The future of Zcash in the year 2020

Agree, a new thread has been made for discussion of that case: Simon Liu v ECC

Further discussion on that specific case should be in that thread.

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Hello to one of my favorite pockets of the Zcash community! I just had a lovely weekend of playing video games with my kids and biking around Boulder, and I finally have a day with almost no meetings, so I can try to catch up on this thread. Let’s see…254 posts? I think I’m probably somewhere around 100 in. I’ll try to respond to things as I go along, but one thing I’ve noticed about this Discourse software is that it forbids me from posting more than two replies in a row, so I might get stuck and have to wait for someone else to post something before I can post any more replies. Nice to catch up with y’all.

[update] Looks like I’m on post… 204.

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@zooko I have bumped your member level so it shouldn’t have that restriction anymore. If it does, PM me and I will tweak things on the back end.

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I think the article/opinion above adresses indeed some points that need to be discussed.

That’s on one side amazing and on the other it just shouldn’t be like that. This is exactly one point i tried to adress several times in this thread. Several FR receivers receive way more than it gives to the ECC budget. This just can’t be right and good.

I didn’t think so far about it. But this is a valid point. I believed until 2 weeks ago that the foundation will be responsible at some time and take over full responsibility over Zcash. This was a wrong believe as i know today. But exactly this believe made me think that there is a reason the foundation is there. After i/we know now better that no such step is planned why indeed do we have a foundation that receices more funding than the ECC developement? I several times allready mentioned that the foundation is in my opinion lagging ages behind.
IF Zcash doesn’t have funds and/or runs out of funding in 2020 i think it’s a valid question if we indeed need a foundation at all? As no decentralization and giving the foundation full responsibility anyway over Zash a lot of funds could be used for direct development.

This raises the question why these key players only fund ECC and the foundation with just such little portion of the Founders Reward? Doesn’t sound right to me and raises automaticly the question: IF the keyplayers and founders are that stingy on their own project why the hell should the community/miners be generously?
The very last thing i think bevor even continue to disucss a dev reward beyound 2020 is an immediate re-organisation and new distributin of the founders towards ECC development. Only if the community sees satisfactory self organization towards developement the community should be willing to give it’s part as well.

Exactly my thoughts. With an estiminated Founders Reward with an value of way over $300,000,000 at the current exchange rate from today until 2020 and the previous rates until last month it’s just a bad joke that the ECC gets into a budget deficit.

Me personally would go even further and remove the transparency part and add that the current founders reward is everything else but not something that garantees the best possible developement funding. Actually it’s totally wrong designed for such purpose, complicated, unefficient, unflexible and having development at the last piority. Designed to fail…

This pretty much fits up my thoughts and why i’am currently that critical to a new dev found.
The winzec dev had to beg for some ZEC, ECC runs on a deficit and meanwhile the receivers of the current Founders Reward obviously don’t show too much interest while counting their bucks…

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Thank! Great, now I can just spam the thread with 100 replies in a row! :laughing: Okay srsly, I’ll try to respect the intent of that default limitation by replying only when I can add value…

Dear Anton1:

I’m afraid I do not understand your post, even though I read it, and then read it again more slowly. Please see if I’m getting closer with what I write below, and then write back.

I think the question of “Where the value comes from” is the most important question in this entire discussion. It would be easy to believe that when a block is found, and that block contains a coinbase with new ZEC in the coinbase, that new value has been created. A lot of people probably believe that, because it seems natural. But, it is incorrect. Generating new ZEC in a coinbase does not create new value. Therefore, it must be a transfer of value. Value is not thereby created, so if the recipients of the coinbase received some value, someone else must have lost an equal amount of value. Who?

This is the fundamental fact that everyone needs to understand in order to know what would happen if we—the Zcash community—adopt different dev funding designs.

This same confusion also happens in regular old monetary policy discussions in pre-cybercoin economics. In that context, economists call it “Real Vs. Nominal Value”. “Real” value means how much you can get out of something, “Nominal” means what the number is. If I gave you 1,000,000 Venezuelan Bolivars in June of 2009, you could probably get a beautiful house in Caracas for it. That’s a lot of value! If I gave you 1,000,000 Venezuelan Bolivars today, ten years later, you’d be lucky if you get a single chicken egg for it. The real value of that has been vastly reduced, but the nominal value is the same.

Let’s talk about cybercoins. Here’s how you can tell that coinbases create nominal value but do not create real value: suppose Bitcoin had been defined, instead of generating 50 BTC every block (resulting in an eventual 21,000,000 BTC), that instead it would generate 500 BTC every block (resulting in an eventual 210,000,000 BTC). What would the situation be like today. Would every BTC hodler be ten times as rich? After all, every BTC hodler would have ten times as many BTC! And every BTC is worth $9221.00 today! But no, that’s not what would happen. What would happen is that the price of BTC would be $922.10, and every BTC hodler would have exactly as much real value.

Coinbases create nominal value. Supply and demand is what determines real value. Since a coinbase increases the nominal supply without changing the demand, a coinbase causes every coin holder’s real value to go down a little. The total amount of real value that all the coinholders put together lose is exactly equal to the total amount of real value that the recipient of the coinbase gains.

Therefore, a coinbase is a transfer of value, not a creation of value. And it is a transfer of value from all coin-holders, to the recipient of the coinbase.

Please let me know if that makes sense.

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This is a good article that talks about a good paper that you should like actually read (I remember reading it a while back but yeah, refresh)

https://tools.ietf.org/html/rfc7282

This belongs in the future 2020 thread @Shawn

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Hello.
The real value is formed by buyers, everything is correct, and is related to the cost of other goods and services, higher cost is better for holders, there is no confusion here, but there are slightly different rules for coins on the stock exchange because the number of coins is maximum and is known unlike the rest of real economy, so your reasoning is fundamentally wrong (and that is why Bitcoin is growing all the time, unlike the Venezuelan bolivar). When generating coins, the cost is not created, I talked about this in my post, the cost is created when buying, the question is what will happen if 0.0001% of all mined coins are traded? Coin holders will shape the value?Richer, too, probably will not be due to the volatility of the market, but now it’s not about that, I said that it’s the current buyer who today acquires a coin that forms its value, and it doesn’t matter how much is sold on the market (the amount of coins is known), and coin holders in this case do not transmit anything and do not get everything simple.
I am the holder, how much do I give each day as a founder reward?

  • if you count in Zec
  • if you count in dollars in a falling market
  • if you count in dollars in a growing market
    I guess nothing.Money previously spent is no longer involved in pricing.
    But if we take the value of coins on the market, then the calculation is different, transferring the cost to the number of coins I get different values, and by the way this is exactly what I am not satisfied with when the market is falling.
    Coins with a finite amount cannot have inflation, there is only the present value (demand) and output. Higher demand means higher value currently on the traded coins.
    Because when I exchanged coins for bitcoins, I had more than now, and the company that worked for this money did not meet expectations, but this is my problem :slight_smile:
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Yes. New ZEC in coinbases do not create new real value (they only create new nominal value). They cause a transfer of real value to the recipients of the coinbases. And who is that value transferred from? It is transferred from all coin-holders. Please see this recent post for further arguments to that effect.

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Why was this post flagged and hidden? It adresses a whole couple of questions and concerns regarding the current FR and even the future of Zcash, fits in perfectly into this topic, but seems someone isn’t liking and instead of answering some valid questions/concerns this article gets censored & deleted?

What’s next? Ban hammer incoming?

Posting the link to the article, and discussion of the article is not the issue @boxalex but copying/pasting the entire articles contents
verbatim is a violation of the Code of Conduct which states:

“You may not post anything digital that belongs to someone else without permission. You may not post descriptions of, links to, or methods for stealing someone’s intellectual property (software, video, audio, images),”

Your posts quoting from the article, and discussion about it remain, only the post that copied the entire contents of the article was flagged.

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I did. and in my response to you I stated that your argument only stands if there is not a total cap on supply. I guess we agree to disagree - I am of the view that mining coins does not create value, it gives value to already mined coins because you are getting closer to running out of that 21 million.

sorry if this comes of as harsh. im in a really bad mood, see my RandomX thread.

EDIT: I hadn’t actually read that post, I thought you linked to another one. I am sorry. My point still stands.

However you are entirely correct with the fiat example. Lets use gold instead.

So by me mining gold out of the ground, I have transferred wealth from every gold owner to myself. I get that argument.
I cannot magically make more gold than is in the earths crust, so I have transferred a greater value to the current holders of gold by getting closer to no more new gold.

I am adding greater value from scarcity than I am taking from dilution. In the short term you are correct, in the long term I am. where is the cross over point? I am not sure. Im going to the pub. I need a beer.

This is nothing to do with my point. I agree with what you say here 100% - The idea that the block reward creates value in and of itself is wrong. I do explain what the block reward in bitcoin was for in an earlier post to you in this thread. My point is dilution v running out.

EDIT2:
If you see block rewards as dilution, then what justification was their for a 4 year FR rather than one that matched the emission curve? surely by your own logic the FR is the greatest thing to devalue zec.

This isn’t actually my stance on it, but how does this logic not follow? what have I missed?

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And how did you come to the conclusion that i don’t have permission from the author to post the whole article on the Zcash forum? Actually i have the written permission from Andrew Munro, the author of the article at finder.au.com.

Permission

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Posting this article from Andrew Munro again after it was deleted due the wrong assumption that i don’t have permission to post the whole article.

This article adresses some very valid questions, concerns and describes the current state of the Founders Reward really good as many of us might not be aware how the Founders Reward is distributed it’s a good easy read to understand what actually leads to the situation that the ECC company runs at a deficit no matter the Founders Reward generates a huge amount of funds.

Opinion: A new lawsuit is sorely testing the Zcash Founders Reward model

The Electric Coin Company is being sued, highlighting the sheer messiness of the Founders Reward scheme.

Key points:
  • The Zcash Electric Coin Company is being sued by a former employee.
  • The lawsuit casts a light on some of the downsides and complications of the Zcash Founders Reward funding model.
  • The Electric Coin Company is struggling financially, and its fate is bound to that of Zcash.

The Electric Coin Company (ECC) is one of the key entities behind Zcash, one of the world’s foremost privacy cryptocurrencies. It’s now being sued by former employee Simon Liu over allegations that it failed to compensate him as agreed for his work.

IN A NUTSHELL

Here’s what allegedly happened, according to the lawsuit:

  • 27 October 2016: Simon Liu signs on with ECC and is granted vested stock options of 15,000 units of stock.
  • 31 December 2018: ECC allegedly says it never created a stock option plan.
  • 4 January 2019: Liu asks to see the company books.
  • 8 January 2019: “[ECC] stated [Liu] has no right to demand a books and records inspection.”
  • 23 January 2019: ECC said it was going to issue new units, diluting everyone’s existing share.
  • 22 May 2019: Liu expresses concerns about the impending dilution, is allegedly told to “stop spreading incomplete and inaccurate information and unverified rumours” lest his employment be terminated.
  • 28 May 2019: Liu resigns as senior engineer, citing failure to receive stock options, intolerable working conditions and unfair threats of termination.
  • 29 May 2019: Liu sues ECC and 50 anonymous others for US$2 million.

Show me the electric money

The “units of stock” referred to in the lawsuit are “membership units” in ECC. This is both an equity share in ECC itself as a business, plus the system by which the Zcash “Founders Reward” (FR) is distributed among founders and vested ECC employees.

The FR is a cut of all the Zcash coins (ZEC) being mined. It is currently 20% of each block reward, and will eventually drop to 10%.

According to the latest ECC financial report, the total ZEC mined each month in the second half of 2018 were being distributed like so:

The top 80% is the portion that goes to miners, the bottom 20% is the combined Founders Reward.

We know that ECC CEO Zooko Wilcox was earning 2,033 ZEC – worth some $305,000 – per month as of July 2018. Extrapolate that to prices of $60 and assume no other changes and it suggests he’s earning some $122,000 per month today, equivalent to a 13-14% share of the total funding that goes to founders and vested employees.

Meanwhile, the total ECC monthly operating expenses were $700,000 per month, it says, distributed as such:

zcash-expenses-report-snip

The Electric Coin Company budget, as you can see, is only getting $367,500 of that though. It’s operating at a significant loss, which the financial report happily admits.

“The company’s operating cost in the second half of 2018 averaged $700,000 per month. An additional $180,000 a month was used for employee compensation during the period. As such, the company has been running at a significant deficit,” it shrugged.

The company has about $5 million in ZEC and USD in the bank, and assuming everything stays as is, it will be out of money by October 2020.

The Electric Coin Company has made no secret of the fact that it’s walking on thin financial ice.

Something doesn’t add up?

The total ECC annual operating budget is $8.2 million and it’s going broke, while the company’s CEO is getting $1.464 million per year. Assuming these numbers are correct, the Electric Coin Company CEO’s earnings are equivalent to 17.85% of the struggling company’s annual budget.

Even in a world of disproportionately high-flying executives, that’s pretty wild.

Of course, you can’t really separate the amount going to founders and vested employees from the company’s finances itself. The Founders Reward is hardcoded into Zcash as a system that currently diverts 20% of the mining rewards to the specified Founder wallets, so those founders, including Wilcox, are directly funding the Electric Coin Company with voluntary donations of their own. That’s where the 2.8% comes from.

This means that if you’re not a founder, your payment as an employee of Zcash is dependent on good old fashioned employment contracts and trust. If the lawsuit is true, it’s a trust that’s being abused.

“[ECC] also promised to compensate [Liu] by paying him a share of the ‘Founders Reward’ in proportion to his limited liability company ownership equivalent in option membership units,” the suit says. “[ECC] did not have authorisation to issue common stock to employees in 2016… [ECC] did not grant any incentive stock option to [Liu] to purchase Zerocoin’s common stock.”

Perhaps recognising the disproportionate amount of funding being diverted to the founders and vested employees, the ECC agreed to release additional share units in in June 2019, which was allegedly one of the things that sparked the lawsuit in the first place.

And then there’s the Zcash Foundation, which is getting a bigger slice of the funding than ECC itself for performing what sounds like a very similar function. It’s being funded by a pre-agreed portion of the Founder Rewards.

“The Zcash Foundation’s mission is to be a public charity dedicated to building Internet payment and privacy infrastructure for the public good,” it says of its purpose in life.

“Electric Coin Co. builds software in support of our mission to empower everyone with economic freedom and opportunity,” the company says of its purpose in life.

Some cryptocurrencies created non-profit organisations to serve as the chief entity behind their projects, while others created for-profit business entities. These entities have typically been funded with ICOs or pre-mines.

Zcash created both, and then funded them both with a system that doles out ongoing mining rewards to a small handful of key players who then voluntarily fund these two organisations. It’s quite different.

And then things got weird

What we have here is a company’s piece of code that’s vacuuming up an enormous portion of its product’s total earnings and giving it to a team of executives and investors, only some of whom are employees of the company, who then donate some of it to the company they are employees of. A portion of the executive earnings is also diverted to a separate charity organisation whose board members also include some founders of the company.

What started as an effort to imbue the organisation’s finances with a new level of transparency have also made the entire thing wonderfully opaque and complicated.

This is reflected in Liu’s lawsuit. Not only is it targeted at the Electric Coin Co. itself, but it’s also aimed at 50 anonymous “John Does” who are together alleged to have breached their contractual obligation to grant equity (a share of the Founder’s Reward) to him.

Presumably, those John Does are Founders Reward recipients who agreed to dilute the supply of Founders Reward units to help address the funding crunch the Electric Coin Company – the company rather than its mish-mash of investors and founders – are experiencing.

So who’s going to foot the bill for this lawsuit? And how about the next lawsuit, and the compliance hurdles bound to face a company that’s building an anonymous digital currency? The Electric Coin Company itself, as a business, certainly doesn’t have the budget.

Alms for the tech company

The Founders Reward was meant to encourage long term interest in the wellbeing of Zcash, but it functionally appears to have turned into a system where a business is dependent on charitable donations from its own founders to manage routine expenses.

History says that those founders have not tended to be overly generous. Plus, like any open cryptocurrency, Zcash is largely dependent on volunteers to survive, but there’s not a lot of incentive to start volunteering when there’s also a team of well-paid founders and investors hanging around.

The Founders Reward is also a revenue model that doesn’t offer much room for flexibility or growth in the Electric Coin Company business itself. You can’t easily hire people to expand as needed – especially if they want to be paid in real money rather than ZEC – and you’re also firmly wrapped up in the volatility of crypto as a whole.

It also means there’s a constant undertow of selling pressure running through Zcash from the founders and miners who need to fund their operations, and if the most recent ECC financial report is any indication, another price drop could be disastrous for the Electric Coin Company.

If the company goes under, who’s going to pay its creditors? What about back-pay for its employees, or suppliers? Will the courts try to garnish the Founders Reward? Plus, if ECC goes bust, ZEC prices would almost certainly plummet, instantly making everything worse for everyone.

If ECC is necessary for Zcash, it probably needs a more reliable funding mechanism than those founder donations. And if it’s not necessary, why does it exist?

Zcash is a grand experiment in more than one way, but it’s having a tough time in the face of real-world conditions.

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You have shown zero evidence that you actually asked for permission to post it before you did the first time. But since you now have it users flags for removal will be ignored. Cc @paige

Can we get back to the actual subject of the thread:

Do we extend the Founders Reward? Yes/No? How do users vote one way or the other?

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Hi all, I just posted to the forum advocating that anyone making proposals for either dev funding or governance decision making do so as separate forum posts for each proposal: Dev fund proposals & sentiments - #16 by nathan-at-least

If proposal advocates could do this, it will be a good step towards refining and clarifying specific proposals, which is necessary for any decision process around these proposals.

I think that’s a good idea. There are several that I have seen in this thread but it’s getting big so they can be difficult to find.

If @garethtdavies @Morpheus or any others who have put together a specific continuation proposal would start a separate thread with thier ideas it would help narrow the scope if the discussion to that particular proposal.

And if you are against any changes to the FR @hloo and others, then users can also start thier own thread with thier reasons and any ideas (outside of scope for a direct ZIP proposal) for continuing development.

How about we make some sort of separate category for these to go into @moderators ?

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Can we use the community-collaboration/protocol category as Nathan suggested in Dev fund proposals & sentiments - #16 by nathan-at-least?

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So get off your lawn and go play somewhere else. I am disappointed. But I will respect the views of the community and stay out of those threads. Good luck with what you decide.

Although echo chambers rarely breed success.

what’s the meaning of that post? I couldn’t understand anything, seriously…