Temporary re-allocation of funding among Zcash entities

Governance
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I write this without having discussed with anyone working at ECC, ZF, or ZCG. I would have gotten more relevant data points if I had (and perhaps I risk coming across like a nutcase because of a lack of context), but in this case I am prioritizing the ability to say that this has been written solely by me, without the influence of anyone at ECC/ZF/ZCG.

Since leaving the ZOMG/ZCG in January 2022, I’ve stayed marginally involved in Zcash. In my opinion the ZCG has done a great job leveling up in terms of scope and community engagement (RFPs).

The dire wallet situation brought my attention back to the challenges facing Zcash.

I don’t want to make a long post, so i’ll dive right into it without more preamble.

I would like to propose that ZCG allocate 50-75% of its block rewards for the next 6 months, and/or some % of its outstanding discretionary funds, towards ECC and/or ZF. These % numbers are arbitrary, I put them here as a starting point.

Why:

1) Because ECC/ZF really need it.

Thanks to the spam transactions we are in crisis mode.

Thanks to our dismal token performance we are struggling to throw resources at the problem (without unbelievable opportunity cost in terms of other protocol priorities).

If I “gave up” on using ZEC because my wallets (plural) couldn’t sync in a year, I can only imagine how many other gave up on ZEC entirely, and how many were prevented from onboarding ZEC during the privacy resurgence that has emerged since late last year.

2) Because this is the best use of funds.

ZCG is doing a good job but investable, high-value projects remain scarce. According to the Q4 2022 transparency report by ZF, only 9% of ZCG’s discretionary budget was utilized at that time (page 19). It’s not because they are reluctant to allocate; rather, they are exercising discipline in quality control. This was a problem when I was on the ZCG, and it remains a problem now (a smaller problem, thanks to the efforts of the ZCG!).

Critically, ZCG funds builders and creators that support “the public good of the Zcash ecosystem” (ZCG website). But if Zcash itself is floudering, then the “ecosystem” ceases to matter.

If the soil is infertile, it does not make sense to keep planting seeds. We need to apply fertilizer first, to turn our resources back into the earth.

3) Because this is good for everyone who cares about Zcash.

And, there is no point for ZCG to hoard ZEC if this means that ZEC is worth 50-80% less next year.

Challenges

Now, before anyone yells at me, I understand there will be challenges. Operational challenges! Legal challenges! How can a nonprofit allocate to another nonprofit[1]? What precedent will this set? How can we decide what % is fair? How do we get all of these sorted in time, before it’s too late to matter?

I am not sure. What can of worms this opens, what jeopardy we put ourselves in, and what the directors of the related entities risk, I will leave it to people more involved than me to debate. (Hopefully we wil see more solutions than problems.) I merely want to throw this out for discussion, as someone who cares about Zcash, ZEC, and privacy but who is not formally tethered to any of the 3 organizations.

It’s time to choose our poison.

  1. Perhaps this change is better implemented at the protocol level (i.e. the block rewards skip ZCG wallet), after a decentralized ZCAP vote? I don’t know, just spitballing. ↩︎

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Short answer: :-1:

A longer answer will follow after dinner and my son’s bedtime. :upside_down_face:

Longer answer:

In my opinion, growing the Zcash developer community, and making it more decentralized is a strategic imperative, and I think the Zcash community made absolutely the right decision when it ring-fenced a big chunk of the Dev Fund to fund independent teams entering the Zcash ecosystem. We need to eliminate single points of failure, and ensure that there’s no single organisation that’s so important to Zcash that we deem it “too big to fail”.

I agree 100% that the situation we’ve found ourselves in is grave. However, I believe that “it’s easier to hold to your principles 100% of the time than it is to hold to them 98% of the time” so, speaking as a ZCAP voter, I wouldn’t be in favour of re-allocating funds from the Major Grants slice except as an absolute last resort, and only if there were a very high degree of confidence that spending those funds would indeed resolve the issue.

Speaking with my ZF hat on, our team has implemented ZIP 317 in Zebra, and we’re prepared to assist ECC in any way we can (e.g. help with Rust async logic - this was a topic of discussion during the April 6th Arborist call).

The whole situation is as frustrating for me as it is for anyone else - we have projects on hold, waiting for this issue to be resolved. If we’d known back in October that the issue would still be unresolved 6+ months later, we’d probably have looked at other solutions, like bringing in specialist expertise. That may still be something we want to consider but I think it makes sense to see what impact ZIP 317 and DAGsync have before deciding next steps.

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I like the spirit of “we should put more resources into the teams most efficiently addressing the problem of basic Zcash functionality.”

I think there are separate questions here and all of them are worth asking and talking about.

  1. Can ZCG find ways to efficiently spend more on core dev priorities that overlap with ECC/ZF work and their teams, without funding ECC or ZF directly? (e.g. can it fund contractors who work alongside ECC/ZF on these priorities?)
  2. Should we temporarily let ZCG fund ECC and/or ZF teams directly to work on these priorities, as a temporary emergency measure?
  3. Can we reroute more of the block reward than is currently going to ZCG, ZF, or ECC to these priorities, as an emergency measure?

Is this decomposition helpful?

To me #1 seems like something that could just happen right away and #2 seems like something that should be easy to talk about and is likely worth moving on as an emergency measure within legal limits.

#3 seems the most delicate since it involves balancing a ton of tradeoffs, some of which I’m sure I don’t know about or fully understand, but is also worth talking about. Can someone chime in with a primer for all of us on what these tradeoffs are and what the limits are?

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Not saying I agree with rerouting funds at this moment in time, but found the topic, and this question specifically, interesting.

I’d be interested in seeing if ECC/ZF apply for grants and getting pressing initiatives more funding.

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Love the spirit on wanting to get this situation solved completely ASAP. From other forum threads, it does seem like things are progressing, but I am curious if there were/is any things that would help make this faster? Basically, were any blockers related to:

  1. Coordination.
  2. Developer resources.
  3. Complexity of problem.
  4. Money (for resources or to compensate for redirection of resources to this one issue).

If it is 2 or 4, rather than directly pay the ECC or ZF, and incur a lot of overhead to investigate the legal implications, optics, etc., ECC and ZF could collaborate to make a wishlist of the resources they need. An example could be a request for 3 external devs familiar with Bitcoin or Zcash code bases and 1 expert on crypto incentives and fee markets/structures. There are orgs like Least Authority, Chainsafe, Blockstream, Digital Currency Initiative (DCI), MIT, IC3, Tim Roughgarden, and trusted independent contractors.

If it is 3 and additional money or resources cannot help then continue on.

If it is 1 then we need to re-examine the dev pipeline for Zcash protocol work and any blockers that slow things down.

I think @ml_sudo’s post should be used as an opportunity to figure out what I just outlined, while still keeping her suggestion on the table until we complete our collective assessment of the situation.

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To me, the most helpful decomposition is:

  1. How did we get to this point?

  2. And, I think less importantly, how successful has ZCG been?

I think the principal problem that the OP brought up is: the low ZEC token price is an existential risk to Zcash.

If we want to solve this problem, I would (1) uncover root causes, (2) outline a first principles solution to the problem, and (3) then think about resource allocation.

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Just adding some historical context that I remember from the original discussions around percentage allocations.

I and many others thought ECC would have access to funding via MGRC/ZCG if needed, and we based our votes on the percentage allocation on that belief. But after the vote Zooko announced (see below) that ECC and ZF had agreed that they would not be allowed to receive funding via that route.

I understand the rationale for that decision, but it has irked me a bit since as if this has been disclosed prior to voting I believe the slice allocations would have been different. I and others in that thread mentioned this back then.

Anyway, this info doesn’t move this particular discussion forward but I thought the context might be helpful.

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Echo this twice as it has been a common remark in past threads. I know that both myself and @artkor and another handful of forum members have raised this concern multiple times (and have shared some dm back and forth).

Both ECC and ZF have more than enough liquid assets available for heavier spending today, but they haven’t notably changed their opex in the past year and a half. Is it worth liquidating more ZEC funds today to fight the fires (with money) or are we in a situation where a controlled forest burn down is tolerable?

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I’m confused by this suggestion for the following reasons:

As far as I know, ECC is not underfunded and they are explicitly prioritizing the problem as quickly as possible. I’m not sure what dev role is envisioned for ZF.

This year ZCG has already made commitments specifically to further development on the wallets that are demonstrably dealing with the issue. We are also in ongoing discussion about how to incentivize work on the problem. It’s at the forefront of everyone’s minds.

Spending time legally restructuring / reallocating funds would be time and resource intensive — exactly what we don’t need— and could set unfortunate precedents for the sake of emergency.

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:+1:

:+1:

My initial reaction reading this thread. Will take some time to think about.

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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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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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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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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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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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