The future of Zcash in the year 2020

You’re right, that matters. A relevant passage from our recent blog post about the ZIP process:

Governance fundamentally consists of three questions: What should we do, who gets to decide, and how are the deciders chosen and held accountable?

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Yup, its far from perfect, but might spark a better idea.

It might depend on the numbers, there’s a big difference between 10 ZEC for 1 month, 100 ZEC for 6 months, etc.

EDIT: Just for clarity, by ‘amount’ I mean the minimum balance held in that address over the required timespan.

Could also impact the inflation rate as coins would be locked up in the holders own wallet if they want to take part in polls/votes etc.

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Just a thought, why not combine both? Amount x Time (in months?)

Example1: 100 ZEC owned for 12 months = 1200 Voting Power
Example2: 1000 ZEC owned for 1 month = 1000 Voting Power
Example3: 50 ZEC owned for 24 months = 1200 Voting Power

I could imagine this way things get balanced pretty good.

Just as a side note, yesterday i came across a project that uses special adresses for exchanges so they never can stake nor vote. Interesting approach that could be implented in such scenario as well.

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Just realized that the above approach would have another nice side effect as well. If a given voting window is for example 3 weeks and the minimum time to get voting power is 1 month it wouldn’t be even possible to gain an advantage from sending funds from one account to another and therefor eleminate one of the main concerns automaticly.

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I’m not sure it would work in practice but its an interesting concept.

Each viewing key would require a seperate scan of the blockchain - could be thousands of keys & that doesn’t scale well, it’d take forever.

Edit: Another thought, this would also be an incentive for folks to shield their funds.

Edit: Yet another thought, a poll could be focused on different classes of holders by defining a minimum or a maximum balance for each poll.

It would also be possible to break down results to show differing opinions between small and large holders as their balance would be known.

This would allow rules such as ‘a resolution passes if at least 50% of the shrimps and 50% of the whales agree’.

Edit: The viewing keys could be disclosed to more than one organisation, allowing the counting of votes to be decentralised.

Final Edits:
All this stuff should happen in the ZECwallet companion app.
If the user opts in their zaddr & viewing key gets registered via zmemo.
Users get a prompt when there’s a new poll & votes get sent via zmemo.
Votes should have a small fee (but big enough to prevent spam).
Creating a poll should also have a cost (a larger fee)
All funds go towards paying for the polling infrastructure.

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Hi Anton. Thanks for your question.

New issuance of coins is a transfer from value from all coin-holders to the recipients of the new issuance. This is because the value of each coin is determined by supply and demand, and new issuance increases supply. Therefore issuing new coins does not increase the total amount of value in the system, it only transfers values from the coin-holders (in proportion to how many coins they hold) to the recipients.

(If issuing new coins created new value then we could solve all of the world’s problems by having the consensus rules just issue more and more new coins faster and faster until everyone was rich!)

This is a fundamental truth about cybercoin monetary policy: there are only two mechanisms of sourcing value that the consensus rules can use to effect monetary policy: issuance (which transfers value from all coin-holders according to how much they hold in total) and transaction fees (which transfer value from the people making transactions according to how many transactions they make).

And, there are only three destinations of value that the consensus rules can use to effect monetary policy: sending it to the miners, sending it to hard-coded addresses, or sending it to all coin-holders (by burning it, which increases the value of the holdings of all coin-holders).

Obviously there’s no point in taking value from all coin-holders (by issuance) and then send that value to all coin-holders (by burning the newly issued coins), so that one is a “no-op”.

The remaining combinations are:

  1. The consensus rules can take value from all coin-holders (issuance) and send it to miners. That’s mining rewards.

  2. The consensus rules can take value from all coin-holders (issuance) and send it to hard-coded addresses. That’s what we use currently for the Founders Reward.

  3. The consensus rules can take value from transactors (transaction fees) and send it to miners. That’s how transaction fees currently work in Bitcoin, Ethereum, and Zcash.

  4. The consensus rules can take value from transactors (transaction fees) and send it to holders (by burning it). That’s one of the ideas for a future fee market design that Vitalik Buterin has proposed for Ethereum (https://ethereum-magicians.org/t/eip-1559-fee-market-change-for-eth-1-0-chain/2783) and Zcash (https://github.com/zcash/zcash/issues/3473).

  5. The consensus rules can take value from transactors (transaction fees) and send it to some hard-coded addresses. That’s one of the proposals I’ve heard for future Dev Funding in Zcash and in Ethereum.

Now, given that there are only two sources of value that the consensus rules can use to fund developers, which one should the consensus rules use, or both?

Historically — for the first ten years of Bitcoin, the first four years of Ethereum, and the first two and a half years of Zcash — the value of coming from holders (new issuance) is much, much greater than the value coming from transactors (transaction fees). Currently according to https://messari.io/onchainfx/view/14D4860B (see screenshot below), BTC has $18M/day issuance and $1.5M/day fees. ETH has $3.6M/day issuance and $175K/day fees. ZEC has $600K/day issuance and $81.00/day fees.

Hope this helps! I think your question is a very common question so I’m glad you asked.

Regards,

Zooko

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P.S.

One interesting thing about the fact that issuance transfers value from all coin-holders in proportion to the total size of their holdings, is that this is the only decentralized mechanism that can cause people who hold a lot to pay more than people who hold a little! Any other possible consensus rules, for example by charging more for addresses which have bigger balances, the large holders can avoid by making many addresses each of which has a small balance.

Of course, issuance charges big holders proportionally the same amount as it charges small holders. Like, if the consensus rules issue 1% of current total supply, then all holders big and small are effectively paying 1% of their value of their total holdings.

As far as I have been able to figure out (in many years of trying to invent different mechanisms) any other possible mechanism would wind up taking more from small holders, proportionally, than from large holders. Issuance is the best we can do in terms of making sure large holders pay an amount proportional to their total holdings instead of somehow getting away with paying a smaller proportional amount than small holders do.

Note that taking value from transactors causes everyone to pay in proportion to how many transactions they make — regardless of the value of their total holdings. If the value that holders are gaining from the system is value from holding rather than from making many transactions, and if the system is sustained by transaction fees, then the holders (large and small) would be getting a “free ride”, and the large holders would be getting a more valuable free ride than the small holders would.

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Hi there, thanks for the question. Please see my answer to Anton above (The future of Zcash in the year 2020) and let me know if you understand why I think that issuance is a transfer of value from coin holders. Thanks!

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Hi Everyone,

Here is a proposal that I had earlier posted on twitter:

  • 20% split between company and foundation for years 5-8.
  • Only to be spent on research, development and adoption of zcash, no more funds to the early investors.
  • A mandate to deliver a voting system for dev funding after year 8.

link to twitter: https://twitter.com/ask_aristarchus/status/1129618217754943488

I want to emphasize a few points about what I have proposed:

  1. This is not the same as the original founders reward. No funds would be given to the early investors or advisers. The funds would only be used to strengthen the zcash protocol, and hopefully increase the value of our coins. :smiley:
    This means paying for researchers to continue to push forward with cutting edge privacy and cybercoin ideas, and paying for engineers to continue to maintain and improve the protocol. It also includes the important advocacy for zcash that is currently happening both in the foundation and the company (such as the 11pm meeting with a foreign country that @joshs mentioned in his post above.)

That’s it. The funds would only be used for these things that benefit the entire zcash community.

  1. With two entities receiving funds there is no single point of failure.

  2. The plan would be for this 20% “Development Fund” to continue after year 8, with a more formal process for the community to select the funding recipients. I see there is already some good discussion about stake based voting in this tread.

I am putting this idea out here now because we (the zcash community) need to start proposing more specific actions, and eventually submitting one or more zcash improvement proposals (ZIPs).

  • Aristarchus
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Also want to add that since the ECC is currently receiving ~12% of the Founders Reward and the Foundation is receiving about ~15% of the Founders Reward, they would actually receive more total coins in the proposal I posted above, even after taking into account the halving.

I think that having more coins directed toward engineering the protocol (vs to investors and advisors) is a very good thing.

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@jmsjsph, respectfully, I don’t like the idea of only funding the foundation. The ECC does a lot of essential work for zcash. If only the foundation received funds, I suspect they would end up just paying the company on a contract basis to continue their essential work maintaining the protocol. Also, though the foundation seems to be made up of great people, I wouldn’t want to be in a position where there is even a chance of the single source of funding going rogue like the unfortunate situation that happened to tezos.

Zcash is still in its infancy and the company and foundation are both functional and doing good work right now. I wouldn’t want to distract them with complicated temporary governance plans, but would rather they focus on engineering and build something sustainable to get the funding mechanism more decentralized in the future.

I have seen that the zcash engineers have some amazing plans for the future of zcash (e.g. more programability and scalability such as seen here https://github.com/zcash/zcash/projects/21). I think that they have good intentions and we can trust them to use the funds from years 5 through 8 to continue to build zcash into the best possible privacy cybercoin.

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Hello Zooko. It seems to me that you did not understand what I wanted to say in the first post, so you answered the general question about value, but even in this case, how the coin owners don’t describe the value correctly, you as the recipient of coins that were not on the stock exchange have value that was not formed according to your rules, right?
The value of the coins is formed by current buyers, because the rough calculation of all the coins at the current price is fundamentally wrong. An example that I described earlier is suitable, where do you have all the coins in your hands and do you trade yourself forming a value, sold 1 coin for $ 100 and got a value formation for all the others? The value of the coin determines the current buyer, and the overall demand.
Now zcash has a low demand, so inflation matters, but by increasing the demand for a coin, the value of all TRADING (because not all the mass of coins participated in the auction) will increase, the coin holders do not influence the value, as soon as the holder starts to trade therefore, as a holder, I disagree with your statement, logically it is not.
It would be more correct to specify the distribution as a tax, the tax on launching the protocol (coins) is 10% of the total weight of the coins and the turnover tax is X% of the transaction, because the distribution of the coins does not need to be converted into the value of these coins, so that no confusion would arise recipients receive in zcash and not in dollars because it is.
Thanks for the answer.

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Welcome to the Zcash Community Forum aka an introduction to modern encryption! I think we’ve all considered that (or similiar) and it’s definitely not off the table so to speak

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This would result in another 1,050,000 ZEC for funding. At the current exchange price of ~US$ 86 an estiminated $90,000,000.
I find it more than strange that there are proposals without us even knowing how much is needed for development. I have asked this bevor and ask it now again: How much funding is needed to finish the product?
If you need a loan from your bank or funds from an investor the very first thing you need is a plan, a detailed budget and and and. This is non different than asking for an extension/transforming of the Founders Reward.

Fine. Leaves still the question: The current Founder Reward is still good for 1 and a half year, WHY are there not made right now any changes/modificiations/shiftings of funds from this huge FR?
The most common thing every single company is doing bevor reaching out to banks and external money is re-organizing internally. I’am not aware of any internal shifting of the current Founders Reward to ensure more funds for development.

Fine, but again, why is this not done allredy today with the current Founders Reward or at least modified? Currently not changing anything doesn’t show any incentive from the current FR receivers, why should the community change something after the people in charge don’t change anything themself?

The founders reward when it expires will have generated funds of about US$ 300,000,000 value. Maybe even more at the current exchange rate. How it comes nobody has forseen that researchers and engineers need longer as expected and must be paid longer and as a result of this proper funding for allocated properly?

I wouldn’t bet on this one. There is allways the point that both fail.

Way not saying it directly and name it contiouns funding forever? Just say it clear that at the end 4.2M ZEC went for funding and 80% to miners and not 90% as promised and stated everywhere.

Ever thought that the current FR distribution is totally flawed by design? No incentive to change this for the next 18 months makes it even worse!

This point contains logic but leaves the question why have a foundation at all than? Is it really worth to maintain 2 structures to maintain 1 project? IF the ECC will be in charge of Zcash there is little to no reason to have a foundation at all. If the project continous to be fully centralized it doesn’t make sense to sponsor the foundation. As a side effect it would break as well another promise that after 2020 the foundation is in charge, not?

While i think the Zcash engineers are top notch someone can argue as well that more or less every single project is working exactly on this, more privacy, more programability, more scalability.

Just some side notes to have in mind with your proposal:

1.) Zcash would for sure be the currency with the most broken promises. Actually it would be the one that didn’t held to a single one. Asic resistance (fail), 90% to miners (fail), Foundation in charge after 4 years (fail), decentralization (fail).

2.) Mining will be fully and absolutly centralized. The less is left for miners the more the miners in very low electricity price regions, especially china profit and the more of miners in the rest of the world gets forced out. I personally consider this a security risk and unfair distribution.

3.) After we have a flawed design by default someone could ask if it wouldn’t be better to support Ycash which adresses and tries to fix these flaws with the same starting tech Zcash has.

My personally opinion is and i wrote this allready the last 6-9 months in different posts that a discussion about an extension or transforming of the founders reward/dev reward should just and only take place after a full discloser on how the current funds of the whole FR have been used and additionally a re-organizing of the current FR is done until it expires.

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Quoting the “Financial Sustainability” section of ECC’s transparency report (emphasis added by me):

We also approached FR recipients to request dilution in order to allocate additional funds to allow the Electric Coin Company the ability to continue to operate and invest in Zcash R&D, engineering and
adoption. This dilution will take place in June.


Putting aside the point of whether ECC can be “in charge” of the network (users have full control to decide what software they run), the intention is that ECC won’t be solely in charge of the Zcash trademark and consensus protocol:


When was this ever promised? Discussions around the Zcash Foundation’s role in the ecosystem were AFAIR always about how it would become an equally-prominent and influentiual participant. If there had been a promise that after 2020 the ZF would be in charge, this would by definition be anti-decentralisation.

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Without outcome nothing happened so far. Let’s see how this request works out. It’s a step into the right direction in my opinion and a good start. A bit late but than again, better late than never.

You are right here, seems this is my own interpretation of what happens when the FR expires in 2020.
Seems i put these sentencenes (below) into the wrong affilation.

The Zcash Company is a good vehicle to draw this team together, organize us, and launch the technology, but in the long run Zcash will need to be maintained by people who are serving the interests of all users equally. …foundation will be organized, but the intent is that it will provide a natural locus for voluntary governance, i.e. for maintenance and evolution of the protocols and software. I hope that having a well-funded non-profit foundation dedicated to serving the interests of all Zcash users will avoid some of the uncertainties…

As said, sorry that my interpretation of this statement, especially the wording launch the technology is interpreted for the first 4 years and the the role of the foundation after that. Seems this is not the case and my English is very bad to understand such elementary sentences correctly … :thinking:

20% is WAY too high. Currently ECC receives 4.2% of the total mining supply, and any future block rewards to fund development should NOT be more than that, IMO. Given that the halving will occur in 2020, the price should appreciate considerably… so I would argue that if we decide a % of block rewards go to fund development (via ECC / ZF), the total should be LESS than 4.2%. I would argue for something like 1%, if at all.

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The time for investors & advisors is over, but the need for research, development, adoption, operations, legal etc will always be there.

My 2 zats worth - funding should continue but at a lower level & that should come from block rewards.

ECC should also develop additional revenue streams, especially where their help/expertise is used by other projects or for-profit entities.

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It’s got such a good growth

Hi @boxalex,

I don’t think anyone can answer your question “How much funding is needed to finish the product?”, because anyone familiar with software development knows that the product is never really finished and will always need the support of skilled developers.

I think that by the end of the first 4 years of Zcash the team will have delivered on their initial promise of building a solid privacy cybercoin with fast private transactions, but I think many Zcash supporters had hopes of building the ultimate privacy cybercoin with many more features. Do you really want to stop development here and go into a “maintenance only” funding mode? You don’t want the world class team to make the coin much more scalable and programable?

To be blunt, I think that this type of attitude would damage the coin and the price would plummet. I wouldn’t not want to own a coin that is stagnating. I want to own a coin that has a world class team of researchers and developers supporting it.

Given that there are always more technical features to add to the coin, and the volatile price of zec, I don’t want to be ‘penny wise and pound foolish’ with development funding at this stage. There is no way to know the exact price of zec in the future, and I think we should be happy if there turns out to be a ‘problem’ of excessive funding for development.

I think that splitting the funding between the company and foundation for the next 4 years provides sufficient funding decentralization at this stage, with the expectation of much more funding decentralization in the future.

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