and make the protocol better. It’s to create educational resources.

The Zcash Foundation’s purpose pioneered modern crypto foundation setups. It remains excellent.

What I can’t understand is why there’s been this several year “power struggle” between the ZF and ECC. Having some checks and balances in place makes sense, but this extends to bickering that has turned away several “generations” of ZF leadership and expertise for no good reason. Maybe the intent is to leave the ZF as a weak entity?

There’s an enormity of different paths for Zcash to grow, including for ZEC investors. The Foundation helps with this. Posts like these (those focused on pointing the finger at the Foundation, not general ideas of exploring a non-US entity) only undermine one of the primary supporters of the ecosystem.

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I agree that the post title is provocative but I think it’s a fair question that I myself have been wondering. ZF is clearly positive for Zcash, but are they prioritizing ZEC holders? What I think many in the community wants, is more communication. I’m optimistic we’ll hear a lot in ZCON3. :partying_face:

I can’t comment on what has happened in the past but today I think the community has been really collaborative especially with QEDIT’s ZSA, ZF’s Zebra, and NU5. If anything, the gas-lighting from outsiders is what the Zcash community must be careful about. :upside_down_face:

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Less control, more optimism :+1: :hearts:

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Hi all,

First, I can totally understand how this post would rile people up, because it’s easy to read it as “does the ZF support Zcash users” which is easy to read is “c’mon ZF, don’t you support Zcash users?!” That is not how I read it, based on knowing Zooko, and instead I read it as seeking clarification on strategy. (Notice in my paraphrase I say “Zcash users”, but the title clearly states “Zcash holders”.)

What I’d encourage us all to strive for is clarity on high-level strategy. Clarity doesn’t mean unanimity or consensus, btw! Just clearly understanding everyone’s approach.

Here are a series of questions I hope help us explore how to gain clarity on high level strategy, and there’s no right or wrong in my mind (and please don’t assume I’m implying my position in any of these questions, and in fact for many of them I’m undecided):

  • Are ZEC holders the primary priority, or are a wider set of users and participants equally prioritized, perhaps “short term transactors”, miners, developers, etc…?
  • Should we prioritize differently between long-term and short-term holders? If someone intends to hold ZEC for 10+ years, do we care about their needs more than someone who intends to hold ZEC for only a month?
  • Is it better for contributors paid by the Dev Fund to be financially “all-in” on ZEC or to be diversified? Should DF orgs diversify their holdings or have a more narrowly ZEC-centered portfolio? How should they balance against ZEC vs USD?
  • Is it better to “upweight” community voices based on ZEC financial incentive alignment, or is it better to encourage community participation from a wide population including those who aren’t long ZEC to maintain broader perspective & ideas?
  • Is it better to fund contributors who are all-in on Zcash as a focus, or contributors who contribute to a diverse set of goals and users? For example, the Arti grant funds Tor developers who support a wide array of network privacy needs and users, whereas Nighthawk developers seem to be solely focused on Zcash.
  • Is it a good idea to fund general public goods that ZEC users may benefit from (ex: Arti) or is it better to fund goods that provide asymmetrical value to ZEC holders? (Varying answers here might be part of the disagreements about BOSL licensing or ZSA design, I speculate.)
  • Is it better to fund redundant independent efforts, or to fund mutually complementary specialized efforts? For example, should we fund many projects doing marketing & education, or fund fewer projects doing marketing & education?
  • Should we fund specialized orgs or multi-functional orgs? Ex: ZF & ECC do outreach & product development, whereas QED-IT’s work so far appears specialized to development, Zcash Media on outreach.
  • Should we prioritize ZEC price/utility/adoption over privacy, or the other way around? (I assume most of us believe these are mutually reinforcing, but I think there are cases where this trade-off comes up. For example, t-addr support.)
  • Is it better to frequently and constantly discuss changes aimed at improving governance and decentralization, or is it better to stick with the current structure and focus on building?
  • When should contributors defer to the community for decision making versus putting forward opinionated-bundle-style proposals?

My belief is that many of the individuals contributing to Zcash (from full time folks to community participants) vary across answers to these questions, and that leads to disagreements about strategy or tactics. That bubbles up to the organizational level.

Meanwhile, I think when such disagreements crop up, it’s natural to become frustrated if we can’t understand people’s underlying decision-making rubrik, and a common unfortunate tendency is to become suspicious of people’s motivations, rather than realize people hold different preferences for trade-offs while hopefully mostly having aligned motivations.

So whenever we feel frustrated with another individual or org, let’s notice if we cannot understand their motivation, and make a practice to dig into if they hold different goals, or similar goals with different beliefs, or similar goals and beliefs with different preferences about trade-offs.

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Thank you for the clarification. When I read this, it gave off very strong “divide and rule” vibes and I had to say something. I have so much respect for everyone who is contributing to the development of the Zcash ecosystem, from ECC to ZF. I’ve said this even to Zooko when it comes specifically to him. And so reading this and understanding it as that ZF wasn’t being given the benefit of doubt hurt me as a member of ZF.

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Its a fanatasy that other projects compete with Zcashs tech and research. There are arguably other projects that compete with Zcash in the privacy coin space. However, all of them win in the areas that Zcash is the worst (like worst in the crypto space. Period). Governance and Community. I challenge anyone to show me another project that has such a complex and crazily structured governance system. Where the ECC is a company which is wholly owned by a non-profit (Bootstrap) which share governance with another non-profit (ZF) which supposedly semi controlled by ZCAP (which itself is a bad mechanism to decide anything).

This brings me to my second point. The Community is non-existent. There is no community. For a project that has been going on since 2016 and the community is smaller than the next shitcoin project should tell us; the community members, where the projects (ECC and ZF) priorities are. The worst part is that the ZF is the one ‘supposedly’ that is to deal with the community. ECC staff (1 in particular) have done more outreach to the community than ZF have done in all the years of its existence.

ZF can put its head into the sand all it likes, and claim that it only needs to engage with Zcap, but there is no love lost between ZF and the other parts of the community (that are not on the forums).

If ECC is ‘supposedly’ all research no real products (wallets, ZSA, blockchain explorers), ZF is even worse. ECC ships code. Its a fact. ZF hasnt shipped any code.

ECC has serious issues itself. ZF has too. I dont know which is worse. Probably both equally.

Now that ppl have raised the issue. I dont really know what the ZF mission is tbh

Footnote: Orchard should be full MIT. More money for the ECC does not inherently equal, value to Zcash or Zcashers.

The complexity is a cost of trying to decentralize governance while being tide to US entities. We should try to build a third entity that’s not based in the US.

This forum is lively, so I don’t think this statement is true.

This is not true. Zebra is in beta and it’s a massive shipment, that.

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