I’d like to start a discussion on ZIP 234, which introduces a mechanism to systematically issue ZEC into future block rewards, along with the alternative proposal put forward by @conradoplg. My goal is to evaluate the benefits and drawbacks of both approaches and ultimately recommend ZIP 234 as the simpler and straightforward method.
The primary objective of the NSM is to create an automated system that allows users to contribute to the long-term sustainability of the Zcash network. As part of this process, ZEC is burned through ZIP 233, and new ZEC is issued into future block rewards based on the amount burned. ZIP 234 smooths the issuance curve, enabling ZEC to be introduced into circulation in a predictable and straightforward manner. The issuance follows a simple rule: for each block, compare the current supply to the 21 million cap, and issue a small proportion of that difference. The design approximates a four-year half-life, similar to the current halving cycles, ensuring a gradual allocation of coins over time.
The alternative proposal contends that instead of smoothing out the issuance curve by distributing new ZEC over time, we could track the NSM balance separately from the unissued funds. Under this proposal, each block after the NSM is activated would issue a small fraction of the current NSM balance in addition to the regular, non-smoothed issuance. This would allow for NSM issuance while preserving the regular halving schedule and avoiding the smoothing effect.
On the December 12th Arborist Call, Conrado stated that the main benefit of this approach is that it prevents unexpected changes to the issuance process that could confuse users. For example, it helps avoid discrepancies in the reported current supply on platforms like CoinMarketCap and CoinGecko, while still allowing the NSM to function. Both ZIP 234 and the alternative proposal introduce changes to the issuance process that could create confusion. The solution to this issue is to educate exchanges and platforms like CoinMarketCap and CoinGecko on how to accurately report the current supply of ZEC, specifically by using “valuePools” in the getblockchaininfo RPC for zcashd (or the Zebra equivalent) to properly reflect the circulating supply.
Another drawback of the alternative proposal is that, while it preserves halvings, it adds complexity by maintaining two separate categories of unissued ZEC. In contrast, ZIP 234 simplifies the process by treating unissued ZEC as a single category, helping reduce potential confusion. As I mentioned in a recent Forum post, there is no direct connection between burned ZEC and new coins issued in future block rewards. Since ZEC is fungible, burned coins are not “reissued”. However, under the alternative proposal, burned ZEC is tracked separately from unissued supply, conflating the distinct processes of burning and issuance. Rather, coins burned through ZIP 233 or other methods reduce the circulating supply, and ZIP 234 allows new ZEC to be issued in a systematic manner that approaches, but never exceeds, a total supply of 21 million.
Zcash’s issuance schedule was inherited from Bitcoin, and halvings represent a legacy feature that has carried over from the past. In some sense, halvings are valuable as a tradition and ceremonial event. For Bitcoin, halvings have become significant milestones, where the reduction in supply is often accompanied by increased market attention and price growth, signaling the next leg of a bull run. These events are celebrated within the Bitcoin community as symbols of progress and scarcity. However, the bull market sentiment and price increases that are commonly associated with Bitcoin halvings have not been as prominent for Zcash.
In my opinion, what truly matters for Zcash is not the halving cycles themselves, but the 21 million coin cap, which is sacred and non-negotiable. ZIP 234 is designed to maintain the integrity of the network’s supply and ensure that the issuance of ZEC never exceeds 21 million coins. It offers a straightforward solution by approximating the current four-year half-life that exists in halving cycles. This design provides a simple and predictable issuance model without the complexities introduced by the alternative proposal. My personal belief is that ZIP 234 is the better option for the NSM. I encourage the community to share their thoughts and feedback on ZIP 234, as well as their perspective on the importance of halvings for Zcash.