Manufacturing Consent: NoamChom's Nu6 Block Reward Proposal

Hello Everyone,

Welcome to Manufacturing Consent (The NoamChom ZIP) which applies growth, decentralization, self-accountability, and merit based themes to the forthcoming renewal of the Zcash block subsidy model (which I am assuming will remain the preference among the majority of the ecosystem).

Note: Block Reward, Block Subsidy, Dev Fund, Allocation, et al refer to the same item

Summary of differences between ZIP1014, ZIP GGuy, and Manufacturing Consent

ZIP 1014 and ZIP GGuy both propose(d) notably higher total block subsidy %s (20 and 60, respectively) than Manufacturing Consent; which reduces the total subsidy to 15% - where all 3 current recipients are retained, and 2 new recipients are introduced.

Manufacturing Consent does not intend to change any of the current governance practices that are being used among the ZF, ZCG, ECC, ZCAP, ZAC (forthcoming), et al.

Manufacturing Consent introduces a requirement that all block subsidy recipients are banned from engaging their block rewards into Crypto Hedge funding, Angel/ Seed Investing, or any other forms of speculative, non-Zcash related treasury activities.

Manufacturing Consent recommends a grace period for existing block subsidy organizations to phase-out any previously normalized forms of the above. (Speculative use of treasury assets; unrelated to Zcash)

This anti-speculation investing requirement is understood as a gentleman’s agreement. There is no means or intention for block subsidy receivers to have their treasuries managed as an outcome of this proposal.

Block Subsidy Allocation and Schedule

Manufacturing Consent proposes that its block subsidy model begins at the second halving in ~November 2024, allocating the total of 15% of block subsidies, as follows:

  • 5% for the ZF - The core infrastructure org in Zcash. They’ve got at least $6 million of BTC to sell down, plus a ton of ZEC and USD.
  • 4% for the ECC - The core protocol R&D Zcash org. They’ve got $30 million of StarkNet, Bolt, and Agoric to sell down.
  • 3% for the ZCG - has more than enough funding already, they’ve spent questionably in recent years; the addition of Qedit to a direct block subsidy offsets their expected spend down rate.
  • 2% for Qedit - they’ve demonstrated strong results, they move faster than the ECC/ZF can keep up with; Qedit should be invited to assume a permanent role, particularly to the context of ZSA efforts.
  • 1% for Shielded Labs - this is currently a TBD, they have been quiet recently but they also could be a good permanent supporter. They are already self-funded up to a certain threshold.

The block subsidy allocations will remain constant until the next-next halving ~November 2028, unless otherwise impacted by TBD protocol changes.

Any block subsidy receiver found breaking requirements established in this proposal could be at risk of having their subsidies removed, by way of a network upgrade prior to the subsequent November 2028 halving, contingent upon significant Zcash community consensus.

Governance and Oversight

No modification to existing/ under development governance processes are proposed.

Zcash has experienced pains, by over-spending resources on governance activities which over the past 4 years have demonstrated marginal value-add to the project. The Zcash ecosystem needs less bureaucracy and more building. As an ecosystem, we place good-faith in the block subsidy recipients to uphold common consensus ideals about Zcash.

Zcash is the world’s leading privacy-focused blockchain asset network.

Long-Term Sustainability and Decentralization

Long term sustainability is only possible with a value accruing ZEC. This proposal doesn’t speculate about how to certainly achieve that desired trend, but it does posit that both 1. a reduction of % allocated to the existing 3 organizations, and 2. further decentralization of the block subsidy allocations to two additional organizations, are potential catalysts to inspire all of the block subsidy receivers to respect their ZEC treasuries more so than they have under the prior-current 4 year block subsidy cycle.

(For Example: Spending $2,000,000 worth of ZEC for a couple dozen YouTube uploads, would become a significantly more tenuous grant to commit into by the ZCG; The ongoing ECC spend down of ZEC on American political lobbying meetings ought also be taken under closer scrutiny.)

Decentralization is increased by the addition of 2 new direct block subsidy receivers, and also by a reduction of funds to the existing 3 block subsidy receivers. More recipients receiving smaller ZEC allocations from the block subsidy necessitates decentralization of power/ action/ wealth.

Additional Provisions

Manufacturing Consent includes the new provision ~disallowing~ block subsidy recipients from Crypto Hedge Funding, Angel Investing, Venture Investing, et al non-related Zcash behaviors.

General

The Dev Fund should encourage decentralization of the work and funding, by supporting new teams dedicated to Zcash. The Zcash Community should implement a continuous governance and fund adjustment mechanism, introducing a flexible governance structure for adapting the Development Fund allocation based on the ecosystem’s evolving needs.

The Dev Fund mechanism should not modify the monetary emission curve (and in particular, should not irrevocably burn coins).

In case the value of ZEC jumps, the Dev Fund recipients should not wastefully use excessive amounts of funds. Conversely, given market volatility and eventual halvings, it is desirable to create rainy-day reserves.

The new Dev Fund system should be simple to understand and realistic to implement. In particular, it should not assume the creation of new mechanisms (e.g., election systems) or entities (for governance or development) for its execution; but it should strive to support and use these once they are built.

Acknowledgements

This proposal is a modification of GGuy’s Proposal, which is a modification of Zooko Wilcox and Andrew Miller’s NU4 Zip

All existing sections of the inspiring ZIPs that have been removed, SHOULD be assumed to be intended as unchanged within the scope of Manufacturing Consent.

References

As needed, are available in the upstream ZIP(s) and will not be duplicated here.

Sentiment

Given the option to only have one, I support the following block subsidy proposal:

0 voters
8 Likes

Qedit and Shielded Labs receiving the same funding seems off to me.

Qedit may require funding for additional implementations or partnerships now that Zcash will support basic programmability. I’d like to see us put more weight behind Qedit/ZSAs and start to plan investments around token launches and apps.

5 Likes

I’d love to have the hindsight of the rest of 2024 in front of me. I agree that a 1:1 doesn’t look natural right now, however my general thought here is that both organizations deserve a small allocation from the new block subsidy model. (Particularly because I see these as offsetting work/ spending that currently ZCG is overloaded with.)

Their participation is also completely speculative right now, so bear in mind that I’m interested in feedback from @_jon @vivek @aquietinvestor regarding their interest level, which sorts of projects they foresee continuing, new project initiatives, et al.

3 Likes

Nice ZIP proposal Naom, the only thing I would suggest is that the poll at the end is unnecessary. I expect there will be a few if not several more ZIP proposals running up to the NU6 upgrade, and as those are posted the poll will become out of date.

2 Likes

Thank you for this. This ZIP has some good ideas.

I really do want to see robust governance reforms of all existing orgs and to align incentives to better support Zcash the product not the idea.

I think it is only useful to discuss the extension of the Dev Fund if there are big governance reforms otherwise it will more of the same. ZAC is just a smokescreen. ZCAP only advises ZF. We need something more representative and with more veto power over block rewards.

Zcash for a billion people but Zcash vote for only 200 insiders?

2 Likes

@noamchom this looks like something that is a solid proposal. With that, i’d like to see it go further towards ensuring the zcash blockchain has utility and the products that can meet customer needs.

i would agree, Qedit has the expertise and track record to take zcash and the blockchain to the next level. I would eliminate ZCG and merge it into ECC as opposed to having its own org. ZCG is more focused on wallets and media which is more aligned with ECC.

If we could modify to

Foundation - 5
ECC 6; including ZCG
Qedit 4
susitainability -0

until we get zsa, stablecoins, programmability we are getting out ahead of the utility of the blockchain by funding so many single asset third party wallets and media. these are the main areas funded by ZCG. After zsa, stablecoins, programmability are done then POS. also I think with programmability we can add a gas/fee structure and that is the solution to long term sustainability where contributors get paid directly from the fees they generate to developers building on the blockchain,

i think the modifications to the allocations above will ensure development funds are properly allocated to ensure core blockchain development is re-energized and we have material less spending on non blockchain related expenses.

if possible also add

zec holders - 5%. i think some type of reward for zec holders is beneficial until we get to POS. so that gets us back to 20%. if this can’t be done, then revert back to 15% or increase all proportionally back up to 20%.

more governance is needed as well.

2 Likes

I’ll read through it again more deeply, but here are a couple of thoughts. (disclaimer This is my personal opinion. They do not reflect the Zcash Foundation and so on though I do use ZF in examples)

When you say “are banned from engaging their block rewards into Crypto Hedge funding, Angel/ Seed Investing, or any other forms of speculative, non-Zcash related treasury activities.”, like to mention that for the ZF at least, technically, this already applies. 501c3 charity status mandates they are prohibited from engaging in self innurment investment schemes with public funds and stuff, which incur the reporting requirements, so on so forth.
The thing is that as far as what anybody can tell, that’s the only thing that enforces any kind of a “ban” on that stuff. This was talked about back in 1014 duscussions with reporting requirements and, beyond the IRS, it was/is basically never actually enforceable, or at least we never came up with a practical way.
How would you, the Zcash community, actually enforce reporting requirements or enact penañties for potentially for-profit entities? Why do for-profit entities think they can profit off of donated money from the public (stupid question!)? What is the lever and why would they not immediately start planning on pivoting away from under it? Who monitors and then, presumably, soft-forks us? What actually constitued that and who gave them this authority? What are they even montoring? How are they incentivized? There are many things open to capture.
The last part where it says “non-Zcash related treasury activities”, I assume falls into the same category of angel funds hedge stuff, but it is a bit ambiguous.
The act of strictly funding development on only Zcash related things bleeds into the same realm of self innurment things like that. The goal is privacy enhancing technologies which is why ZF also funds things like tor and this frost thing xp which does work for Zcash (after a modification) but it also works for other things, too.
With the long-term sustainability part thing and adjusted subsidies: If, say, the ZF became the recipient of too much funds, then changing the funding stream would already be in their best interest anyways. Adjustments have been made to 1014 over the past couple of years, NU’s are dime a dozen!:heart::sweat_smile:, so it seems practical to just cross that bridge when we reach it.

I won’t touch on the price and percentages and things like that.
But, ultimately I am a fan of 1014. My concerns as described relate to who is receiving it and what is actually keeping them in line wrt to above mentioned things because decentralization merely for its own sake is just ridiculous. I’ve made similar statements in other threads related to future development fund models so this shouldnt come as a surprise, I suppose.

2 Likes

Thanks for the proposal @noamchom!

Just so everyone is aware, at $40 per ZEC would mean 1% is approximately $250k a year.

So that means annually:
5% ZF = ~$1.25m
4% ECC = ~$1m
3% ZCG = ~$750k
1% QEDIT = ~$250k
1% Shielded Labs = ~$250k

QEDIT’s latest proposal alone is around $2.5m.

3 Likes

Unironically ECC and ZF “playing hedgefund” has put them in a position where they don’t have to solely rely on block rewards, has that come at a cost to the price of ZEC? Maybe… but those coins were going to be spent on operations anyway

What’s apparent however is the pie we are trying to slice up is very small and if we are relying on it for all our development funding we will die from malnutrition.

Does anyone know what the state of external funding landscape is now? Zcash could be in a position to ask for some VC funds of our own since the license switch, and no doubt some of the bigger zk projects on ETH who are flush with cash will be “borrowing” from us

3 Likes

$2.5 million is not a small amount of money. This development fund is paid by miners and can be sustained because holders purchase it. If this amount is too large, we should proceed later when the financial situation calms down.

Don’t try to do everything at once. Once one development (Zashi, POS…) is completed successfully, there may be more room for development funds.

2 Likes

My comment was referring to the 1% allocated to QEDIT. I was pointing out that the ZEC price would have to be about $400 for 1% to fund QEDIT’s latest proposal. I believe the last time the ZEC price was above $400 was in 2018.

2 Likes

It’s my understanding the the ecosystem would require well over $10m USD per year to have enough funding available to even begin seriously working on POS again. This proposal provides $3.5m in development funding at $40 per ZEC. I find it hard to believe POS work will be completed in the next 4 years under this proposal.

1 Like

The amount they asked for was $2.5 million. We need to evaluate whether this amount is reasonable and discuss the development amount again. When a company or a country spends $2.5 million, they don’t approve every proposal just because the plan is attractive.

And if the price of Zcash remains at its current level for a long time, technologies like ZSA will be too much for Zcash.

2 Likes

I’m not expert but it’s in the ballpark. ~9 crypto/software engineers. Contract rates are well over $200k. Total salaries alone for a year would be well over $2m. Need more details about time allocation to this project. Hard to believe they can actually deliver in a year. So $2m to 3m feels about right.

The point of this post was to show the figure is within the ballpark of what is required to fund QEDIT’s proposal. We need to reflect on if that works and if it’s a priority for Zcash in the next year of 2 and if so how we might fund that.

Keep in mind all that aside I believe the cost of maintaining Zashi and Zebra is more than $2.5m.

ZCG note: yes ZCG reach out to experts to provide assessments on proposals.

3 Likes

I guess the point of this proposal is that there IS cash in the ECC and ZF treasuries so a smaller reward might work

2 Likes

this is from 2021 and we are still talking delaying and making up excuses instead of building a platform for DeFi

we need to prioritize it by

  1. stop funding all grants outside of this DeFi vision; that includes single asset third party wallets, and media.
  2. start saving current block rewards.
  3. using the excess capital at ECC and foundation.
  4. stop funding third party projects, venture investing
  5. start building which seems to really start with deprecating ZcashD

In my opinion ZEC went up because the market expected development of this DeFi vision (not zec as fiat), then when DeFi was not built, the stock deflated right back to where it was. All funding should be focused on the zcash blockchain and DeFi.

ZEC will have its single digit moment if we continue with the zec is fiat for day to day spending vision. or it could still have its 100x moment if we are successful in a DeFi vision.

I would be ok with 20%; but it would have to be for a new DeFi vision (which is the old vision before zec is fiat for day to day transactions diverted spending).

The orgs that are not aligned with a DeFi vision should be defunded. And we need to reallocate to new orgs like Qedit.

5 Likes

For developing software, especially on Zcash, $2.5M is a tiny amount.

The problem is how little capital there is to distribute so it ends up being a massive request relative to what is available. Raising capital should be a primary focus. Capital available is too little to have any meaningful impact on this project. Even failing startups have more capital to work with.

I completely agree with @Jgx7 .

2 Likes

ECC has 20m in capital, the foundation has around 3-5m in unallocated capital (guesstimate). plus we have the future unallocated block rewards. so the money is there to fund Qedit. The shared vision is what seems to be what’s missing. We still are focusing on ZEC is fiat for day to day spending. Does ECC want to tap into what should be our communities investment fund to help pay for DeFi?

One other option is ECC could seed Qedit, so it would post collateral for 2.5m to fund Qedit: Qedit would only tap into the collateral if its 4%+ direct funding allocation was not enough. moreover, ECC/foundation can do this now. we should not need to wait any longer to restart the DeFi vision.

so if they/ECC want to seed DeFi privacy projects as they have with agoric and starkware (and the foundation does as well with Tor), i can’t think of a better one to seed than our own via the qedit request to start building out DeFi at zcash instead of DeFi on other projects.

My biggest fear is Zcash has been captured by ZEC is fiat group where consensus voting is dominated by grant recipients who have a financial interest in getting paid from block rewards. A very large number of people get paid for the ZEC is fiat for day to day spending vision and it is far larger group than the people in the community who are paid to create the Zcash Blockchain DeFi vision. We need to really consider if we as a community are already “captured” by grant recipients and those people who effectively buy votes by allocating money to the ZEC is fiat for day to day spending vision (meanwhile ZEC holders only way out is to sell if they are not aligned with ZEC is fiat vision because we have no coin weighted voting).

The orgs clearly believe in the DeFi vision because by their own admission that is what they are hedging into when they fund Agoric, Starkware, Eth, and even BTC (who will increasingly go in this direction). The common denominator is all the hedges are into DeFi related projects and then what we are building is Not Defi. Its fairly clear what the right development path was or would have been because the hedges appear to have all paid off and ZEC development has not.

3 Likes

IMO, there has been too much focus on pure technical/theoretical prowess. For instance, after a year of NU-5, we have arguably the strongest privacy system but hardly any software supporting it. I think the Defi plan continues on the same path. ZSA core is going to be implemented but not integrated.

Then, another team can swoop in, pick up where we left off, and release a product.

I prefer the Starknet approach where you start with a product (their L2 exchange). See where the market demand is, make some money, and then generalize (Cairo).

7 Likes

Yes. It also intends to be sure that ZEC are less freely available in the next 4 years, which will imperatively make the recipients of their % of the freebies treat them with more respect.

My belief here is that Qedit and Shielded Labs are intentionally “under funded” because it doesn’t make sense to accidentally over fund them (wherenever there is always the possibility of ZCG performing budget gap coverage).

Overall as many of you know, I believe there are huge problems with over funding organizations because it inevitably forces them to find more esoteric, creative, value negative means of keeping bussy… Look no further than the Zcash Parachute project, countless other ZCG grants, and on the ECC side - they over spent in many value-negative initiatives in the last 4 years. ZF is still paying legal counsel and auditors to conduct Trademark battles…

There are better things to spend capital on, this is why I believe that funding for free needs to drop lower. We’ve got to think about the bottom line in these next 4 years. The easy money belief system needs to be eliminated.

Yes I believe that governance needs to be improved. No, I don’t believe NU6 should be the field for which that debate is held/ resolved

I agree in theory, but in practical terms… My guess is that this is impossible given that NU6 happens in only 8 months.

My guess is that they’ve got the good fortune of having not been investigated by the IRS yet. We’d only know in hindsight, whether or not it is legal to achieve 501c3 status for a project named Zcash, then to become a protocol encoded receiver of Free ZEC coins… which the organization then turns around and sells into the market to create a huge bag of Bitcoin.

I call that a Crypto Hedge Fund, taking speculative risks, from the pockets of the project investors (ZEC holders). Maybe I’m too conservative in my assessment, maybe the IRS would see it differently.

All Good questions, I don’t have explicit responses. But if my proposal gains traction, I’ll put in the work to formalize expectations around these topics.

I believe that it is a broadly supported theme that I’ve created here:
Under the next block subsidy model, recipients will be banned from taking ZEC from the protocol and then re-investing them into other non-Zcash speculative crypto projects.

Correct.

Where did you pull that generic theme from? I looked at the ZF mission statement, and it speaks directly to Zcash. I hadn’t noticed any remarks that open the book to sponsoring anything they want, at their discretion.

Once again though, funding other stuff like Tor is fine. Even funding StarkWare is fine. But I propose that it shouldn’t be taken out of the pockets of ZEC users/ investors.

I understand how you reached your 60% proposal, its bottom up/ worst case modeling. My opinion here is that we’ve all got to say our prayers at night, keep buying & zodling, and keep building & evangelizing. ZEC should be valued by the market well above $300 in the years ahead.

I’ll ask all of the readers here to imagine a best case scenario… add an extra zero to GGuy’s totals here from a $40 annual ZEC. Let’s instead suppose $400 per coin.

Exactly my point for years now… its only speculation, but I would assert that if the orgs had been acting with some interests toward ZEC - rather than Agoric, Bitcoin, StarkWare, or Ethereum

We could easily be holding this debate within the context of ZEC being valued at $100 each.

Block reward receivers shouldn’t be shooting their project in the feet, by derisking out of their project natve coin. It is counter productive.

Great Question.

Once again, ECC is sitting on a warchest of $20 million in others assets with liquidity. The block reward should never be the sole funding mechanism for Zcash work. All of the altcoins that ECC owns today can fully fund the organization for at least 3 years, if not 4.

Boiling my proposal down to annual capital flows based on $40 per ZEC for 4 years doesn’t make sense. I’ve made a few broader assumptions

  1. Significantly more valuable ZEC in the years 2025-2028 (lets suppose $100 - 400)
  2. Organizations sell-down their huge bags of BTC, Agoric, ETH, Starkware to cover funding stresses
  3. Broad re-visioning of ZEC as a valuable asset to save, rather than a liquid, dilutive fiat-like digital coin

yes!

Exactly. And I am here suggesting that this maligned feature-product situation has been created due to the moral/ behavioral pitfalls created by Free Money (ZEC). With less available Free ZEC, this entire ecosystem will be forced to focus on creating value. (Rather than creating $2 million dollar YouTube videos, for example)

5 Likes