MGRC getting a ZFND grant

On the call a minute ago the subject of funding of the MGRC itself came up.

There is no direct provision in 1014 for this. To the best of my recollection this was to stop the MGRC from going rouge with the funds.

@amiller suggest that the ZFND contacting the MGRC. Is it possible the could get a grant instead for their operational needs?

It would give them a higher level autonomy and still give a mechanism for the ZFND to hold some kind of accountability.

I have no idea of the tax implications of this though, I would assume the MGRC would need to set up as a legal entity somewhere. idk. this is just an idea.

@amiller @nathan-at-least - I mentioned this in the chat, but couldnt the ECC or ZFND refuse to sign off on the network upgrade? I dont know enough about law aspect of the trademark. I know the intent of the trademark was to stop the other party erroneously modify the network or software. Does it also give you the ability to veto current network rules?

EDIT: Merged post.


The subject of how the MGRC is going to fund itself has come up again.

Do we need a separate zip that allocates some of the MG slice to the MGRC via the foundation? I don’t mind writing it.

realistically if any funding is going to happen this must be the easiest way. I don’t know the legal consequences of this though.

@daira how easy would it be to get this to activate along side NU4? I know proposals are locked, but can anything be done? Maybe put it in NU5 with retrospective action? I know you thought it didn’t need to be in the zip, no one really did. But it would be quicker for me to write a new zip and pr based of the info I find.

It is literally to cover what might be an oversight in how the MGRC gets funded from the ZFND. I am still digging through old discussions tho i might find a post / stream convo that clears this up.

What does everyone else think?

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I would think that if the MGRC members were to be a contractor for the Foundation the funds would still need to come from the MGRCs allocation of ZEC.

Actually, thinking about it a bit more, that may be the only way for any kind of compensation to work since the ZFND (and the contractor) has file with the IRS. I don’t see how the MGRC would be able to do the required documents since they are not a separate legal entity with a IRS EIN number.

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Is this really true? 1014 gives the MGRC authority to disperse funds “to perform major ongoing development (or other work) for the public good of the Zcash ecosystem, to the extent that such teams are available and effective”

The only provision that directly prohibits MGRC members from funding themselves is 7:

i.e. they MUST recuse themselves when voting on proposals where they have a financial interest

However this doesn’t preclude a plurality of 4 members voting to fund a well-specified contract for the remaining member (with that member recusing themselves from the vote) to perform work on behalf of the MGRC to further the Zcash ecosystem.

One might perceive a conflict of interest there (especially if there is an implied expectation of reciprocity), but it isn’t one that is explicitly bound by 1014 and indeed if the final outcome is a 2/3 or 3/2 split of full time members to part time ones then I think the internal check of the committee should be sufficient to satisfy the conditions laid out by 1014 - in addition to the actual election of these members.

To that extent particular MGRC operations would be the subject of a Major Grant provided to a designated individual who just happens to be an MGRC committee member - no different that if that member were also affiliated with any other team seeking funding through MGRC.

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I think a similar question might be if the ZFGRC could allocate itself directed funds in lieu of general purpose funding i.e. could the ZF Grant selection process itself qualify to recieve its own granting?

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I see what you are getting at, my comment wasn’t directed at that. It was directed at who pays for the MGRC and where they get their initial funding.

As for MGRC members creating projects then applying for MGRC funds, I think that is unlikely because the MGRC was designed to give a large amount of funding to a few companies, not a little to lots of companies. That sort of stuff would probably be better suited to a ZFND grant.

I don’t think there is anything that directly prohibits it though. If a member puts together a proposal and it passes the MGRC then I don’t see what the problem is. The MGRC has to publish transparency reports and the proposals are made public. It would have to be a Major Grant though.

It did come up in the discussions. I will try to find the relevant information.

EDIT: If you are talking about the MGRC colluding in a series of votes to fund themselves for their house keeping, through ZFND oversight, I’m not sure. This was discussed too. I just cant remember what the outcome was. It seems a very bad way to do the funding though.

Wouldn’t it be easier just to put another zip through that defines how the funding happens?

I think it is more, could the people who oversee the zfnd grants process apply for zfnd grants.

It might be an attempt at funding recursion, which would cause the problem you have shown.

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Im not sure if they themselves might be prohibited from applying for a grant for a separate project that falls within scope given their station (I’ll have to look that up) but for the selection process itself? Idk

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According to the ZFND by-laws (which kind of apply because requiring the MGRC to abide by the same conduct and reporting requirements as the ZFND was voted down though is still very much encouraged if for no other reason than things go that much smoother) and to paraphrase, “accomodation for expenses for meetings may be allocated upon a resolution given no other conflicts” but this would be allocated from the ZF general purpose funds and we’re talking about a seperate, autonomous group (because they’re not subject to the same legal consequences) so whether these accomodations could fall into the “non-substantative quantity” category (which might work idk) is up to the ZF legal otherwise a seperate fund stream with which to do that (I think would be better) is required


(And the only thing I could figure that applies to a MGRC’r applying for a seperate grant is the conflict amendment (1) and they might just recuse themselves from voting perhaps)
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Obviously the MGRC will have operational expenses, and there was strong consensus that its members should be paid. It is unclear in ZIP 1014 whether these funds should come from the ZF slice, or the MGRC slice.

I’ll repeat here what I said during the call (with my ZIP editor’s hat on), which is that funding of the MGRC’s expenses was omitted from the ZIP not because there was any particular controversy about it, but just because Zooko insisted that “only necessary changes should be made to the ZIP” at that point (when it had already been signed off by ECC’s and ZF’s lawyers). He went on to say [speaking for ECC] that “Even without this change, it will be possible for MGRC members to be compensated appropriately.”

In light of this, I had [speaking for myself] been expecting the ZF and the MGRC to work out how MGRC would be funded between themselves — preferably before Canopy activation! I guess it could be a question that is publically voted on at the same time as the candidates. Then again, we already did that in an informal forum poll, and the result of that poll was pretty clear.

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Excellent. Ill take that as a no for the moment then.

Thank you for the clarification. :slight_smile:

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Despite what everyone is saying here, the problem is the zip is very explicit. " The funds SHALL be received and administered by ZF. ZF MUST disburse them as “Major Grants”, but subject to the following additional constraints: …" . That precludes straight salaries or expenses.

Recall, the MGRC money goes through ZF and ZF is responsibly for administrating it as a 501c3 and disbursing it . This puts a couple of constraints on the money like reporting/KYC/OFAC, broad alignment with ZFNDs mission (“privacy for the common good”), and conflict of interest. None of that should be a problem. But the ZIP puts additional constraints which are.

So there’s no provision for using the money to fund expenses outside of grants. Could you imagine some work around where there is a grant to fund the MGRC? Maybe. But if it paid salaries to MGRC members everyone on the MGRC would have to recuse themselves from voting on it because of a conflict of interest. MGRC members aren’t supposed to profit off of grants. But there is an even larger issue: the zip very explicitly says “Grants of indefinite duration SHOULD have semiannual review points for continuation of funding.” There is no way such a review can be conducted by the MGRC of its own actions. To me the oversight requirement is actually more of an issue than the direct COI one. One could argue that COI applies only to outside conflicts of interests and salaries aren’t that. But the requirement that ongoing grants get reviews is both explicit and common sense. And it’s common sense that you cannot evaluate yourself. So no, grants shouldn’t and can’t be used this way.

Could we change all of this? Sure, the community governance panel could vote on a modification to allow ZF to disburse money as salary. But the community governance panel or its successor would have to do that.

We cannot just ignore the zip or interpret it as we want. And making sure we abide by that is very fundamental. The crucial point of a governance mechanism is making it clear what ideas won and what ideas lost. Even if you disagree with the idea or find it imperfect. And yes, reading the ZIP, it very clearly is imperfect.

But we deal with that by amending it, not making assertions of “oh, its fine.” If someone could take a poll from a forum with open membership or senior people in the community could make factually incorrect statements about what the zip does (it’s plainly clear money can only be dispersed as grants), we would not have that. We’d have a political mess. It’s important to get the norms right from the start. And the norm is things go through the community governance panel or its successor.

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very much agree with what secparam said.

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The ZIP is anything but explicit when it comes to the structure and operations of the MGRC itself, but no, no it doesn’t. The ZIP precludes ZF from using the funds to finance its own operations:

They MUST NOT be used by ZF for its internal operations and direct expenses. Additionally ECC and ZF are ineligible to receive Major Grants.

It could be argued that as a de facto-component of ZF that this would include MG but that would directly contradict section 7 of the ZIP:

At most one person with association with the ECC, and at most one person with association with the ZF, are allowed to sit on the Major Grant Review Committee

The MGRC is a component of the Zcash Ecosystem intended to further Zcash development. Members of the committee will be elected by the community as a check on their power. Nothing precludes a member from seeking funding from the committee as long as they recuse themselves from voting on it.

As such there is nothing in the ZIP that prevents an MGRC member from doing so seeking to fund work that would further the capabilities of the MGRC itself (as long as they recuse themselves from actually voting on a proposal that they have an interest in).

Such a process neatly ties in the MGRC with other Zcash Ecosystem projects, placing it one step towards independence and furthers the decentralization of the community. Th election process provides even more oversight, and on that point:

But there is an even larger issue: the zip very explicitly says “Grants of indefinite duration SHOULD have semiannual review points for continuation of funding.” There is no way such a review can be conducted by the MGRC of its own actions. To me the oversight requirement is actually more of an issue than the direct COI one.

Let’s quote the whole sentence:

Major Grants SHOULD support well-specified work proposed by the grantee, at reasonable market-rate costs. They can be of any duration or ongoing without a duration limit. Grants of indefinite duration SHOULD have semiannual review points for continuation of funding.

A member approaching the committee with a well defined, limited time period work offering for the MGRC could be reviewed by the other 4 committee members and voted on while maintaining oversight.

Also, and I don’t like this but, SHOULD is not SHALL. Those words were explicitly chosen to given the MGRC flexibility on that matter (even though I don’t think that flexibility is needed in this case). If we are being literal about what the ZIP actually says, then that is what it actually says.

There are plenty of emotive reasons to not like the above process. Portioning out some amount of operational expenses is cleaner and removes a lot of politics from the MGRC. I’m not against such a change, but I don’t think one is necessary to achieve the intent of the community and the integrity of the MGRC process.

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Posting this as a CAP member.

If you must to go down this road (please dont), then I would point you to these posts:

You need a good reason. That good reason/support will be in a livestream or post on the forum.

You are looking for a post that contains something like “We excluded grants of finite length so the MGRC can give itself a MG” Or “The intent of the zip is for the MGRC to receive a MG”

because without that, the zip does not give a mechanism for the MGRC to fund itself, and we already have a process to fix this: the zip process I am happy to write the zip if you don’t want to. (look above in this thread, at my merged post and @daira comment on it) - you don’t need to try to find complicated alternatives that could very well violate the spirit of the zip to get this done. (they may not)

Realistically what is going to happen is the ZFND is going to decide on how this plays out, that is the intent of the zip, this is a strong reflection of the community sentiment.

Is this really such a problem? What problem are you trying to solve? I think we will find the post/conversation @Autotunafish references when he says the MGRC should be treated as contractors. but the conversation will be there in one form or another. Please help look for it.

The ZIP is incredibly vague on many things. But it is crystal clear that money “MUST be disbursed as major grants.” Which precludes simply paying salaries or expenses. It is possible one could structure that as a grant that pays all of the MGRC , but it runs into the problems I listed above about review.

Now, can an individual be hired to do administrative work via a grant? Seems like the answer is yes. It would have to be on reasonable market rates for administrative expenses. And as far as I know, Individual MGRC members can apply for grants (even for their own projects like Open Privacy) provided they recuse themselves from voting and review. So yes, potentially MGRC could hire one of its own members for admin work. @sarahjamielewis was that your point?

If so, I apologize if my last post missed the subtlety of what you were getting at. But most of the compensation discussions have been about paying everyone to recruit high quality talent to the MGRC. And doing it at pay that I think is well beyond what we’d pay for administrative work. I do not think you can use a grant to do that because of the COI and review burdens since it applies to everyone. And doing an end run around that by having everyone do an individual grant is not appropriate. It’s corrupting the system from the start.

Again, none of this means we can’t pay the MGRC: we just need to amend the zip via the CAP. So, if the MGRC votes to pay itself a salary, the CAP can vote to change the zip to allow it. The process matters. Particularly when it is people trying to enrich themselves.

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I think it is far too late to amend the zip. It has been signed off by the legal teams. this was zookos rationale for there being nothing in the zip already.

The easiest way would be to write a new zip and have that zip reference 1014. However I would be surprised if this gets in before NU5.

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Now, can an individual be hired to do administrative work via a grant? Seems like the answer is yes.

Yes, that was my point.

Personally, I don’t see the problem of restricting the funding of MGRC work to that particular process (or more strongly: I think such a process is desirable, maintains the intent of the MGRC and is in the spirit of the eventual decentralization of this process). I think the check of the remaining members and the explicit check of elections, and the overall transparency of the process should counterbalance any potential corruption. There is ample precedent of committees with similar (and even much more responsibility) being able to handle it. That’s my argument for it and people will either agree or disagree with it.

On the other hand, I totally understand that the above process requires an inherent amount of faith in the MGRC and the process, which is pretty difficult to have without prior operational precedence or an idea of who will be on that committee. While I have concerns about the inefficiency of forcing the MGRC to go back to the CAP (outside of an election period) to approve MGRC operations that they arguably already voted on by elected members with particular policies - I’d be willing to concede that there is an argument for doing this in the first iteration.

Not enough time to amend the zip this time, yes I completely agree. Far too late. And maybe amend isn’t even the right term. But it stands to reason 6 months from now the GCP could vote to allow the MGRC to be paid directly. Thats the way we should go about doing this if the elected MGRC decides they want to be paid.

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Sarah,

Please explain to me why this is not an acceptable method.

Using your example, rather than getting a cap vote to modify the zip, why not just ask the ZFND for the money to pay for the admin.

That is the intended route.

How the ZFND finds this money I don’t know. But if it is a reasonable operational cost, the ZFND pays. The ZFND are also responsible for deciding what the wage is too.

If you want to get technical about it, It is not a MGRC problem but a ZFND problem - it is not meant to be solvable by the MGRC.

I really don’t think a zip like that would get merged because community sentiment has already been collected - but I don’t mind writing it anyway. What am I missing?

@amiller Any thoughts?

the link @daira posted earlier showing the community sentiment towards this.

(Speaking for myself.)

That applies to funds from the MGRC slice. The option that had consensus in the informal poll, to the question “Should ZF compensate Major Grants committee members?” was “Yes, for their ‘reasonable time and expenses’ as determined by ZF.” If they were paid and expensed from the ZF slice, that wouldn’t contradict the statement that the MGRC slice only goes to grants.

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