Incentivizing Zcash Shielded pool growth brainstorm

General
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I been pondering the idea of incentivizing Zcash z-address adoption & longterm shielded pool growth with a % of the block reward.

Shielded ZEC “staking”?!

Not sure how it could work but let’s brainstorm…

say @zcashomg grants 1% of their 8% of total ZEC block reward allocation to shielded pool users or “stakers”

maybe users lock up shielded ZEC into a hashed timelock contract that expires at the block of the next halving?..(are shielded timelocks even possible currently?)

so long term ZEC shielded pool zodlers can be rewarded through inflation & new users are incentivized to migrate to the shielded pool right away & stay

this could also be a way for x amount of the supply/float to be locked up in contracts for the next 3 years…

I obviously haven’t crunched any real numbers but would 1% of block reward for 3 years be enough of an incentive for new & current shielded pool users?

would it have to be setup in a way that if you have x % of total ZEC in the pool you are rewarded x amount in rewards?

let’s say you are .1% of the current shielded pool, so like 600 ZEC, would you get .1% of the total rewards allocated to this idea? (.1% of the 1%)

As shielded pool grows your rewards diminish but your privacy is improved with the anonymity set growth…

It is by no means a fleshed out idea But I would like to discuss the potential viability & sentiment of this with the community.

This concept is similar to the PRINCE proposal from Reddit that was mentioned in today’s Gardening club call, found below…

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As much as I am a fan of incentivizing Zcash users to move all funds to Shielded Pools, I think it is too early to make these heavy core consensus level changes. It might be better to incorporate these ideas when ideating on migration to a Proof of Stake mechanism. Otherwise, the Auto Shielding feature in wallets to migrate all transparent funds to user’s shielded address is a better bet to move many-a-ZEC to Shielded Pools.

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In Proof-of-Stake design, I think there are some low-hanging fruit along these lines.

The simplest kind of design constraint is to say something like “the staking / delegation mechanics are transparent” (*) but you can only delegate from the Orchard pool.

What motivates (*)? There are several motivations:

  • IMO, the total amount of voting weight that validators have should be public. Some protocols actually make this private, but that seems risky to me, because then no one can tell which validators have more control over the network. Other protocol designs could make the total transparent while keeping every delegation position private. That is appealing, but it’s more complex, so IMO that might be a good “POS v2” feature (see next).
  • Existing protocols use transparent staking mechanics, so if we use the (*) constraint, we can do less work by plugging Orchard into one of those existing protocols.
  • This approach has “good-enough/practical privacy” IMO:
    • These data/metadata are public: which validator is delegated to, the amount of the delegation, when it was created or withdrawn, and any rewards/penalties it has accrued.
    • These data/metadata are private: which user or address the funds came from or are withdrawn to, whether or not any two delegation positions are associated with the same user/wallet.

So if we use that design constraint in v1 of proof-of-stake, then:

  • No one may earn staking rewards without their funds first being in the Orchard (or latest/greatest shielded pool), so this may incentivize transparent ZEC to migrate into shielded.
  • The total balance of ZEC in the latest shielded pool will exclude staked ZEC.
  • The privacy of staked ZEC will be “good-enough/practical”: no one can observe the history of any staking positions, link any staking positions (outside of timing or other off-chain metadata), or trace funds that withdraw from staking (back into the latest shielded pool).

How much this incentivizes migration away from transparent ZEC remains to be seen. Staking rewards are a carrot. Maybe we can think of other carrots, for example, requiring shielded ZEC for interacting with ZSAs or bridges.

The PRINCE idea that @decentralistdan mentions above is a stick: imposing fees on transparent balances.

I’d personally like to see how much the carrot works first, because that doesn’t give any user a bad experience, whereas users who are hit with fees (especially if they didn’t expect it) may get turned off.

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:100:

:+1: I think this is enough. Open questions from me:

  • Are rewards collected liquid immediately and where will these funds exists? Orchard pool?
  • Bonding/unbonding times for SSZ (shielded staked zec)
  • Do longer periods held staking earn any benefit?

Can you expand on the reasoning for this?

:100:

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I strongly support this approach. Because Transparent ZEC are net-negative to the Zcash mission, there ought to be a protocol level taxation against t-address balances.

Taxing non-preferred behaviors is broadly accepted as a social good, so there shouldn’t be much push back against Zcash adopting a taxation against transparency on the blockchain.

Suppose the alternative headline:

Transparent coin tax improves freedom, security and lowers risk of surveillance.
Transparent ZEC services usage drops 27% YoY, signaling potential long-term impact to increase global financial privacy & freedom

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In fairness, we should first give our users a better self custody experience, especially shielded self custody options. Zcash presently does not provide this well.

Otherwise, I like the idea once the above is addressed.

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Why not carrot on a stick? :sweat_smile:

Well that leaves us zec holders as mules :joy: we need better looking metaphors :grin:

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Is there a way to just deprecate the pool where the coins are basically just in a storage mode and do not really have much function; but we have a gateway or method for people to migrate their coins at anytime in the future to the new pool? Importantly, we force them all through the turnstyle to prove to everyone there was not an exploit. Rather than charging a tax, I would be on the side of just making the coins useless, which forces the holder to migrate. As long as we keep the migration path open, then no harm done. So, if someone is just sitting on coins, they are not really using them anyway and dont need the functionality. And if they want to use the coins, a simple migration will enable them to easily make the coins useable in the preferred pool.

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It’s a great question.

I don’t think that if staking is possible that HODLing will be “a thing” anymore and just replaced with staking indefinitely.

It’s not really good for the anonymity set that people move to orchard and just sit on their funds either. So it would be good to actually have a way to be able to spend the funds that you are staking in a way that the funds delegated to be staked are change ownership but the staking remains.

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If we add more assets into the Zcash blockchain (UDAs/stablecoins), wont they vastly increase the anonymity set such that ZEC spending wont really be required at all as it relates to anonymity ?

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Stagnant coins make my point clear about the primary use case: Number Go Up

People in majority want ZEC to go up in value, they’re not primarily interested in the privacy features. There are a few reasons

  1. Using ZEC privacy is technically challenging
  2. It is very hard to find peers also using ZEC privately
  3. risks of losing value by using ZEC (i.e. buying shoes with ZEC at $30 then finding ZEC at $100 a few months later)

Stagnant coins are the evidence that people in majority hope for the value of ZEC to increase over time.

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overall yes.

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I sense that too. Do you have any thoughts on what would happen with those stagnant coins when number goes up? will they fly away to other chains through DEX and CEX’s? will they stay?

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When investors like Naval Ravikant encourage folks to buy and hold Monero and Zcash, I believe it’s so folks can allocate some portion of their wealth into a true private SOV. For me, this is the most compelling use case of Zcash where Zcash acts a Swiss Bank account without the Swiss Bank.

My impression (worth two cents I know) is folks will continue to HOLD Zcash after the price appreciates as this was always the intended purpose. The only sellers at the moment seem to be POW miners and the three Zcash organizations who use ZEC for funding development expenses and grants.

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hw wallet support… u can never expect the pool to grow without being able to store crypto in a hw wallet.

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Curious if you feel ZEC has become easier to use in the last 6 months? On your second point, I think discovery is the golden opportunity for someone to solve. :mag: :mage: :zebra:

Education is never ending but I do think we are moving in the right direction. Example, we now have an easy to find, easy to use, Shielded Pool graph.

We are also building community nodes that can be used for study, and or learning.

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