The Zcash Posterity Fund

  1. Only in the form of smoothing the emission.
  2. What about adding an extra 1% to the dev portion of emissions? So 8% 7% 5% 1% = 21% :exploding_head:.

Are there expectations that these tough decisions are completed going into ZCon4 (and the conference will act as a description of what the implementation will look like) or will ZCon4 be used as a public square to host additional debate?

  1. Yes ZSAs should pay fees in ZEC.
  2. Yes the ZSF should be able to hold and distribute other assets.
  3. It will allow ZCG, ECC, and ZF to negotiate better terms for funding partners/groups. Terms for funding projects/teams could include the “donation” of some newly created ZSA into the ZSF.

I believe the long term value that ZEC is primarily as a scarce asset to enforce a cost of using the Zcash network. The Zcash network will eventually include some form of generalised on-chain proof verification. It makes sense to me that the token used to pay for this be arbitrary and specific to the network in question.

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I’d like to share my opinion on this front, although since Shielded Labs is driving their own proposal they may choose to take it in different directions vs my ealier “Posterity Fund” vision. (I already am a big fan of the rebranding to “Sustainability”. I’m not at all a marketing guru. :wink: )

IMO, one of the strengths of the idea is explicitly to decouple the question of where funds come from and the issuance schedule vs where funds go to.

The latter question is crucial for multiple reasons: consensus safety, governance, and so forth. Extremely important topics to discuss.

But my opinion is that if we block setting up the fund and beginning to gather deposits on also changing decisions about where funds are distributed to, then it makes it much harder to make forward progress.

This is why in Long-term sustainability with the Zcash Posterity Fund I clarified:

This post and the Posterity Fund proposal focus on the sources and amounts of network funding and are agnostic as to the recipients

So my thinking with that was “keep recipients the same when deploying the fund” to decouple the two decisions.

Of course, since the design changes the issuance rate, it is already impacting the recipients in some way. My simplistic thinking was that the current issuance is divided among various recipients (miners and Dev Fund orgs) in a certain proportion, so the “most neutral” choice for payouts is to maintain the exact same proportions and recipients.

If the fund were deployed in that manner with “neutral” changes to the recipients, then it would enable the possibility of accruing different sources of deposits (transaction fees, various ZSA fees, etc…) without delaying those deposits from accruing while the community decides to alter recipients or proportions.

If the community was behind this approach of “decoupling” where funds come from vs where funds are distributed to, then it seems much easier to me to get the fund up and running without needing to answer important governance questions like “how much of the funds should go to network security versus a development fund” or to “miners vs stakers” (say in a future hybrid consensus change) or how much to Dev Fund recipients or if those recipients should change, etc…

Again, all of those are extremely important questions, I just don’t personally believe we should postpone setting up the fund prior to deciding on those other questions. Another issue here is that some of those questions should be answered at different times.

For example, consider these two questions:

  • “Should we establish a new fund like the current Dev Fund after the current one expires, or should we let the current one expire and direct all new funding towards consensus security?”
  • “Should we adopt a given PoS transition proposal that redirects consensus security funding from miners to stakers through some transition mechanism with some schedule?”

Now think about when we need to answer those two different questions. We may need or want to answer those questions at the same time, or the first before the second, or the second before the first depending on a lot of factors (for example if there’s any good proposal for a PoS transition before or after the Dev Fund ends). So if we decided to postpone setting up the Sustainability Fund, which other questions about funding destinations would we want to wait to decide on before deploying SF?

There may be a variety of plausible good alternative proposals here, but I’m of the opinion doing one thing at a time is simpler in terms of governance.

My 0.02ⓩ.

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@nathan-at-least I applaud your efforts on this. Ill be honest, it wasn’t an exciting or revolutionary first read, but when I finally grasped the difference between the ZSF and raw Dev Fund are it’s striking how important it is we decouple issuance and funds.

@nathan-at-least So your comments got me thinking. How many ZIPs makeup a complete funding pipeline. 1, 2, or 3?

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I’m not sure what you mean by a funding pipeline, and I guess how many ZIPs depends on what Shielded Labs is planning.

The most minimal thing I can think of wouldn’t have any deposits, so if only that were deployed, the net effect would be to just smooth issuance to a decay curve (and remove halvings). I would guess that could be a single ZIP.

One kind of deposit that seems simple and safe to me is a rule like “90% of txn fees are deposited into the fund and 10% go to miners”. We want some to go to miners so they have an incentive to include txns. I don’t believe this would be controversial for miners since fees are so tiny today, yet that also means deposits would be small. Meanwhile it gets the ball rolling so that if fees go up (say from more adoption, ZIP-317, ZSAs, etc…) after this change were made everything the Sustainability Fund would start working it’s magic. If we waited until after fees grew large and then attempted to redirect them into deposits, it may be more controversial / political at that time.

I personally would advocate putting that kind of fee change in a separate ZIP from the basic Sustainability Fund definition. It’s conceivable some would want the SF but not that specific fee change, and even if everyone wants both it feels cleaner/more modular and establishes a precedent for “here’s how to introduce SF deposits in a ZIP” for any future protocol changes (e.g. ZSAs, bridging, programmability, …).

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With ongoing SEC and CFTC regulatory actions against crypto builders, brokers, and networks, can @nathan-at-least and @Dodger give any remarks about how you are contemplating your 501c3s, and their carried risk involved with both the 1. acceptance of ZEC from the protocol, 2. redistribution of that ZEC for dollars

Based on my review of the Howey Test, and to the context of how the SEC is evaluating crypto currency ecosystem actors, it looks almost certain that they will be capable of taking both Zcash Foundation and Electric Coin Company to court for sales of unregistered securities.

Beyond the above speculation, how are your teams considering the possibility of something like the Zcash Sustainibility Fund being able to act as a potion-pill to reallocate protocol ZEC in a manner that would eliminate regulatory risk to both organizations?

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Are you an attorney, @noamchom?

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LOL, are you a comedian? When I used the phrase my review I meant that to imply, anyone’s review of the Howey Test based on how the SEC and CFTC are currently reading it.

The regulatory risk to this developer ecosystem isn’t a joke.

I am hopeful that you and Nathan, or whomever are legally skilled team members within ZF and ECC, can share some perspectives about how regulatory risk is being factored into the big picture for Zcash.

ZF and ECC have monthly operating expenses close to 1.5 million dollars, so the community would prefer to have some assurance that serious topics are being treated seriously.

  1. Obviously yes, I don’t know who acts as broker for ZF and ECC, but in order for block reward ZEC to turn into dollars paid for operating expenses, there is some external entity investing money in order to receive those ZEC.
  2. Yes, the common enterprise is both among the orgs providing the block reward ZEC (either ZF or ECC), and the broader Zcash ecosystem as a decentralized global enterprise.
  3. Yes, the entirety of crypto currency markets posit that coins bought today will at some future point in time provide profit on the initial dollar cost.
  4. Yes, because the block reward ZEC transacted explicitly turn into the dollars that fund the operating expenses of the ZF and ECC. Said efforts being the primary driving forces that sustain and accrue value to Zcash.
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Hi @noamchom,

Speaking for ECC, I recognize the concern, especially against the backdrop of aggressive actions taken by the SEC under this administration.

In addition to our work with outside counsel on this, my team includes a global head of regulatory relations (Gary Weinstein) and head of US policy and strategic advocacy (Paul Brigner).

We have been on top of this for some time, including a number of activities that I won’t go into here. The most highly regulated exchanges around the world have completed their own analysis as well, and are comfortable that Zcash is not a security. To our knowledge, not a single regulatory or regulated entity considers Zcash to be a security.

As it relates to regulatory risk, my concerns, and where we spend significant time, are related to privacy, defi and self-hosted wallets.

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Thank you for this proposal which I fully support.
I love the the idea of smoothening the emission as well as the possibility of depositing Zec into ZPF.
It would be interesting to fund future protocol developments by depositing Zec into Fund.
I think also that the part of tx fees(if not all of them) should be definitely redirected to the Fund. Maybe I don’t follow completely the importance of miners(or future validators) getting tx fees directly…

If there will be still some funds inside Sprout and Sapling pool on the day go their deprecation, will it go to ZPF ?

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Before we try to mess with the devfund mechanism, I would like to propose we narrow down how the funds can be used by mean of a ZIP.
I’ve noticed a growing trend where devfunds is used to fund something and in return Zcashers get nothing out of it.

2 very recent examples :

If Zcash devfund funds something, there must be a “what’s in it for Zcash community” otherwise it should not be funded. Also, funding political speech / propaganda should be explicity forbidden in the ZIP.

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Hi @joris

As to the ECC call outs:

  1. Gary’s Forbes work is predicated (by Forbes) on not being biased toward any particular coin. Meanwhile, he is building credibility and reach with key messages that impact narratives for Zcash, which may be in common with other projects.

  2. The podcast is a platform (as is the PGP breakfast series) that allows us to build alliances, introduce or reshape narratives, and influence influencers in DC policy circles. In some cases, the guest may be ambivalent or even antagonistic toward Zcash or privacy-preserving tools coming into the conversation. It’s a long play.

These activities are highly strategic, with very little cost. We’re open about what we’re doing and why. Just ask.

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Wax on, wax off.

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(Speaking for myself, not ECC.)

This is not the example you are looking for:

  • The funding came from the Major Grants slice of the dev fund, approved by ZCG (not ZF).
  • The funding was for developing Arti (a Rust implementation of tor to replace the C implementation). This can benefit Zcashers in that the resulting implementation will be feasible to integrate as a library into Zcash nodes and wallets (the C implementation is not - I attempted to do so multiple times), as well as making Tor overall more reliable.
  • Mullvad Browser is a version of Tor Browser that replaces tor with Mullvad VPN. That means it does not include the one part of Tor Browser that the Zcash grant is funding development on.
  • The “payment methods” screenshot comes from Mullvad’s pricing page. Monero was added to the list of accepted cryptocurrencies around May 2022, almost a full year before Mullvad Browser was announced.

I would be very interested in knowing what is preventing Mullvad from accepting Zcash; it would be a great match! Maybe the answer is “we need X technical thing”, which is something that could be addressed (perhaps with a grant!) Or maybe the answer is “no users have requested it”, which is something that Zcash community members can fix :slightly_smiling_face:

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Hey @str4d I knew all of that, but there’s a lack of “return the favor” attitude from a grantee that got $1M. It is unacceptable to bleed the community from $1M and not even care that the partner you work with doesn’t support Zcash.

I didn’t mean to hijack this thread, but my point is if rework is done in funding mechanism, then I request we also rework ethics in funding.

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A grant is a job, not a favor. Hire the best people who can get it done. Loyalty in the workplace is unproductive anyway.

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Thanks to everyone who has provided feedback. I want to bring the conversation back to the Zcash Sustainability Fund and focus on one specific issue. As Dodger mentioned above, one important question the community needs to answer is “Should the Zcash emissions schedule change”? As previously stated, the ZSF preserves the 21 million supply cap, but smooths out the emissions curve and maintains an approximate issuance rate that replaces the four-year halving cycle.

So far, I have seen no one raise an objection to changing the emissions curve. There are two potential objections that I’ve considered. First, individuals may want to maintain the halving cycle because they believe (based on Bitcoin’s performance) that periodic supply shocks lead to price appreciation. Second, Proof of Work maximalists may object to the ZSF because they believe such a change could potentially bring Zcash closer to implementing a Proof of Stake consensus protocol. I personally don’t believe either of these objections are particularly strong or valid.

What are other objections we should consider? If you have a strong opinion against changing the emissions curve, please respond to this thread or, if you prefer to respond privately, reach out to me via DM.

Thanks!

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I’d love to see these activities covered in a new thread. I’ll only follow up here this last time before opting to create a new thread for the topic of regulatory risk.

My original concern(s) are not that carte blanche Zcash might be a security according to the contemporary opinions of the SEC or CFTC in US. I’m of the belief that ZEC, no moreso than BTC, LTC, or any other Proof of Work crypto currency is at risk of being wholly labeled as a security and then put to the responsibilities of being treated as such.

My concern is about regulatory risk to the Electric Coin Company and the Zcash Foundation and their specific actions involved with claiming the ZEC block rewards and then brokering them to some unknown to the public third party. (Can you share any insight into the mechanics of how ECC received ZEC are transacted into USD?)

With that in mind, have you got some feedback about how the ECC have perhaps squared the circle to feel assured that their modus operandi isn’t carrying more regulatory risk than is responsible or necessary? Let’s suppose that ECC chartered itself outside of the jurisdiction of the assorted US federal bureaucracies (in a jurisdiction that doesn’t hold as strict of a vision for regulation of securities), in a situation like that I wouldn’t have any concern about that hypothetical ECC’s carried regulatory risk.

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Quick thoughts.

I don’t really see a major objection to smoothing the emission curve. If there is a continuously variable amount of ZEC emitted, it may make bookkeeping a bit more of a pain for block reward recipients like ECC or ZF, but maybe not. (Just a small thought.) On the other hand, eliminating (relatively) drastic changes in token inflation rate may make the properties of the currency seem less idiosyncratic and perhaps help with volatility.

The argument against smoothing the curve in favor of being able to game the halving volatility seems weak to me. An ideal currency is less volatile, not more.

The idea of the ZSF and emission curve smoothing being a gateway drug to POS also seems tenuous.

One thing getting rid of the halvings will do is get rid of the hard-coded 4 year intervals that have been useful to demarcate decisions about the dev fund. It may be worth encoding those 4 year (or some other interval) markers some other way if the halvings no longer provide them by default.

I’ve only had time to scan this thread briefly, although I’ll say I am generally in favor separating the input and output discussions. I think a lot of points will come up in the future about the output part of the equation, but it seems to make sense to me to start saving early. It reminds me of when I sat down with a financial planner to set up a retirement account and they ask all sorts of questions about the future. How much are you gonna want each year for retirement? Will you have any boats? Etc. I had literally no idea how to answer that, so we just fudged some numbers for their software. But of course, it is obvious that the sooner one starts saving, the more you’ll have later. Now, many years later, I have a much better idea of how to handle myself with long-term financial planning because I’ve learned a lot between then and now. I could imagine a similar situation for Zcash; it is intuitive that starting to save earlier is better and also it is likely we will learn more and more over time how what to do with any funds accrued to the ZSF. This is not to say we shouldn’t be thinking hard about the best ways to allocate resources in the future, only that we will probably be wiser in the future and not having it all mapped out now shouldn’t be a blocker.

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