Temporary re-allocation of funding among Zcash entities

Governance
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Of all the things I can think of that ZCG could spend money funding to help ZCash; giving grants to ECC or ZF is at the bottom of the list. I would rank it somewhere down near burning the ZCG budget each month to reduce supply. Zcash exists as a public good that will outlive ECC/ZF and all of us. At some point on a long timeline, the dev fund will end and the network will live on. If ZCG does its job right we will have hundreds of companies as competent and capable as both the current other recipients.

To be clear: I think the ECC and ZF are both well managed, fiscally conservative and do great work for zcash and the community. Their work and mission is fundamentally different than that of ZCG’s.

The 9% discretionary fund spend is used to fund the Ambassadors and occasionally ZCG members promoting ZCash at conferences. It is not a reflection on grants output or anything relating to funding ecosystem developers. The ZCG has publicly been very conservative in funding the past few quarters. This includes some incredibly difficult conversations with the very wallet developers that rushed to find a solution to the network spam, to ask them to reduce their budgets and road maps this year. All of our grantees have understood the budgetary constraints and are currently working heroics in order to deliver their roadmaps with, in some cases, less than half the funding they needed. The grantees are the front door to the ecosystem, when new users go to a ZCash website, when they download a wallet, when they watch a video or read an article about Zcash; 9 times out of 10 it was funded by ZCG. If we could double our spending and get the grant milestone twice as fast, that is where funding should go. The wallet teams funded by ZCG gave users the options when the network was under attack and let users access their funds. These same wallet teams are now looking at hardware wallet integration and how to onboard the next 1 million zcash users.

Unfortunately the market is not on our side. The grants dashboard is public and hopefully familiar to everyone.

Our big funding grants for ecosystem partners (funding the next ~12 months worth of work) include:

  • Nighthawk & ALL public infrastructure (explorer, lightwalletd, etc) - $551k (reduced from $1m)
  • Zingo - 375k
  • Ywallet + Ledger - $300k
  • Zcash Media - $900k
  • Free2Z - $333k
  • ZecHub $71k

For Comparison, ECC’s transparency report accounts 44% ($337,040) of their monthly budget on development. This was from July-Sept last year so the numbers may be different.

ZCG brings in .25 ZEC per block, 1145 blocks a day. ~8,587 Zec a month which is around $300k a month at today’s prices. Split between the ZF and ECC the money would not even make up for the short fall in the reports.

This funding is not just crucial to the ecosystem, these grantees are the biggest contributors in the ecosystem. Not included in my list are ZSA’s, bridges, community managers, forum moderators, etc who get funding from ZCG.

Removing funding from these projects kills the ZCash.

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12

What is mind boggling about the wallet ecosystem: more than a handful of wallet efforts have been funded over the past 3-5 years, and none are working well today (none have worked well since prior to June 2022). It seems that the butter (funding and human capital) has been spread too thin and yielded many unsatisfactory wallet products and a lot of re-inventing of the same wheels.

Why has the Zcash ecosystem never granted focused priority and funding to the build, delivery, and maintenance of a truly tech bulletproof, upgrade competent, and world class UI wallet client?

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Not to go too deeply off topic:

I would phrase the question differently.

Why is there no ROI for wallet development?
If wallet teams could monitize the products, the market would pick the winner.

I would pay per tx to use a wallet. I do to use samsung, apple, or google pay. I don’t beleive in “The tx fee is only for the miner”. This is zcash. devs get paid. Without a good ux there are no transactions. add a tiny fee, ill say i agreed to in the t&c checkbox.

Community grants should be for as many capable people as need them, so its not great for picking winners and losers or for being a businesses sole income stream.

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14

Problem

I think, as mentioned by others including @Dodger, that the real problem here is how long it’s taking to address the syncing issues. I’m sure there will be retrospectives conducted post “emergency mode” to work out what went wrong and what we could do better. I don’t think it’ll be a single thing, but many things that will be identified as needing to do better.

Item 1 - Dev Fund QEDIT

Offer QEDIT 20,000ZEC (seed funding) + 1% (or some other %) of ZCGs funds. I’m sure we can structure it in a way where QEDIT will still submit projects to the community and go through community feedback just as they do today with the grant process. The difference here is by funding QEDIT more directly we are in practice simply funding QEDIT to pay for a head count to work on Zcash. A head count that could also enter an emergency mode and help out. We should reach out to QEDIT and start discussions if that’s something they’d be interested in. Currently with how grants are structure QEDIT can’t do that. Would it have helped in this case? Who knows. But I imagine Zcash would in a better position with more decentralisation and agility.

Edit: I think funding seperate entities such as QEDIT will produce (at least with the state of things today) better outcomes for Zcash then simply giving ECC/ZF more ZEC.

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15

Hi everyone.

In this post, I’m not advocating for any particular outcome but providing the community with the latest information given the speculation about ECC’s financial standing.

Our assets are comprised of the following:

ZEC tokens: 107k
USD: $1.13M
BLD tokens: 41.24M after having recently sold 360k BLD tokens. 14M are locked up.
Starkware: We made a $200k seed stage investment. Current valuation unknown. Rights to future tokens are locked up.

Our average expense rate for Q1 2023 was $660k per month.

We have begun selling BLD tokens in small increments to avoid negatively affecting the market price of BLD. We owe a debt to Least Authority for $3.75M.

We receive 7,656 coins per month. At today’s ZEC coin price of ~$36.50, and assuming that we can’t sell BLD faster than we have been without negatively affecting the price of BLD, we have approximately 14 months of “flight fuel.”

Virtually all of our variable expenses including growth campaigns, travel, user research, PR has been paused. We have paused hiring for comms, security, product and engineering needs. This affects engineering, regulatory, growth and digital efforts.

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For comparison purposes, here’s a summary of ZF’s financial standing.

At the end of Q1, ZF’s assets were:

  • ZEC: 197k
  • USD: $3.7m
  • BTC: 69
  • ETH: 12

At current market prices, that equates to $12.9m worth of assets. We receive 5,479 ZEC from the Dev Fund each month.

ZF’s expenditure is very “lumpy” (i.e. it’s distributed unevenly throughout the year) because of Zcon, and one-off big ticket items like audits and grants, so it makes more sense to look at our annual expenditure, versus the most recent quarter.

The Foundation spent $2.35m in 2021, $4.1m during 2022, and our original budget for 2023 was $6.9m (an average of $575k per month). At current market prices, that level of expenditure would have seen us run out of money in July 2025.

In March (after Silvergate and SVB were shut down, and it became clear that Crypto Winter wasn’t going to end anytime soon), we revised our 2023 budget downwards by ~20% to $5.5m (an average of $458k per month). Those savings came from cutting back on our plans to hire more people, spend more on grants and research, host more community events, and introduce a scholarship program. I also took a pay cut.

That reduced level of expenditure pushes our runway out to February 2026.

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18

To me, this points to where the ZCG system can be improved to better service the interests of the zcash community and the protocol itself.

Rather than accumulating a big pile of ZEC and waiting for the right idea to come along, I think ZCG could be more proactive and allocate funding towards specific projects the community wants and put them out to tender to different organisations.

Every time i have spoken to zooko directly he has said that zcash should be MORE decentralised and not reliant on ECC for everything. That point was kind of lost on me until now.

We have shielded labs working on the posterity fund which AFAIK is not receiving funding through the ZCG, but why not? Can’t we as a community decide whats important then pay someone to make it happen?

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69 BTC

nice

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then let’s finish right here. Such a statement looks like the end of the project due to the wrong choice of financing method.

My opinion on the proposed is the following:

The development fund already has a controversial reputation in the wider crypto community. But if we want even more bullying, teasing and shitposting from the outside, then yes, let’s start making non-consensual financial manipulations in favor of the organization, which many people consider to be a centralizing force.

And, by the way, ECC has already taken out of state some of employees whose funding has already been approved by the grants committee.

But if the situation reaches a critical point due to the low price of the asset, then the only right solution is to reduce the costs of the organization and focus even more on activities that can support the price.

Intensive way of thinking - I don’t have enough money, I need to do something.
Extensive way of thinking - I don’t have enough money, I need to ask it someone.
These are completely different approaches. The first is entrepreneurial, the second is consumer.

It also depresses me that more and more people in ZCAP believe that ZEC is a token for donations to cryptographic science. Either the ZEC token is still an investment and there is no need to build a decadent policy of planning its cheapening. Or let’s say that it was the most science-intensive scam in the history of mankind and start all interested developers publish a dollar account to continue financing developments.

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Hello Josh! Thank you for such detailed transparency. I’m not counting on an answer, because it may have the label “non-disclosure of information”, but I’ll ask anyway because this is a significant nuance. Does ECC have any partners (large investors or funds) who are willing to exchange ZEC for dollars outside the market at current market prices (In order not to influence the market). Or ECC independently sells ZEC in market conditions.

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23

Dear Josh,

I want to express my gratitude for providing transparent details. As a fellow BLD holder, I propose an alternative solution. Instead of selling BLD, we could pledge it and mint IST (stabletoken), thereby supporting both Agoric and Zcash ecosystems. What are your thoughts on this?

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Hi @artkor. We don’t disclose this information. Thanks for understanding.

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Hi @edward_stccap, welcome to the forum!

I would love to do that under normal market conditions. I certainly don’t like selling at this price. But there are other near-term dynamics, including risk management. In the case of BLD, we are working with a third party to monitor liquidity and limit slippage.

In full disclosure, I am also personally a BLD token holder.

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So, at current prices, ECC has roughly ~$3.96M of ZEC and ~$9.14M of BLD tokens. Seems a little strange to have more than double the value of a token other than the one the company builds for.

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Agreed but it’s not by choice. The BLD came from a seed stage investment we made in 2018. The tokens were only recently available and not highly liquid - $600k in trading volume over the last 24hrs.

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The fact that they were writing seed stage checks back in 2018 is the real strange part.

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You know guys, I found the words to formulate the paradox of the Zcash development fund. Along with the fact that I cannot deny its great role, I also cannot deny that it is the most non-market mechanism of influence on ZEC.

I’ll explain. The normal investment market is arranged in such a way that the lower the price, the more willing to invest their money in the token. And the higher the price, the more willing to sell the token. Cryptocurrencies such as bitcoin do not violate this principle. Because investors are guided by this market principle. Miners are similarly guided by exactly the same market principle. After all, their motivation also has an investment nature. Miners buy equipment when it is cheap, and sell a mined coins when it grows in price, covering their costs and making a profit.

But only the development fund has a completely reverse non-market logic. When the price tends to go down, development funds are forced to sell even more and even more coins. And now we are discussing the sale of additional coins here, beyond the budget of the structures, seriously stating “there is no point for ZCG to hoard ZEC if this means that ZEC is worth 50-80% less next year.” And this happen in the phase when the market is growing, the price of ZEC shows catastrophic weakness, and there are no people willing to buy a coin on the market.

I don’t know what could be sadder, but I have to admit now that it looks like a bad investment, with all its potential. Sorry. The topic is so bad that I give it the highest danger rating.

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What you are talking about is tokenomics. Essentially money games. In my view, worrying about tokenomics is much, much lower on the priority list than worrying about adoption. Creating something that people find really valuable to use.

It is like a company spending time worrying about how to prop up their stock price instead of being a good business. Sure, it can be a consideration, but if you don’t have a product or service that people want to use, you should probably focus on that first and less about money games.

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Realignment of the Budgets:
There is nothing wrong with tight budgets. Its what you choose to do.
The market is focusing the budgets of core zcash organizations. What are the core competencies inside ECC/ZF. Has competencies aligned with opportunities? Has competencies aligned with budgets?

The organizational desires: growth campaigns, travel, user research, PR, hiring for comms, security, product and engineering needs. Could be split into separate individual projects, which would be presented to zcash community grants. If ZCG votes for these projects, great! The zcash community will either elect or unelect ZCG members (hopefully) based on their performance. This could reduce ECC/ZF internal budgets, focus their core competencies and grow zcash organizations.

Please, ECC/ZF write a blog post outlining what organizational activities have had to be paused, what was the estimated budget. This can act as a guide for individuals an organizations to say, hey we have these core competencies lets take this opportunity. It can send a message to ZCG of market demand.

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Adoption? I’ve been writing about Zcash for more than 5 years. I communicate with retail investors in ZEC and I can say that people are attracted by the position that ZEC is a promising asset that will allow them to benefit. But today, when two full crypto cycles have already passed, they do not see that this is at least a reliable asset in which they should save their money for the day when they need it. A huge number of people want to dispose of funds when they need them. And they want to be able to do it without loss. This is the main adoption of ZEC for today. This is his minimum task!

This is an open forum, anyone can read what we are writing here. I cannot promote ZEC with a clear conscience and heart, knowing that we do not prioritize the interests of these people. And we all have to consider the interests of people, because once we lose the trust of these people, we will never restore it.

But I’m not unique in this aspiration, because exactly the same feeling of confidence on ZEC for many people is the desire of many here. This thesis even listed in the ECC’s North Star as one of the main priorities: “A feeling of security so people are confident that their ZEC is battle tested and secure from censorship, debasement or loss”.

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