Protect the integrity of the monetary base supply schedule

Folks, I and others from ECC have been listening to the dev fund discussions carefully, in public and in private conversations, and we’re working on updates to share with you about our current operations, our plans for the future, and also our assessment of how the current crop of ZIPs would impact ECC.

We hope it will help inform the discussion by giving information that the community can use to plot its course. Stay tuned for that!

Right now I’m posting just to bring up an issue that is bothering me a lot: potential adopters/users/hodlers of Zcash need to have confidence that the monetary base supply schedule is extremely predictable and immune to manipulation. 21 million eventually, 10.5 million in the first four years, half as fast of an issuance rate after each halvening, etc.

I’m bringing this up because a few of the dev fund ZIPs suggest changing that supply schedule by burning coins in certain cases. I believe that if one of those proposals were to be adopted that it would severely undermine confidence in ZEC, and cause large numbers of people around the world to stop buying and holding ZEC, or to refrain from beginning to buy and hold ZEC.

This is because a lot of those people will perceive such a “burning coins” protocol as artificially limiting the supply in order to artificially pump the price. Even if there are solid reasons why burning coins is a good idea, and even if it isn’t being used to artificially manipulate the price, most people around the world will not learn, understand, or believe those reasons and will instead just shy away from owning ZEC because that additional factor introduces complication, uncertainty, and the possibility that they are somehow getting exploited.

The monetary base needs to be extremely predictable and it needs to be extremely simple. It takes many years for people to become confident enough in a network that they are willing to trust it as a store of value, and we should be very, very cautious about making any changes that undermine that.

It isn’t clear to me that there are solid reasons why the community would want the protocol to limit the coins going to core support orgs, but if there are, then I would suggest we implement that by distributing those coins to the previous year’s worth of miners. This achieves the goal (which again, I question) of limiting funding to core support orgs, it makes no change to the monetary base so it will not undermine confidence among potential coin-holders, and it gives additional incentives to miners to maintain their operations over time instead of exiting the ecosystem.

Oh, one more thing: SEC risk. The word “burn” is a red flag to the SEC. Artificially limiting supply — or even talking about artificially limiting the supply! — is one of a handful of things that are red flags to SEC. Now, as we said in, we believe Zcash is not a security, and that it is very far from being mistaken for a security by SEC, because we never had an ICO, because ZEC was never tradable before it was useful, and because Zcash is decentralized. The fact that ZEC is unlikely to be classified as a security and de-listed from all USA exchanges and businesses is one of the under-appreciated strengths of Zcash.

However, like we said in, it would be a shame if the Dev Fund process accidentally increased the risk of Zcash being mistakenly perceived as being a security. That’s another reason to stay away from changes to the monetary base supply schedule.

However, like I said above, I think a much more important reason to stay away from such changes is that they would undermine confidence in ZEC as a stable long-term store of value.


Aye. While many proposals involve “throwing away” Dev Fund ZEC in some cases, the mechanism of “throwing away” coins is mostly an orthogonal matter, and may be implementing either burning or by assigning the coins to various parties past or future.

@mistfpga had the excellent idea of creating a Supplemental ZIP enumerating how coins can be “thrown away”, and having full proposals choose from this menu.

The menu would include (off the top of my head):

  • simple burn
  • burning, but delaying the halving to restore total
  • distributing to past miners (within some time window)
  • distributing to future miners (within some time window)
  • redirection to discretionary spending by some designated entity
  • redirection to spending by some consensus enforced mechanisms, such as:
    • a “shielded adoption incentivization fund” that would pay interest on ZEC held in z-addresses

Side notes:

  • Regarding securities regulations consideration: as discussed elsewhere there is a big difference between burning done by an “[active participant that] controls the creation and issuance of the digital asset” (quoting the SEC framework) versus having a community-approved consensus rule that does so automatically and without the discretion of any participant.
  • Distributing to past miners isn’t great in terms of incentives (unlike distributing to future miners, it doesn’t increase security), and it also may create operational and tax issues by “airdropping” coins on people who happened to do some mining a year before.

Just one point of clarification plus a couple points of disagreement. The point of clarification is that some of these “ways to redirect money away from specific recipients” have the effect of delaying issuance (right-shifting the supply curve), and others don’t. From Eran’s list:

  1. simple burn: down-shift the supply curve
  2. burning, but delaying the halving to restore total: right-shift the supply curve
  3. distributing to past miners (within some time window): no change to supply curve
  4. distributing to future miners (within some time window): right-shift the supply curve
  5. redirection to discretionary spending by some designated entity: no change to supply curve
  6. redirection to spending by some consensus enforced mechanisms, such as:
    a. a “shielded adoption incentivization fund” that would pay interest on ZEC held in z-addresses: no change to supply curve

While in my previous post I said that manipulating the supply down was a terrible idea, I also think (perhaps a little less strongly) that manipulating the supply to the right (delaying the issuance) is also a bad idea for the same reasons.

Remember, the vast majority of users and hodlers whose decisions impact Zcash will not have the information or the capacity to distinguish between these nuances. What is obvious to you, Eran, and to me will never be understood by the vast majority of those people whose support we need. That’s why I insist that “The monetary base needs to be extremely predictable and it needs to be extremely simple.” Anything that doesn’t change the supply curve (3, 5, and 6 in your list) qualifies.

Two points of disagreement:

As Swihart previously replied that’s not necessarily what we’ve learned from legal counsel, and we would advise against coming up with your own legal theories.

Disagree. Inasmuch as this “redirect coins away from other people” consensus rule is predictable, then it incentivizes miners in advance and it is part of their normal operations and taxes.

Frankly, all of the proposals I’ve seen for “redirecting coins away from certain recipients” seem overly complicated and likely to have unintended consequences. The simplest solution to all of this is “just don’t do that”. If we really think it is so important that it is worth the complication (a lesson I’m continually learning: whatever it is, it is almost never worth the complication :laughing:), then I still strongly suggest we keep the overall supply curve as close to unchanged as possible.


Hi Zooko,

I feel quite strongly on this topic too. I believe that the curve has to be slightly adjusted. I think the least harmful/impactful is keep to the ~21million (no more no less).

We are at a place where we have to decided between two evils.
1 - no dev fee at all (thus being consistent with the quoted statement)
2 - Adjust something, be it the curve, issuance to miners, total issuance or something else. (being inconsistent with your quoted statement.)

We have established we really need to do 2 if we want to keep the ECC, people are strongly suggesting not to give 100% to miners. (which I would argue more people made financial decisions upon than a slight tailing to the total supply schedule) but that is a moot point now really.

But I also strongly agree with this.


There is an option that isn’t on tromers list (I have an long post on this I will try to get up today at some point.) but you could add to the final tailing emission. Nobody knows when that will be. the halvings are predictable, if that is something that is seen as more essential than other options then tack it on the end of the total emission.

Could you soften to an idea along these lines?


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This is only partially inconsistent with the quoted statement.

  • Adjusting the curve or total issuance results in adjusting the supply.
  • Adjusting the percentage issuance to miners vs dev fund does not (on its own) change the supply.
  • Adjusting something else may or may not adjust the supply, depending on what “something” is :slightly_smiling_face:

I agree that a mechanism to destroy “excessive” funds seems a bit unnecessary and changing the supply curve should be avoided if possible. It should be required of those who suggest the burning of excessive funds define what that threshold is and why i.e. what is your comparitive figure, where does it come from and why do think it applies here because personally, the idea of destroying funding allocated for development seems completely counterintuitive to this entire undertaking and I know of no similiar business structures to campare to.


I rather see excess devfunds locked into a devfund for the next halving, ad infinitum.

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Although I have read through your post and your arguments are mostly sound, as in I would have no problems in supporting or even advocating such views I as a member of the Zcash community have to think about the broader crypto community and humanity in general.

We will support you all the way under one condition and one condition only.

  1. Whenever you think that dropping some dank rhymes about SNARKS is a good idea you must resist those urges.
  2. When 1. fails you shall repeat the following sentence in your head " A rapper with the pseudonym of lil’ Zooko entering the scene would NOT only serve for the betterment of humanity".

This must not happen to zcash.

I 100% agree with the need to protect the monetary distribution curve and supply, it’s a fundamental part of what makes Zcash, Zcash.

There are many good suggestions (ZIPs) so far for how to manage a pool of ZEC (development fund) robustly and with transparency but once you start introducing burning and delayed access to that pool it becomes not only more complex but adds risk.

Who gets to determine when how the delay/burning happens? Could it be manipulated to try to affect market value? Is it discretionary or well defined? And of course running afoul of SEC rules should be avoided at all costs.

I would rather spend the effort and debate on the already difficult questions about how a development fund can be transparently managed by two or more parties to keep the development of Zcash going.

The added complexity of delays/burning of ZEC seems superfluous to the core goal of a development fund: paying people to work on improving Zcash.


I was about to rant.

I was about to have have a disposition.

All I am going to say, is DO NOT CHANGE THE TOTAL COIN COUNT. 21,000,000.



I think this is a reasonable alternative to a burn for my purposes. Can it be implemented simply?

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HI Matt,

Just out of interest how do you see it working? I cant see how it can be implemented at all.

The main issue being pools, do most of the mining.

FR rewards are identical to mined rewards, so doesn’t this “back pay miners” also work on the FR addresses? or will there need to be special cases which the algo wont pay? in that case can those addresses mine at all? or send/receive coins?

Whoever proposes this idea really needs to flesh it out and the full mechanics of it.

I can certainly imagine paying the mining pools, and relying on their customers to demand pro-rata disbursement. If this only happened once, it might not work out – but if this were common and communicated in advance, that might be okay?

Definitely not ready to propose this, but I think it’s interesting if there’s concern about “right-shifting” the money supply, which seems to be the only reasonable alternative to a burn for my purposes.

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Hey @zooko,

Respectfully, I don’t think you’re in a position to judge the motivations of coin holders. I have been here since day 1, accumulating ZEC through both mining and buying, and I have incurred immense losses as a result. I invested my life savings into mining hardware and continue to spend a good chunk of my income on electricity bills. Although I’m a passionate believer in Zcash’s ethos, my primary motivator has always been the pursuit of profit, and that’s the true source of Bitcoin’s massive success. The number one reason people talk about and buy BTC is because they know other people got rich buying it.

Nobody has ever become rich buying ZEC, and the only people who have benefitted from it have been the Founders Reward recepients and the ASIC manufacturers. Anyone else who has ever touched ZEC has lost money. This is the real reason Zcash receives so much hate on Twitter.

I hate to say it, but ZEC is literally the worst store of value in history. Zcash lost more purchasing power in 3 years than the US dollar lost over the last 106 years. The majority of people will never want to buy an asset with such poor past performance.

The only hope Zcash has for survival is to attract buyers by increasing the price. This can be achieved by adjusting the supply curve to massively reduce inflation and cure the supply/demand imbalance. Without making a change, ZEC will continue to bleed out.

I understand that you’re concerned about the SEC, but I and most other ZEC holders don’t give a damn about the SEC. We’re down 96% or more on our investments and we need to make our money back. Unless that happens, Zcash will always be a failure in the eyes of the people, and Zcash will never achieve mass adoption.

You need to stand back and see the bigger picture from the perspective of the average user.


I think so. One implementation would be that the consensus rules require a block to award coinbases of the right size to some previous miners. The simplest would be to award all of the coins that are supposed to be “burned” in this block to the miner who mined the block exactly a year ago.

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So I would need to keep all my mining priv keys for a year, or the funds are automagically burnt (by being sent to an old address I no longer have the priv key) isn’t this the same as “time-lock” which is also a SEC no-no? (Legit question. You have had legal advice. is time-lock an issue? I remember it was before, whilst this isn’t exactly the same, it feels similar)

This just seems like burn by a different name. - Remember you see this as possibly simple at the protocol level. what happens at the mining pool level?

What happens if a pool rotates their priv keys on a regular basis? What seems easy for the protocol to handle makes it a logistical nightmare for everyone else. and double confusing. certainly less “predicable” in my personal opinion.

Thanks for your time,


Tweaking the time period would fix that, maybe burnt coin goes to the addr paid 100 blocks ago, or 1000, or 10.

Wouldn’t want to be a miners accountant :slight_smile:

I really wish @zooko had addressed @vgm 's posting, because it contains the key to clearing up @zooko 's expressed confusion as to

Members of the community who have held Zcash over the long haul have seen its value erode steadily, with no sign of that turning around. The longer you hodl, the more wealth you lose. So those “core support orgs” funded by the dev fees have reaped positive value for themselves (assuming they cash out at least some fraction of the freshly minted coins on a regular basis) but provided only negative value, in the form of a wasting asset, to long-term holders. So it should not be surprising at all that the aggrieved holders would like to limit the flow of coins to those “core support orgs”. If someone seems unaware that he is stepping on your feet, hard, a good whomp upside the head ought to get his attention.

However, the crux of my frustration with ECC is not the decline in value that @vgm points out. That’s only a symptom. If ZCash were actually a useful medium of exchange, its value would not be eroding but rather growing.

But as it turns out, ZCash is anything but a useful medium of exchange. There are plenty of things I would like to buy with cryptocurrency, anonymously. Let’s take two: gold and Web hosting. Several reputable online precious metal merchants accept BTC or BCH at only 1% more than paying with check. And many Web hosting suppliers accept BTC, BCH, and even Litecoin and Monero – but I have found only a couple that accept ZCash, and those are either marginal players or impose a very large markup. Can I even buy alpaca socks with ZCash?

This lack of adoption means that Zcash is not a realistic medium of exchange – so why would it become a store of value? Moreover I have seen absolutely no indication that ECC has a credible plan to change this. Sure, we hear a bit about lightweight wallets lately, but over the years most of what we hear from ECC is that new and shinier bells and whistles have been added to the back-end tech. With basically nobody using Zcash for real commerce, exactly whom do these bells and whistles benefit? Meanwhile other coins with significantly inferior privacy technology, can focus on user adoption first-- and if they succeed, can later bolt on better tech.

ECC’s focus on trying to appease the SEC and the rest of the KYC/AML establishment is also of dubious value. Okay, fine, so not acting like a “security” has some value and might keep the SEC off ECC’s back for a short time. But the crypto space in general represents a nice, fat meal for wealth-hungry governments, and it is hard for me to believe that they will let a truly private cryptocurrency flourish. I suppose that ECC is hoping that by hopping through compliance hoops, they will convince the regulatory wolf to eat them last, after a full meal of pre-mined “securities”. But you know, that wolf is going to want dessert sooner or later.

If ECC is going to keep getting a dev fee, it would be nice for the community to get two things in exchange: measurably wider adoption among merchants, and a contingency plan for when the USG convinces all the exchanges to freeze ZEC out.

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Stopped here, 20 characters

@MikeInMass A year ago there were only a few dozen places you could spend Zcash, and today there are more than a few hundred stores accepting Zcash. Yet we all know where the price has gone in the past year. Merchant adoption helps the people who want to use it, but does not necessarily help speculators.

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