Shielded Assets Discussion

They have not yet been published but @steven-ecc is actively working with them to get than done as soon as possible.

On the topic of ECC ZSA endorsement: though I believe the possibilities are exciting, ECC hasn’t committed to implementing ZSA support in ECC software (zcashd). It’s not currently on our roadmap. We’d like to see strong user demand and a model that supports ZEC holders.

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There have been ideas both ways.

One way is as you mentioned, all transactions keep the same default fee to ensure maximum fungibility in the shielded pool. But the issue there is the default fee is so cheap it makes it trivial cost to issue/use a ZSA token.

In my opinion there should be a higher fee for ZSAs because they are using Zcashs blockspace for something other than transacting directly with Zcash:

But the key to maintaining fungibility in that scenario would be for all ZSAs to use the same higher fee.

Yes, it’s a trade off in that looking at just fees on the chain a Tx could be attributed to “some ZSA transaction took place” vs “some regular Zcash transaction took place” but it would need further study to know if it’s worth the trade off.

To me it seems like a good compromise if it makes ZSAs “consume” more real Zcash to operate.

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I understand that ECC hasn’t officially put it in the zcashd roadmap, similar to how PoS isn’t officially on the roadmap , but according to polls and ECCs own blog post:

There is strong community support for ZSAs. But as we are discussing above, it needs more research to be proven to be viable.

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Yes, there is strong positive community sentiment for this type of support as evidenced by the ZCAP vote, especially. For ECC’s support in zcashd, we need to see more, as you’ve stated here as well.

Important to note that soon ECC won’t be the only entity supporting a consensus node. I’m not sure what if anything the Zfnd is committed to supporting for ZSAs within zebrad.

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Thanks for the link to the previous discussion. I tend to agree with @secparam . If you want to encourage the adoption of something, typically you wouldn’t tax it at a higher rate.

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Not even if it has added value through increased functionality?

(Asking out of interest and not representative of the Foundation’s views on this.)

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Tldr; Personally I think fees are a distraction from the underlying problems you mentioned. I think the more important problem is the risk of dividing or meaningfully changing the community. We will have two seperate groups advocating for the direction of Zcash. Wether or not that will be easily managed or not is yet to be seen. I’ll run through my thought process for ZSAs below.


ZSA Merge Technical Risk

For the most part it seems the Zcash community/ZOMG has decided ZSAs would be good to implement and merge into Zcash. All things considered I think the merge will likely happen.

To do this from a technical standpoint some “trivial(ish)” but high risk changes will be made to the consensus rules. Luckily Zcash has some of the best engineers that will (hopefully) ensure that risk will be reduced to very (very) low. The goal is that post ZSAs the ZEC token will function exactly as it did pre ZSA. There will be nothing technical changed to ZEC token itself. We could probably imagine a world where ZSAs were a seperate chain. What that would look like and how that would affect ZEC is also a question I think we also need to keep in mind.

ZEC utility risk

Once ZEC and ZSAs have merged will be multiple seperate tokens, that in theory could have been implemented in multiple seperate chains. I think the risk of ZEC utility changing negatively by merging ZSAs as opposed to a seperate change is fairly low. The obvious utility change is the use of ZEC as a fee for ZSAs and luckily for us this experiment has already been done in Ethereum and proven successful. Ethereum’s value has a very meaning correlation in value with the value of ERC20 (and other) tokens. I can’t imagine it’s likely that ZEC value would not correlate with ZSA value in some way.

But we also see the negatives of ERC20 (and other) tokens on Ethereum. High utilisation = high fees on Ethereum. That’s something that could happen and could reduce the utility of ZEC. IMO I’m insanely optimistic about the ability of ECC (and others) to scale Zcash and believe that we need to solve the scaling problem with or without ZSA so don’t see this as a ZSA specific problem.

ZSA creates new users

New groups of users will likely enter the ZCash ecosystem. Some will hold ZEC, some will use ZSAs, and some will join the community.

New ZSA users affect on ZEC supply

Bringing in a new community of users is mostly a good thing in the near term for ZEC supply and demand. Some new ZSA users will hold ZEC, reducing the supply of available ZEC. ZSA users will also require ZEC for transactions which will increase demand.

There is probably a lower probability that current ZEC holders will convert a meaningful total ZEC into an assets that might increase supply of ZEC more then the increase in demand from new users investing and utilising ZSAs. This all trends towards a likely increase in price of ZEC.

New ZSA users affect on community

I think this is probably the most significant risk to change the outcomes, ideology, sentiment of the Zcash community. There is a meaningful probability that the ZCash community shift large amounts of focus and conversation to ZSAs which would infact deflate from the important conversation and focus around ZEC. But I mostly see this as a marketing issue rather then a technical one.

This is something that seems to be more easily controlled in the ETH and BCH communities. ERC20 (and other) tokens have their own spaces/websites/communities for conversations and marketing to occur. BCH has SLP which is seperate. Will Zcash need seperate communities for ZSA discussions and ZEC discussions? I think trying to guess this upfront will probably result in lower productivity of resources and lower quality of outcomes. But I think this is something that will happen organically. My best guess is new ZSA communities will split off and create their own discords and websites and advocate their needs/requirement to the Zcash community when required. Wether or not this is distracting to Zcash’s (and more specifically ZEC’s) overall goals is yet to be seen.

I think those within ECC are incredibly smart deprioritizing ZSAs internally. This leaves ECC, as far as I can tell, as purer advocates for ZEC and its utility in the medium term over ZSAs. If ECC were implementing ZSAs the success of (and rhetoric towards) ECC may be largely tied to the success of ZSA. This may have been a bad thing as it takes away from all the other amazing current and future achievements of ECC.

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With respect to the conversation on fees I guess we need to agree on what the problems are before we decide on a solution. Unfortunately, without context of the problem being address, some fee conversations can be read as the Zcash (ZEC) community trying to “milk” ZSA users for using “our” chain like they are some kind of second class citizen…

Sorry for being dramatic but I imagine a future ZSA user could see it that way. Especially given transacting ZSAs won’t be technically that different to transacting ZEC.

Now I’m not saying higher fees isn’t the answer to a problem, but there may be better solutions. For example if the problem is the risk of high ZEC fees being high we could be explore algorithmic fees (different or same with ZEC) that measure transaction ratios and prioritise ZEC transactions over ZSAs.

But I think the true solution to the fee problem is scaling which should probably be a higher priority all things considered.

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(Agree on scalability which I voted for in September last year)

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I agree with everything you’re saying, except for the milking part. I think many ZEC users have experienced DeFi on Ethereum, and so it would take raising the transaction fees for ZSAs significantly higher before anyone considers themselves as being milked.

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I just want to say this thread is a good example of the things I like best about the Zcash community.

Great perspectives, thoughtful and passionate debate, respect for each others opinions.

:heart:

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Tx uniformity is a strong case for not raising ZSA tx fees, than exploitation of ZSA users, agree.

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I guess we also have to take a real deep dive past our biases and really consider if a zBTC transaction should be considered less important to Zcash then a ZEC transaction. One could argue they are both just stores of value and our goal is make stores or value and transactions of value private. Why would/should we prioritise ZEC transactions over zBTC?

If the answer is to increase the value of ZEC (for personal gain or dev fund) I’m not entirely convinced higher ZSA fees going to miners is an effective way to achieve that goal.

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Frankly speaking, I’m 100% unbiased on the fees subject. Just picking your brains as it sheds a lot of insight as to why who prefers which option :slightly_smiling_face:

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Having a higher fee for ZSA only makes sense if a ZSA transaction costs more to verify. Personally, I want a ZSA transaction to show as exactly the same as a ZEC on the ledger. The privacy benefit of such scheme itself will make Zcash more attractive than any other chains.

In a future where Zcash is the dominant chain, ZEC as a native currency will be valued differently than any other imported ledger including zBTC. To quote @balajis:

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What if zBTC was a permanent import (proof of burn)?

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In the case of permanent import, there will be contentions on which network the real BTC lives on. If Zcash were to be successful, it’ll do so in a multi-chain world. In this multi-chain world, different communities will stake claim on which network the “real BTC” lives on. Won’t the value of “BTC” then be fractured among zBTC, xBTC, pBTC, wBTC and other alphanumericBTCs? There will be cost to importing ledger to other chain.

Also, there is always probability that BTC will survive on its chain. If Zcash were to be so awesome and we can support billions of users, what prevents BTC core devs from forking the tech and import the ledger where ZEC is replaced by BTC on the new “Shielded Bitcoin Network”? I would imagine something similar will likely happen and I prefer that the chain BTC survives on is Zcash.

“In the year 2100 the whales notice that the mining reward is basically zero, and there are fewer and fewer transactions happening on the slow, expensive, zero-privacy BTC network. So they decide to simplify and save money by shutting it down.” (Gavin Andresen in A Possible BTC Future)

What I think would be worrying is for a new community to launch their tokens as ZSA and use Zcash network as their main home-ground as freeloaders. My intuition says that requiring ZEC to pay for transactions would be enough to prevent the freeloaders problem in Zcash. However, would that stay true in the long term?

Personally, I would prefer if minting ZSA requires paying fee which will be collected to the dev fund. This way people who wants to develop on Zcash will contribute to the fund that has enabled them to do what they want to do on Zcash.

Edit: clarification on freeloaders problem.

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I had to go back and reread the proposal after looking at this discussion. They intend to explore two methods:

“1. Default method - use the existing fee mechanism today with $ZEC, applied to all asset types:

  • fixed fee per transaction, indifferent of asset type
  • same for issuance transactions
  1. Low-hanging fruit - introduce some variability based on different criteria:
  • change fees depending on the type of transaction, but still make it fixed
  • change fees based on the number of action descriptions or per KB

We want to ensure that the fee mechanism fits well within the desired privacy model of indistinguishable transactions.”

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That’s a really interesting perspective. I’m the complete opposite. I worry that a new community wouldn’t consider launching their tokens on ZSA and use Zcash as their main home-ground.

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Clarification: I would love for everyone to be on Zcash. What I worry about specifically, is the freeloaders problem. I imagine requiring ZEC for using Zcash is enough to make sure ZEC continues to be relevant.

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