State of Zcash Governance
Disclaimer: The views expressed here are my own and do not necessarily reflect the views of my employer ECC. Also, I previously disclosed that I will be leaving ECC as of August 1. Also, all of this is intended for education and dialogue – none of this is financial advice.
TL;DR
The current Zcash governance model is too tightly controlled and is no longer appropriate for the project. The Zcash trademark, along with the trademark agreement constitute the “One Ring” that consolidates power in the ecosystem. It is bad for Zcash, putting the project at risk, and slowing us down.
If Zcash is to flourish as a public good, the ring must be cast into the fire. This needs to be done before any decisions about a renewal of the Zcash development fund. We should also discuss new and better governance, the minimization of jurisdictional risk, and funding models that deliver better outcomes.
The foundations of Zcash are stronger than ever and I have high expectations for its future. But we can’t rest on that. We can and should push continual upgrades, governance included.
No atrophy. No regression. Only forward movement.
Introduction
The purpose of this post, like my prior post on the state of Zcash adoption, is to provide my perspective on the state of the Zcash project, challenges and roadblocks, as well as thoughts on various paths forward. I intend to be forthright and candid with the perspective and opinions I express.
Even if the thoughts I express here are not shared by everyone, I hope the community finds them informative and useful. Please bear in mind that the opinions expressed here are mine alone. Any errors and oversights, are my errors and oversights. Please point them out so that I can correct them.
This post focuses on the state of Zcash governance and lays the foundation for community discussion and deliberation on what governance should be.
It’s my belief that we should not have a new dev fund conversation without first addressing the current state of Zcash governance and its implications.
While some may be quick to dismiss governance as plumbing that no one cares about, in actuality, it is this plumbing that determines the direction of the protocol and the allocation of funding in support of that direction. Zcash governance, or rather, the decision makers in the governance structure, will determine whether there is a new development fund, and who will receive it. Based on the information shared in this post, and your feedback, I hope to post again about the state of Zcash Ecosystem Funding in the coming weeks.
The foundations of Zcash are stronger than ever and I have high expectations for its future. But we can’t rest on that. We can and should push continual upgrades, governance included. No atrophy. No regression. Only forward movement.
Please note that I have been a key member of the ECC executive team over the past five and a half years, and participated in the recommendations and advocated for decisions made by ECC. This has given me unique insight into the inner workings of Zcash governance, but also may color my opinions. Please reason it out for yourself.
In this post and elsewhere, I in no way intend to disparage any person or call into question the path that led us to this point. Quite the contrary! The people at ECC, the Zcash Foundation and in the Zcash community have been some of the smartest, thoughtful and principled people I have ever worked alongside.
I want to acknowledge a few people for sharing their own ideas and perspectives directly or in the forum over time, some of which are reflected in this post. Thank you @Beth, @aquietinvestor, @ml_sudo, @earthrise, @nathan-at-least and @zooko specifically. There are likely other people that influenced me. Apologies if I overlooked you.
Governance Primer
Blockchain governance is a decision making process that:
- Codifies what the chain does, and how it operates
- Defines who gets to be decision makers and the manner in which their choices are expressed
- Determines the direction of the project based on the choices of the decision makers, influenced by incentives
Incentives may be, but not always financial. Other incentives include the need for the utility of the thing being created (such as private digital cash), the desire to be part of something meaningful, or the desire to see one’s perspective or beliefs “win,” either because they believe it to be the best thing for the project, or because the allure of power and reputation. None of us are immune to incentives.
One of the challenges with participating in centralized systems is that we must trust that the incentives of those in authority truly align with our own. If they don’t, we can (hopefully) opt-in to something else that does.
Decentralized digital currencies are more complex. Decentralization is not binary, but rather a spectrum that a project tends to, if healthy, move from centralization to greater decentralization over time. As a young project, centralization is the natural state as it’s the manifestation of the vision of a few, with rapid iteration possible because decisions can be made centrally and without the need for broad consensus.
However, if the project is to be a shared public good, it must continually add new decision makers. We trade speed of iteration and a singular vision, for vibrancy and resilience. Vibrancy and resilience are fueled through greater participation, and greater participation fuels even greater participation. It’s how we get network effects.
Zcash Governance
The following is a diagram of the key actors (circles) and “functions” (squares) in the Zcash ecosystem responsible for governance today. The lines represent the relationship between them.
There are many other voices and actors not depicted here, but they have limited power to influence the direction of Zcash. Why? Because Zcash governance is under the tight grip of two actors: the Zcash Foundation and the Electric Coin Company (ECC).
One Ring to Rule Them All
The most powerful tool of Zcash governance is the “Trademark Donation and License Agreement.” This legal agreement, signed in 2019, transferred ownership of the Zcash trademark from ECC to the Zcash Foundation with certain stipulations as summarized in ECC’s blog announcing the agreement. It establishes the Zcash trademark as the centerpiece of Zcash governance.
More specifically, this agreement gives the Zcash Foundation and ECC the exclusive right to legally determine what chain is called Zcash. All upgrades must be formally sanctioned by these two organizations. If they don’t agree on what chain is Zcash, no chain can be called Zcash in the jurisdictions where the trademark is protected. The name of the chain, token and logo all disappear.
Per ECC’s blog:
Yes, you can fork as Ycash did, but no third party can make the decision to call the new chain any kind of variant of “Zcash” without violating the Zcash Foundation’s trademark. And because ECC and the Zcash Foundation have built a fantastic moat including stewardship of the Zcash brand and third party relationships, any fork has a massive uphill climb.
The Mysterious Divination of Clear Consensus
Now in theory, both organizations are obligated to support the community’s voice. That provision of the trademark agreement is copied here:
“19.12 Approvals. Each party covenants and agrees that it will not make or withhold any approval, consents, or other decision under this Agreement if such approval, consent, or other decision is contrary to the Clear Consensus of the Zcash community. For purposes of this Agreement, a “Clear Consensus” of the Zcash Community will be determined by evidence agreed to by both parties, or in case of Dispute regarding such evidence, decided as specified in Section 14 (Dispute Resolution). Subject to the foregoing, all approvals, consents, or other decisions required by either party under this Agreement shall be given within any applicable time period specified herein and shall not be unreasonably withheld, conditioned, or delayed. Any decision or determination to be made by a party hereunder shall be made in such party’s discretion, with the use of such party’s good faith and reasonable judgment.“
But what is “Clear Consensus?” What it means in practice is not defined, and as such is a subjective decision based on an agreement between the Zcash Foundation and ECC. If we extrapolate this further, “Clear Consensus” is a subjective decision based on whatever particular person has authority to make this decision at these two organizations. Today, that person is Zooko Wilcox at ECC and Jack Gavigan at the Zcash Foundation.
Objectively divining clear community consensus is an impossible task. To begin, what is the common definition of the “the Zcash Community?” No such definition exists. Are we assuming the community is adequately reflected on ZCAP or in the forum? What about ZEC holders that don’t or can’t participate in either? What about non-english speakers? What about those that desperately need Zcash and wish they could have a voice but must remain out of sight? Since no definition of the “Zcash Community” exists, Zooko and Jack currently get to choose. And even then, objectively, what defines “Clear Consensus" and at what point in time?
There are no good solutions to this because a good solution does not exist. “Clear Consensus of the Zcash Community,” is like Sasquatch. Some claim it exists but no one has really ever seen it. We’re trusting in hazy snapshots.
To date, the Zcash Foundation has largely leaned on votes from the Zcash Community Advisory Panel (ZCAP). Quoting from the Zcash Foundation’s site, the ZCAP “is a panel of community members established by the Zcash Foundation (ZF) as a means of soliciting advisory input from the Zcash community. ZCAP was originally formed in 2018 as a community governance panel. It has been repeatedly expanded, and, as of April 2023, there are 167 members from across the Zcash community.”
The Zcash Foundation has used the panel to vote on its board and both the ECC and Zcash Foundation agreed, under the Trademark Agreement, to leverage it to determine consensus for ZIP 1014, which included a new development fund for them both. The foundation’s executive director at the time of ZCAP’s inception, Josh Cincinnati, penned a blog that outlined its creation and intent. How members may join, and the rules that govern it, has been changed by the foundation over time, but some of the initial intent, such as stake-based voting, has not been realized.
Sounds like a reasonable sentiment gathering mechanism, right?
While the current foundation executive director, Jack Gavigan has seemed to assert that ZCAP is governance of some form, the reality is that the voting body is a group of people that may or may not have any active engagement in the community, may or may not hold or use ZEC, and is polled with questions developed solely by the Zcash Foundation, when it chooses, and the results of these polls are non-binding on the foundation’s decision making.
To its credit, the Zcash Foundation, and Jack specifically, has suggested that it may be changed and jointly owned by ECC, but it’s my opinion that the ZCAP is both flawed in its construction and too centralized in its management. Sharing its ownership with ECC, another self-interested party, in order to codify it as governance for a decentralized project should be a non-starter. Fwiw, I think it is a useful mechanism for engaging a subset of the Zcash community, and I am an active member and voter, but don’t agree that it is an appropriate mechanism for governing a public good such as Zcash.
For all the faults of the foundation’s ZCAP, ECC’s approach is even more confusing. ECC has not made it clear how it will evaluate community consensus for any upcoming decision. It has advocated for ZEC holder polling but, to date, there are no viable means to safely support this method of assessing community sentiment, and ECC currently has no other means other than its subjective determination of sentiment for a given decision. This lack of clarity results allows ECC to maintain optionality, deciding when and how it will make its determination. I don’t believe that any abuse is intended by ECC, but ECC’s subjective determination of sentiment is the current state of things. This is unsatisfying, leaving Zcashers confused about how to best express their voice, and thus, often assuming the Zcash Foundation’s ZCAP to be the best mechanism for expression.
To summarize, Zooko and Jack are the current joint decision makers on any consensus rule changes to Zcash, as long as they can agree on how “Clear Consensus” by the Zcash community will be determined. If they can’t agree, nothing can be called Zcash.
I believe both of these people are well intentioned, but that there are two people determining how the community feels, on a case by case basis, is concerning. The current governance model is antiquated and brittle. It’s not appropriate for Zcash and it’s time the project evolves beyond this structure.
Something else to consider: what happens if one of these orgs collapses, is sued out of existence or otherwise forced to shut down? What happens if jurisdictional powers require a change that forces one of their hands? What happens to the trademark then? We claim we can “just fork,” but practically speaking, forking for this reason would cause an extreme amount of damage and pain. Resilience is far better than reliance.
Control of Community Speech
There are a few other challenges with the current governance structure beyond control of the trademark and confusion about community consensus.
As shown in the diagram, in addition to trademark ownership, the Zcash Foundation has significant power as it manages and/or moderates much of the conversation with the community. This creates a risk of the suppression of speech and also capture.
Let me give you an example. In the case of Zcon, which is the annual in-person and online event the Zcash Foundation hosts on behalf of the Zcash community, speaking submissions are made to the foundation.
I greatly appreciate all the hard work that goes into Zcon, including the challenge of curating and surfacing the most valuable information and conversations in a tight window. The team at the Zcash Foundation has done an amazing job with these events. However, the community has no visibility or voice in determining any of the content or workshops, and neither does the foundation’s ZCAP. It’s a black box. The Zcash Foundation curates and schedules content without any transparency or community say-so.
This year, “SoK: Programmable Privacy in Zcash” is the first session after ecosystem updates, which is based on research the foundation commissioned, and a path for Zcash for which the foundation is advocating. The session will be emceed by Jack Gavigan. Whether or not it is a worthy topic of discussion (and I believe it is - pretty excited about it!) is not the point. But that the foundation has the unilateral power to pick and choose what the community discusses, without prior community engagement, on Zcash’s biggest stage, is concerning.
In another example, ECC requested a workshop to discuss the decentralization of the Zcash digital assets (website, twitter, readthedocs and cypherpunk zero) it manages. It’s a pretty big deal as these assets are often where people first land when they want to learn more about Zcash. Additionally, the website is the canonical location for communicating the foundation and ECC’s decisions about network upgrades. The session was repeatedly rejected by Jack due to his own concerns about the trademark and content moderation, without asking about ECC’s intentions for how it intended to engage the community on this topic. As far as I know, Jack made the personal and final decision to exclude ECC’s intended desire to engage the community at Zcon on decentralizing digital assets. While not explicitly my point here, I believe it would be fantastic if the foundation opened up the selection process to the community as is done for other conferences, perhaps even more ad hoc sessions as was done at Zcon0.
O say can you see…
Another key challenge is related to jurisdictional risk. Take a look at the jurisdictions governing each of the actors in the diagram above. Or to make it easier, I’ll just drop in another diagram here illustrating all the various jurisdictions involved:
ECC and Bootstrap, the Zcash Foundation and by extension, the Zcash Community Grants, and the governance-defining trademark agreement, are all under US law and jurisdiction. While generally friendly today, we cannot discount aggressive legislative and regulatory courses of action as digital financial privacy becomes an even more contentious issue.
Diversification of jurisdictional risk does not solve all problems, and there are many positives about being based in the US, but centralization under a single government creates an existential threat based on the current governance model.
Liberté, égalité, fraternité
“Power concedes nothing without a demand. It never did and it never will.” - Frederick Douglass
Where do we go from here and how do we get there?
Well first, that is a question for us, the community. We should not rely on or expect a path devised by either of the two trademark stewards. If we the community stand up and stand firm, I believe ECC and the Zcash Foundation are good actors and will abide by our wishes.
I wish I had the perfect answer for perfect governance. But, there is no perfect answer. However, there are paths to explore that may lead to a stronger Zcash. Some may be good, some flawed. But I believe it’s reasonable to assume the current structure is brittle at best, and fundamentally flawed at worst.
Of course, one option is to keep it all as it is, to accept the status quo as the best option available. But even if you sit in that camp, let’s at least open the overton window of possibilities.
The following are a few ideas to consider. All of these are a topic in-and-of-themselves and this post is already too long, so I’ll summarize.
- Destroy the ring, er, I mean dissolve the Zcash trademark and nullify the ECC / ZF trademark agreement. The Zcash Foundation and ECC would give up their power over Zcash governance and the unworkable responsibility for determining “Clear Consensus.”
Independent of chain governance, there are other examples where the existence of the trademark, international maintenance, and enforcement actions, however well intended, has generated significant legal cost to the community and resulted in unnecessary friction and confusion, such as the case with the Mighty Jaxx campaign.
Zcash is ready to stand on its own, without a US based organization controlling the name, logo and ticker symbol / coin name. Bitcoin doesn’t have a trademark. Let community consensus naturally define what Zcash is. It will be fine and we will be better off.
-
Require the Major Grants Organization (if reinstated) move to legal independence in a non-US jurisdiction such as Switzerland or Malta. It will cost money and time, but it’s necessary for reducing the current concentration of power and jurisdictional risk. I believe there is strong support for jurisdictional diversification of dev fund recipients.
-
Ahead of any new dev fund, should there be one, we should explore changing the governance structure to reduce the concentration of power, the risk of capture, and jurisdictional risk. This might involve something like a “Zenate” with 5 to 7 globally distributed community members (could be orgs, not just people) that have the authority to manage and reroute funds (if needed), hold fund recipients account for commitments, and assess community sentiment. We might require that they work with the community to create a “constitution” or set of guiding principles for assessing sentiment, funding and governance decision making.
-
Consider a change in the funding strategy to accommodate different types of contributions including infrastructure and security (ongoing), speculative investments and community support. Funding structures are intertwined with governance, but I’ll come back to this in conversations or another post.
There is a lot to digest here, and we need others to weigh in to support or challenge my assertions, but as a fellow Zcasher recently remarked to me, “change is in the air.”
Thanks for reading.
[Edited to remove a statement asserting that Monero doesn’t have a trademark. Apparently one was filed in the US]
[10 char]