Shielded Labs: An Independent, Non-US Organization

Excellent news, US centralisation is one area I’ve been very concerned with for some time.

Thank you Jason, you are one of those rare individuals who takes concrete actions to move Zcash in positive directions, all the best with this initiative.

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I congratulate you @aquietinvestor for this proposal that will help build a better future for Zcash.

I am confident that the team of Ambassadors will be able to collaborate to help fulfill the vision of Shielded Labs.

Best wishes!

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I will provide a detailed update later this month in April. In the meantime, please read the below post and provide questions, comments, and feedback on the Zcash Sustainability Fund (aka Posterity Fund). Thanks!

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This is awesome to hear! Looking forward to seeing how this develops… getting out of the US should be a priority. It is sad to see the direction our country is moving lately.

I think it will be important to educate the Swiss Government on the benefits of Zcash. If they were smart they would make it legal tender and position Switzerland as a crypto privacy hub.

Future idea:

A Zcash based exchange headquartered in Switzerland that has only ZEC pairs and allows shielded deposits/withdrawals.

–Incase anyone missed this, Zooko spoke to some bankers out there I think last year. See link:

https://www.snb.ch/de/ifor/research/id/researchtv-event?event=wc_627cb949655918275d72e3d2

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I think it’s great that the Zcash ecosystem is becoming more decentralized!

What’s the legal structure of the organisation, and how much legal exposure do its owners, employees, or key contacts have to the US?

One of the ongoing issues with distributed systems is unexpected centralisation, where engineering teams or individual companies effectively control cryptocurrencies. So it’s important that any new entities are truly independent and decentralised.

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Shielded Labs is structured as a non-profit Swiss Association. All funds must be used to support its mission, which is to serve the Zcash protocol, community, and ecosystem. In terms of governance, Shielded Labs has a board of directors that is responsible for managing its affairs. The board is elected by its members, the “Zcash Community Council,” which oversees the board and ultimately holds it accountable. I chose to structure this entity as an Association because having members is a great way to decentralize control of the organization.

I am a US citizen and serve as a board member. All other board members will be non-US citizens. It is my intention to have most (if not all) employees and key contacts be non-US citizens. For example, Shielded Labs is currently in the early stages of working with a team of developers based in Europe on a certain development project, which I am hoping to announce to the community later this month.

I agree with this statement and it is very much aligned with Shielded Labs’ long-term vision. However, I am starting this entity completely from scratch and with limited funding, so it will take some time to get there. Hopefully not too long!

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I will provide a detailed organizational update on Monday, June 12. In the meantime, Shielded Labs in partnership with the Equilibrium Group has posted a draft proposal for the Zcash Sustainability Fund (aka Posterity Fund). Please review it and let us know what you think:

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Hi @Autotunafish. I’m answering your question on this thread since it wasn’t related to the Zcash Sustainability Fund.

Here’s the link to the Swiss Register:

https://www.zefix.ch/en/search/entity/list/firm/1567136

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Hi everyone,

I wanted to provide some updates about Shielded Labs related to funding and the initiatives it will focus on in the months ahead.

Funding

I am happy to announce that Shielded Labs has received funding to help bootstrap its operation.
We received a generous donation from an individual who is aligned with Zcash’s mission and values. Although they wanted to remain anonymous, this individual firmly believes in the importance of layer-one privacy and the critical role it plays in preserving individuals’ autonomy and financial freedom. Shielded Labs is very grateful for their generous donation and for their commitment to advancing the decentralization of Zcash. We plan to use this donation to fund our first development project, the Zcash Sustainability Fund.

Overall, funding is still very limited. I’ve spent the past few months trying to raise donations, but it has been difficult given the challenging market environment. Since Shielded Labs is a non-profit, donors do not receive an equity interest or ownership stake in the organization, which makes fundraising more difficult. In the coming months, I will continue outreach efforts and actively engage with potential supporters to secure the financial support necessary for our mission. Shielded Labs is also interested in exploring grant opportunities, possibly including the Zcash Foundation’s Minor Grants Program.

Initiatives

Development

Shielded Labs recently announced that it is partnering with the European-based Equilibrium Group to develop the Zcash Sustainability Fund. Please read our proposal and provide your thoughts, feedback, and suggestions. We will allow a comment period for at least one month. If there is general community support and no significant objections, we plan on starting development shortly thereafter.

If we can obtain additional funding, there are two other development projects we are interested in pursuing. First, we are exploring covenants that would introduce programmable logic into Zcash transactions to allow users to define specific rules and conditions that must be met before funds can be accessed. Covenants would give users advanced security features that enable custom spending policies, create time-delayed transactions, and provide immediate response options in case of compromised keys. For example, a time-lock vault could impose a time-based constraint on spending Zcash, ensuring that funds remain unspendable until a specified period has passed. This mechanism also provides protection against immediate spending and offers users a chance to detect compromises and take appropriate action. We’re also interested in developing a feature that serves as an emergency measure to lock funds when the owner suspects a private key compromise.

In addition, Shielded Labs is interested in developing a coinholder voting mechanism. To be clear, we do not endorse pure on-chain governance; however, we recognize the importance of providing a means for coinholders to participate in the governance process. As Zcash becomes more decentralized, we need additional ways to determine community consensus. Such a mechanism would allow coinholders an opportunity to express their preferences and participate in the decision-making processes that shape the evolution of the Zcash network. Aditya wrote an RFI for a coinholder voting mechanism last year while he was on the Zcash Community Grants (ZCG) committee, which provides a valuable blueprint for the design of a secure and private mechanism.

User Adoption

User adoption is one of Shielded Labs’ core initiatives. In the immediate term, I would like to focus on two key areas:

First, there has been several discussions on the forum about getting more people to use Zcash. One specific initiative @earthrise recently proposed is Zcash being adopted as the de facto currency within a niche community that has historically grappled with censorship by established payment processors or has unique privacy requirements conventional payment processors cannot fulfill. Shielded Labs can play a role in providing structure to this project to transform these discussions into actionable items that can be implemented. To facilitate this, I will establish a User Adoption Working Group that meets on a regular basis to deliberate on strategies and identify specific communities where Zcash can be effectively introduced. These meetings will prioritize tasks, delegate responsibilities, and establish clear deliverables, ensuring focused and effective efforts. Through consistent communication and collaboration, we can optimize our impact and achieve successful outcomes that increase user adoption.

Second, as a member of the ZCG committee, I have come to realize that one important aspect of the program is currently lacking adequate support. While the Zcash Foundation does an excellent job administering the ZCG program and supporting the grant process, there is a notable absence of dedicated post-approval assistance for grantees. Shielded Labs can play an important role by providing ongoing assistance, mentorship, and resources to grantees to ensure that the potential of these projects is fully realized. For example, we can assist @pitmutt with outreach and marketing efforts to encourage adoption of Zgo among payment providers. We can also partner with QEDIT to create educational and promotional materials that communicate the value of Zcash Shielded Assets to a wider audience. If any grantees are interested in post-approval support, please reach out to me to discuss this opportunity further.

Community Support

Community morale has reached an all-time low, and there is a growing sense of concern and dissatisfaction within the Zcash community regarding various aspects of the project. In order to build a stronger and more resilient ecosystem, it is important to acknowledge and address these issues. To that end, I would like to set up time with community members to share their feedback on what they believe is currently lacking and what they believe could be improved within Zcash. Your input is essential to shaping the future of Zcash, and I strongly encourage you to participate in this feedback process.

I would also like to offer my assistance as a resource to community members to help ensure the Dev Fund 2024 discussions are driven by the community and not existing Dev Fund recipients. If you need help brainstorming proposal ideas, seeking feedback on your proposals, finding like-minded individuals to collaborate with, or understanding how to engage effectively with the community, I can help provide guidance and support.

I am starting office hours where community members can schedule time to speak with me directly about these matters. To schedule a meeting, please book a time slot via Calendly. If you prefer something more private than Google Meet, please feel free to reach out to me via DM on the forum or Twitter, and we can arrange a meeting on Jitsi or Session. I look forward to connecting.

Conclusion

In addition to the initiatives mentioned above, I am also focused on recruiting more directors and contributors who are non-US citizens based outside the US. This is essential for building a truly geographically diverse and robust organization. There are a couple individuals I have in mind who I believe would make good board members, but I have been moving intentionally slow to maintain flexibility and explore various options. Nevertheless, this is a high priority, and I will keep you updated on the progress I make in this regard.

I am excited about the future of Shielded Labs and the role it aims to play in the development and decentralization of Zcash. In the short-term, Shielded Labs endeavors to be an independent contributor to protocol development and other ecosystem initiatives. In the long-term, it aspires to be a core entity that stands beside the Electric Coin Company and Zcash Foundation and makes Zcash stronger and more resilient in an increasingly uncertain regulatory environment. It will take time and additional funding to get there, and we’ll inevitably hit some bumps along the way, but I am confident we are on the right path and working towards success.

Thank you.

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I agree, having something more along the lines of an incubator would add a lot of value to the ecosystem.

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What a breath of fresh air!

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That’s exactly how I feel too!

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Hi @aquietinvestor ,
Each of the suggested activities is very important for Zcash and its ecosystem. I really hope you will be able to follow through on your intentions.

If there is something else that Shielded Labs could take care of that in my opinion is missing:

  • Regulatory aspect, see also the recent ban of private cryptocurrencies with Binance. Meet with European exchanges and help them understand how to read current regulations without exceeding them.
  • Lobbying institutions, promoting Zcash or even the “Grayscale Privacy Fund” ETF (link).

I know that these activities would require specific resources and some effort, but in my opinion it is something that is lacking in the current organizations.

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Hi @bloxster. Thank you for your feedback. I agree with you on the importance of regulatory outreach and promoting Zcash.

In terms of regulatory outreach, I agree that it should be an area of focus for Shielded Labs. While I currently lack the necessary funding and staffing resources to fully commit to this initiative, I have been engaging with European organizations involved in policy efforts related to crypto. I have spoken with members of the European Crypto Initiative and the Crypto Council for Innovation to discuss Shielded Labs and Zcash, and emphasized, for example, that Zcash’s shielded memo feature is designed to comply with GDPR’s travel rule. I will continue this sort of engagement.

One way to prioritize regulatory outreach is to add an attorney to the Shielded Labs board who is well-versed in European crypto policy matters and can effectively advocate for Zcash. I have been strongly considering this and am searching for the right candidate.

Regarding promoting Zcash, Shielded Labs has a “Narrative Development” initiative. The objective is to create informative reports that highlight the value proposition of Zcash and distribute them to relevant organizations and institutions. Due to resource constraints, I have currently prioritized the User Adoption initiative over Narrative Development. However, I hope to start the Narrative Development initiative later this year.

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Excellent proposals! Best of luck!

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Great to hear from you, this all sounds great and I am excited to watch things develop. --In regards to Community Support I think hosting Twitter spaces may be interesting and help bring the community together to collaborate and discuss ideas. Does Shielded Labs have a Twitter page?

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I really like the idea of having a Twitter spaces event to discuss Community Support. @shieldedlabs is the Twitter handle, but there hasn’t been any activity yet. I’ll look to start using it in early July. On that note, i’m looking to find someone to help run the Twitter page. Please reach out if you’re interested.

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I’d be interested to hear about tax-exemption status for the non-profit

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Shielded Labs does not currently have tax exempt status, but is taxed as a non-profit on a cost+ basis.

After Shielded Labs was organized, I applied for tax exempt status on the advice of Swiss legal counsel. However, after three or four months of deliberation, the tax authorities rejected the application. I was surprised with the outcome because Shielded Labs seemed to meet all the requirements for tax exempt status.

Shortly after the rejection, I spoke to the COO at Nym, which is also based in Switzerland. He said it was a mistake for Shielded Labs’ legal counsel to advise me to apply for tax exempt status right away; that the tax authorities expect the organization to first prove it is meeting the requirements on an ongoing basis before applying. So, Shielded Labs intends to apply again at some point in the future.

As I mentioned above, Shielded Labs is taxed as a non-profit on a cost+ basis. What that means is if Shielded Labs receives CHF 500,000 in donations and has operational costs of CHF 350,000 in 2023, the “profit” for 2023 would amount to CHF 17,500 (350,000 x 5%). Shielded Labs would pay 7.75% profit tax on the CHF 17,500, amounting to CHF 1,356.25 (17,500 x 7.75%), which is equivalent to a tax rate of 0.39% (of the CHF 350,000 spent). There is also a negligible capital tax in Zug of 0.5% of profit.

Shielded Labs is not subject to capital gains tax. So, if it holds ZEC and the price increases significantly between the time the ZEC is acquired and the time it is liquidated to cover operational costs, there is no tax liability on the gains.

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I hope Shielded Labs will also consider other means of communicating its message. With the debacles on Twitter and Reddit (and I’m just waiting for Discord to follow suit), we need a presence outside of the walled gardens.

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