The Future of Zcash Ecosystem Development Funding

We have just published a blog post describing how the Zcash Foundation plans to support the Zcash community in reaching consensus regarding the future of development funding for the Zcash ecosystem.

A number of organisations have informally expressed interest in receiving funding from a possible future Dev Fund. We now invite them to formally confirm their interest so that the Zcash community has clarity about how a hypothetical future Dev Fund could be allocated.

There has also been informal discussion about whether the current Dev Fund should be extended or replaced, so we also invite community members who wish to put forward proposals for what should happen after the current Dev Fund expires in November 2024, to do so by posting such proposals to a new topic here on the forum, under the Governance category.

As organisations announce their interest, and proposals are put forward, we will update this post with lists of both.


I would like to see the project move in a direction of full decentralization from a development, pricing, and funding perspective, where Zcash becomes a platform for worldwide privacy based currencies. Whether or not this is possible, I do not know. But, I do think it would lead to more and better options for customers and a better and more competitive environment to improve the user experience. Below are my rough thoughts on a way forward. It is not meant to be a carved in stone plan. Its a flexible idea for moving towards an Etherurm like platform for privacy based money. @Dodger @zooko @nathan-at-least

Zcash The Blockchain of Money

Ecosystem Platform & Block Rewards Funding & Development Decentralization Plan

1. Executive Summary

To create a viable development & economic ecosystem that is open, and decentralized. The mission is to offer privacy based currency transactions to people worldwide. Currency is broadly defined to include any asset or fiat currency a person wants to use or receive. As such, this plan contemplates Zcash adds programmability, creates an L1/L2 blockchain structure, and creates a split fee gas/transaction fee framework to unlock worldwide development not restricted by the Foundation/ECC/ECG or dependent on the development fund or grants. To be clear, this plan is not designed to get rid of the development fund, only to change the way in which it is funded and more importantly to open up funding opportunities for third parties without needing permission or funding from the dev fund or permission from Zcash, subject to threshold security and branding requirements.

The split fee gas/transaction fee framework will open up development to third parties who wont need to rely upon a centralized organization for funding. Their products will pay for themselves through transaction fees where the Zcash and the third parties split the gas/transaction fee (as discussed further below). Market forces will determine the ultimate fees a given product can charge. Certain requirements may need to be in place so as to ensure prices are not restrictive in situations where a given product may lack competition that forces a respective developer to lower prices to be competitive. The idea in all cases would be to create a competitive market for Zcash transactions.

By adding programmability, Zcash can broaden the application of privacy based technology to virtually any asset in which people globally choose to transact. By adding a transaction fee structure, customers pay per transaction where the Zcash blockchain would earn an L1 gas/transaction fee for the core blockchain network and for staking rewards. A transaction fee structure decentralizes the platform so creators of applications can charge whatever they want so long as they at a minimum pay the L1 transaction fee to Zcash. I would propose Zcash seeks to decentralize and outsource as much of the edge use case development and funding as possible and create a fee structure that allows for third parties to create the edge cases and provides enough room for these third parties to market their products, and support their own local needs.

As part of this plan, it we propose creating a Zcash Treasury organization (or protocol) to help transition the sources of development and community funding from block rewards, which is effectively 100% funded by ZEC holders, to a combination of a) transaction fees charged for money in transit b) unstaking/hosting fees charged for money at rest via POS unstaking staking fees c) community direct crowdsourcing for community defined projects and d) charity for general purposes. We believe this funding structure more closely aligns with the concept of consent, transparency, and community whereas the current block rewards structure is not sustainable with 21m ZEC coin cap, opaque,and is not inclusive of the entire ZEC community. In short, the current framework is not condusive towards enabling an open system where developers are free to create on top of the Zcash blockchain without having to fork. The goal should be to create a blockchain that is so valuable an easy to use, there is not a need to fork. Zcash should focus on making the blockchain easy to use, easy to build on top of, and have a fair and reasonable fee based system that helps pay for development, support and local marketing needs.

The expectation is that a) transaction and other fees will be used to fund core development including; direct L1 blockchain maintenance and improvements, wallets, SDKs, and develop a suite of L2 privacy based currencies available to people globally and b) crowdsourcing and charity funding will be used to fund community focused non core development projects like government relations, local community ambassadors, local community marketing, non core blockchain and development costs and c) ultimately provide yield for ZEC holders. For discussion purposes, the following fees would be proposed:

  1. Third Party TXN payment fees - L1/L2 gas + wallet fees if any
  2. User wallet to wallet TXN fee - fee TBD
  3. Hosting fee - TBD (I dont think hosting or protocol fees are a good idea).
  4. Unstaking fee - 10% of rewards
  5. Crowdsourcing platform fee - 5% of amount funded
  6. Instant crypto to fiat payout TXN fee (integrate AMP protocol and allow user to connect wallet to bank) - 1%
  7. Others TBD (copy Paypal, Ethereum, other wallets, similar coins)

Issuance of a new L1 token with a issue/burn architecture may be optimal in order to ensure ZEC maintains is 21m cap under all scenarios. This possibility is not discussed in this plan.

2. Introduction

2.1 Purpose and Objectives

In this business plan, we propose to create a Zcash Treasury organization (or protocol) responsible for collecting user fees (as defined herein) on behalf of the Foundation, the ZCG, and the ECC where such fees are distributed to these organizations in much the same manner as the existing block rewards are disbibuted. As such, we present a comprehensive plan to transition away from block rewards towards more sustainable long term funding sources. These long term funding sources are primailiry comprised of various (i) fees paid by end users for the products they use; including but not limited to, a) transaction fees or gas, b) unstaking fees, and c) one time fees (the “Platform Fees”) and (ii) community based crowdsourced direct funding. In the near term between October 2023 and November 2024, the plan is to develop and implement the Platform Fees structure such that it is capable of offsetting the sunsetting block rewards that otherwise would be paid to the Foundation, ECC, and ZCG and a crowdsourcing platform that is capable of enabling community members to fund special projects local community based organizations and other local community activities. Then, from 11/2024 onwards, the block rewards will remain in place only to the extent the Platform Fees are not sufficient to cover the sunsetting block rewards as long as Platform Fees are effective and generating fees pursuant to the proposed Transaction Fee protocol.

The main objective for this document is to help provide a long term viable economic model (A) for the community, contributors, and partners so that they can trust the Zcash blockchain and its current and future assets will have utility as represented by the Platform Fees and (B) so ZEC holders can trust the 21m cap will not be modified or breached and C) so ZEC and any future Zcash blockchain assets can be trusted as a store of value. Importantly, a Platform Fee structure will not only be more transparent as to the real transaction costs, which are currently paid to miners and the development fund via block rewards, but; will also help to align development activities towards creating products and features desired by end users. The incentive will be to generate privacy based transactions in any asset consumer wish to transact whether its ZEC, fiat, or any other asset. So another objective of this document is to so see that funding is focused not only on ensuring the wider adoption of ZEC; but also on the creation and development of future Zcash blockchain assets (adding privacy technology to stablecoins, adding privacy based ZSAs) that can leverage Zcash’s unique privacy features which provide significant value in the evolving digital economy. Should customer wish to use privacy based stablecoins as expected, then Transaction Fees would also help to defray the blockchain costs and improve the economic viability of the Zcash ecosystem. The strategy also comprises enhancing privacy technology, zk-SNARKs, improving scalability, network performance, transaction speed, improving cross-chain asset interoperability, and moving to POS.

The Platform Fee and community crowdsourcing structure better aligns development with currency products designed for people to use on a regular and recurring basis.


The Platform Fee structure is only meant to be a mechanism to collect fees as a means to replace the blockwards as a funding source. The distribution of such fees will continue to go to the Development Fund (Foundation, the ECC, and ZCG) in the same was as block rewards. It is recommended that the governance of these organization more closely aligns with the funding and transaction model where ZEC holders (as measured by current holdings) and people who use ZEC on a day to day basis (as measured by annual transaction value) vote for the governing boards. Other community members who do not hold or use ZEC do not get to vote; but they can participate by funding their favorite community based projects directly via crowdsourcing.

The below table is a hypothetical Platform fee structure for discussion purposes. The actual transaction fees will depend on the competitive environment and a more in depth analysis of competitor fees. In the example below. L2 assets pay gas to the Zcash L1 blockchain. L2 assets charge gas to pay for L1 gas plus L2 gas. Wallets charge transaction fees to pay for L1 and L2 gas plus any additional fees. An open development architecture would allow third party developers to create L2s independently of the development fund and keep L2 fees so long as they pay the L1 fee for the Zcash blockchain.

In the above scenario a 1% transaction fee could yield $50,000 per day in fees assuming $5M in daily transaction volume. These fees would be split between the L2 asset, the L1 blockchain and the miners. The amount going to miners would change to ZEC holders in a POS architecture. These fees can be dynamically set and modified to prioritize instant payments or other features.

Once Platform fees reach a to be determined level, excess Platform Fees will be paid to ZEC holders either a) as staking rewards or b) as yield in a to be determined ZEC yield mechanism. The benefit of the open architecture platform is that it offers a strong incentive for third parties to build on top of the Zcash L1 blockchain at their own cost thereby decentralizing development and maximizing the L1 blockchain use cases and scale. The more the L1 can be scaled, the lower the L1 gas can be all else equal.

In the areas local community programs, education, ambassador programs, global regulatory relations and other activities not directly associated with improving the blockchain or creating additional privacy based assets, or creating SDKs, a crowdsourcing platform will be created that is managed by the community and not by the Foundation, ECC or EGC. Users can submit ideas, and the community can connect directly with people wanting funding to improve the Zcash community (below is copied from Monero).

This document hopes to ensure that Zcash remains competitive in the ever-evolving cryptocurrency market, offering its users the best in terms of privacy, security, and overall user experience, not least of which is creating a viable economic model that seeks to ensure ZEC and any future assets on the Zcash blockchain act as a long term store of value.

2.2 Current State of Development Fund

The Development Fund gets it funding solely from block rewards to fund a multitude of projects including; blockchain development, ZEC improvements, wallets, community projects, marketing and advertising, and general funding requests from the community. The development fund has expanded its role significantly beyond core development, which has fractured the community, and caused the developers to lose focus on the core mission which is to bring privacy based currencies to all for “day to day transactions”.

Centalized Funding & Development Model

Block rewards funding is by definition a centralized model. Block rewards come into the development fund. Then, government-like organizations are created to “pick winning ideas”, fund those ideas from ZEC holders “block rewards tax”, where ZEC holders take on the risk associated with third parties to complete the work as promised.

This funding and development model creates material risks for ZEC holders. First, it creates a bottleneck for development. It is at its core a centralized funding & development model because all development must go through the gatekeepers. The development fund organizations can only fund and manage so many projects at once. Second, the development fund organizations must “pick the winners”. This approach forces ZEC holders to rely on the grant committee or other organizatoins to fund projects that will add value to Zcash. With a ZEC price at $25 and virtually unchanged since its inception, we must ask ourselves, have they just not funded projects that are what people want from privacy based crypto coins? If they pick losers, then ZEC holders bear the loss. Third, if the grant recipients fail to deliver on the work for which they were paid. This again causes ZEC holders to lose money. Fourth, since development is funded in ZEC, it creates selling pressure on ZEC price as projects are funded. It also forces the ECC, Foundation and Grants committee to sell reserves for a more stable currency so as to be able to fund projects already committed to at higher ZEC prices. ZEC holders bear this risk as developers will default on their commitments when the project is priced in ZEC. As such, the development fund is not a bad concept. But, using block rewards to centralize development is not the optimal funding mechanism. Therefore, to fully decentalize, we must transition away from block rewards and towards a transaction based funding mechanism for the development fund and provide transparency on L1 gas costs to decentralize development so that third parties can fund their own development and charge their own gas/transaction fees.

Decentalized Funding & Development Model

The optimal funding mechanism is one that is fully decentralized. Under this model, all L2 assets would pay L1 gas to the Zcash blockchain. If Zcash can open up the blockchain charge L1 gas to developers building on top of the blockchain, then L2 developers can fund their own projects, charge their own transaction fees and only be required to pay an L1 gas fee to Zcash for the use of the core blockchain protocol. It is contemplated that ZEC would be an L2 asset on the Zcash blockchain and be required to pay the market rate for L1 gas fees. ZEC would need to charge a fee to pay for a) L1 gas and b) additional amounts to cover development. In this case, the foundation and miners would split the L1 gas fee and the ECC/ZGC would receive the additional amount charged above the L1 gas.

The benefits of an open system are many fold. One, it removes the bottleneck in development. Anyone can build on top of Zcash in this model. Two, it pushes funding and development risk from ZEC holders to L2 developers. L2 holders will fund their own projects in whole or in part for the prospect of making money. This is also beneficial to Zcash because additional L1 fees help to scale up the use of the blockchain. Three, it eliminates forced selling associated with a material part of development. Four, it enables developers and the market to identify the opportunities for creating and optimizes the use of Zcash privacy based blockchain. Most importantly, it creates a transaction fee mindset that focuses development on funding projects that generate and/or support and improve transactions and related transaction fees. If customers are not willing to pay a transaction fee, it almost certainly means its not a valuable or worthwhile project or feature to fund.

2.3 TBD

3. Market Analysis

A market analysis is required in order to better understand the needs of customers and users of privacy based currencies. Especially for day to day transactions. Just as important, it is critical to understand what user expect from a wallet and how it should interact with the outside world, if at all.

3.1 Overview of the Current Cryptocurrency Market

3.2 Position of Zcash in the Market

Zcash is considered to have premier privacy technology. However, its market penetration is not meeting expectation. Why? Is ZEC focused on the wrong markets? Does ZEC understand customer needs? Is ZEC to volatile to be used as a currency for day to day transaction? What is the foundation upon which ZEC can or should have objective and fundamental value? Should the Zcash blockchain be leveraged to offer a full suite of privacy based currency solutions?

3.3 Competitive Analysis

3.4 Target Market Segmentation

  • 3.4.1 The target market is for mainstream usage where ordinary people desire to transact privately; but who otherwise are not breaking any local or federal laws. The main desire for privacy is for competitive reasons, a desire to avoid big data gatherers who target user publicly accessible user transactions with unwanted advertising junk emails, coupons, or otherwise use a persons transaction data for unwanted purposes or for more illicit activities like theft and phishing scams which are more difficult when using Zcash privacy technology.

  • 3.4.2 Blockchain assets include ZEC, stablecoins such as USDz, or ZSAs.

[analysis of competitor fee structures]

3.5 Future Market Projections

  • 3.5.1 It is expected that 2/3rds of people or more live paycheck to paybcheck. As such, the majority of people who transact on a daily basis require a stable coin where their earnings received are easy to transact for payment of their expenses. For these people, minimal slippage and price volatility is essential. It is also essential for retailers and vendors to also receive money with low slippage costs and low volatility. As such, we believe for these end users, privacy based stablecoins are the ideal solution. With that, a full suite of privacy based coins should be offered for maximize consumer choice.

  • 3.5.2 Market opportunities for Native Applications and Financial Instruments

  • Zcash has a variety of market opportunities in native applications, financial instruments, and integration with other cryptocurrencies. For instance, zk-receipts (proof of payments) could ease integration by eliminating the need for some providers to manage hot wallets or nodes.

  • Adding financial tools like options (atomic swaps) could spur Zcash trading and boost adoption. A Twitter poll showed that 66.7% of respondents agree with this statement.

  • The use cases are so vast and fundinq requirements so large that an open decentralized development architecture is required to capture the market opportunity. To try and have all development funded and controlled by the Foundation, ECC, and ZGC is not optimal, it slows down development, and limits the ability to properly scale the Zcash L1 blockchain as effectively as an open system where third parties fund their own development with the expectation of earning L2 gas (and paying L1 gas).

4. Development Plan

Although this plan is not focused on “how” the money is spent. It does contemplate restructuring funding towards blockchain and asset development focused on privacy based currencies for all and a open development architecture. It also seekds to move funding for community projects and certain other related expenses to a community based crowdsourcing platform.

5. Available Resources and Partnerships

The goal of this plan is to decentralize development by providing a transparent gas/fee structure for third party developers.

5.1 The Electric Coin Company (ECC)

5.2 The Zcash Foundation (ZF)

5.3 Zcash Community Grants (ZCG)

5.4 Crowdsourcing Platform

5.5 Third party L2 development

6. Strategy and Implementation

Guidance for Foundation, ECC, and ZCG funding.

6.1 Strategy

  • 6.1.1 Develop and nurture partnerships in areas like native applications, financial instruments, and research

  • 6.1.2 Foster an open, inclusive, and decentralized Zcash ecosystem; especially focused on enabling new assets such as privacy based stablecoins, ZSAs and others to be offered on the Zcash blockchain and crowdsourcing community projects to be created for the Zcash community.

1 Like

100% this the pitfall of indiscriminate free funding (Block Rewards) is that it inevitably creates moral hazard in decision making/ maligns mission objectives vs winning practices for the project.

1 Like

Results Matter:

The Zcash Development Fund must continue.

9% ECC: They are the backbone of the ecosystem. I would like to see them have 2% of their split go to fund outside teams they want to focus on co-development that directly aligns with their product mix.

4% ZF: The leadership as been and will continue to be an important pillar of growth.

4% ZCG: The results are mixed. There has been a lot of resources burned. I would like to see a cap put on grants to a max of $500 000 to any organization, above that these grantees should be able to be self-funding or attract outside investment after this level of grant. I think this fund should be much more focused on smaller grants to build much more community focused groups, and not teams that build and run.
ZCG should be completely independent of ZF.

1% Nighthawk: They are committed to zcash, they have run important infrastructure for the community. Some difficult decisions in the past but I support directly funding an organization taking full aim on the India market.

1% Ywallet: Results are there, I would support even more if the focus was more on building a stronger organization.

1% unknown
Probably Qedit if they deliver in NU6. I still worry that Qedit folks the chain, I think that team may be one of the strongest groups in the ecosystem, I have so much hope for ZSA.
Free2z: Great results, I think their team is much more focused on growth and how to grow the ecosystem outside of the crypto followers.

I support the renewal of the dev fund!


the dev fund should continue. but we must change the way it’s funded. block rewards does not align development with creating the blockchain of money. alignment is very tight when funding is based on transaction fees. that will get development focused on 1. improving the blockchain to have more assets that create transactions; adding programmability; and
2. improving the customer experience including fast transaction times and UIUX
3. it should also eliminated unnecessary spending like government relations, and lot of wasteful markeing and funding projects that dont get completed.

block rewards get paid no matter what. it creates a culture of politics and fiefdoms. most of the fighting internally is about how to control the spending and we don’t hear much about creating great products. so even if customers don’t use zec, the dev fund gets paid. we need the dev fund to get paid when they develop products people want to use as evidenced by verified transactions. and if they create products people want to use, the transactions fees may even be more than they would get from block rewards!! and that’s a good thing. we need alignment for focused development.

in the example above: y wallet gets 1% and nighthawk gets 1%. ideally they would charge a txn fee, or annual fee directly to users and then use the fees to support the wallets. the dev fund can move on to other projects.


Thanks for putting this together!

It demonstrates that it has a lot of work behind it.

I need to take some time to read it. :nerd_face:


dev fund allocations

  1. ECC - 8% core blockchain, POS and programmability - create fee structure 90% requirement for core blockchain development only
  2. foundation - 4% - blockchain - 50% requirements for core blockchain work. create a community crowdsourcing platform.
  3. Qedit 6% - privacy based fully collateralized stable coins and ZSAs, privacy prodicts 100% requirement for development spending.
  4. ZGC -2% - seed and co fund small projects where transaction fees will take over after products developed. wallet SDKs. if ecc/foundation/qedit want to offer their share to ZGC they can also divert from their share as they desire.
  5. dev fund may need to have managerial responsibility independent of the organizations.

Create an objective framework to manage development with milestones. the dev fund allocates based
on the groups meeting their development timelines and budgets.


block rewards get paid no matter what. it creates a culture of politics and fiefdoms. most of the fighting internally is about how to control the spending and we don’t hear much about creating great products. so even if customers don’t use zec, the dev fund gets paid. we need the dev fund to get paid when they develop products people want to use as evidenced by verified transactions. and if they create products people want to use, the transactions fees may even be more than they would get from block rewards!! and that’s a good thing. we need alignment for focused development.

Agreed, dev funding should be based on transaction fees. Incentives matter. The funding has not been spent well enough up to this point.