Following on Indpendence which stated:
Both Shielded Labs and ZODL, arguably the primary architects of Zcash’s future, are fueled by capital from billionaire venture capitalists who back an authoritarian regime, and hold massive direct stakes in ZEC.
In Threads - part I I asked:
what other Zcash ecosystem organizations might be involved?
nearly all the leading organizations in Zcash are either explicitly funded by ultra-wealthy MAGA megadonors, directly support the efforts of those organizations, or are funded from unknown contributors.
and and with introduction of Zakura,
the Zcash chain appears that it can now run entirely without input from independent organizations.
This post looks more closely at funding patterns: what, when, why, how, and the first pass of who, and lays out the implications for the Zcash blockchain: price appreciation benefits these investors.
This is to say when ZEC becomes more valuable, Zcash itself now appears to benefit authoritarian interests.
I regret how long this post took (trying to confirm my reasoning through research and private discussions), and my own limitations. I am not a financial reporter. However, with almost 0 news coming out that didn’t just repeat the ZODL press release, I’m going ahead. I hope to learn from any corrections, and create a path to more clarity. Mostly, this post will examine the ZODL funding, but I did uncover one extra fact about the funding of Shielded Labs (SL), who has maintained a quieter stance.*
It was a major, highly visible shift in the Zcash ecosystem when the entire ECC team quit, and re-formed as the for-profit ZODL, then raising over $25 million in a “seed funding” round. ECC left the oversight of the non-profit Bootstrap, which was painstakingly formed to be entrusted to oversee Zcash developed as a public-good, and had significant holdings from prior donations (including significant ECC equity). The nonprofit parent existed specifically to keep development aligned with the community and the protocol’s long-term health rather than investor returns. Though some of the specific investment instruments remain undisclosed, the primary protocol development organization ECC respawned as a private company, ZODL.
Before moving on, we might ask why the ECC team made the change to for-profit-ZODL. Consider these possibilities:
- It allowed for institutional investing. Due to their legal structure, investors can not give donations to a non-profit. The ECC team wanted more funding than Bootstrap would provide.†
- It was suggested to me that it was necessary for some legal reason due to the NEAR interoperability being built into Zashi in 2025** - and other issues were considered only after that decision.
- Bootstrap presented legal or public relations hurdles, had an ethical system, was accountable to its stakeholders in some way, or had plans incompatible with the ECC, and therefore had to be abandoned.
- The “seed funding” for the “startup” was itself a ‘power event,’ designed for publicity purposes, aiming for price appeciation.
Regardless of the reason, the team quit Bootstrap, reformed as a for-profit, and quickly raised ample funds from parties including some of the most powerful Venture Capital firms (VCs) in crypto to do the same work, without the same oversight or constraints.
Specifically, the investors were institutional VCs [Paradigm, a16z crypto, and Chapter One], two corporate investors [cypherpunk technologies, Coinbase Ventures], two ‘family offices’ [Winklevoss Capital, and Maelstrom (Arthur Hayes)], named individual angels [Balaji Srinivasan (@balajis), David Friedberg, Haseeb Qureshi (of Dragonfly Capital)], and other unnamed “leading angels across crypto and technology.”
I’ve highlighted the authoritarian support of the Winklevoss Twins (behind the cypherpunk corporation and Winklevoss Capital) in my Independence post (though since then, cypherpunk also has launched the world’s largest Zcash mining fleet at 18% hashpower, supplied by Winklevoss Capital, where one employee has been vocal in retiring the independent protocol block reward funding steam of the Zcash dev fund, with some parallel ideas from Qureshi).
Many of the other investors are also notable for their support of authoritarian government and commercial forces (for just one striking example, a16z also funds the mass surveillance startup Flock), leading two rounds totaling $425M, (see here and here) and participating in more. So as to not make this post interminable, I’ll go into more detail on the funders themselves in a follow up.
How did ZODL make investment attractive, or, why did investors invest? It will almost certainly not be to later issue public stock, generate significant revenue via fees*** or services, or by minting a token other than ZEC. Acquisition by another, larger company for its talent also seems unlikely. There is no clear and viable return mechanism, that is, a path to profit, for a traditional equity play found in a seed round.
So, what does an exit look like for these investors, if it is none of these? For at least some of the investors the answer seems clear: coin value appreciation, aka ZEC price goes up. The round funded the development and shepherding of a network whose value is measured in tokens that investors already held: it increases the value of their existing ZEC positions. In that case, any equity is merely a mechanism to formalize the relationship, and not a meaningful value transfer.§
Five of the named parties had a documented ZEC stake, close association with such, or Zcash commercial relationship at the time of the funding event: cypherpunk, Winklevoss (through the Gemini exchange, cypherpunk, or as the mining equipment counterparty), Coinbase Ventures (Coinbase is custodian for the recently launched Grayscale ETF - which has a 2.5% annual fee), and Maelstrom held at the time of the round, but has since publicly dumped. In the time I have been working on this post, Paradigm also declared a stake on September 17, though the size of the position was not disclosed.
That leaves Six of the named parties (a16z, Chapter One, Balaji, Friedberg, Qureshi, Nicholas) which have no public documentation of ZEC holdings or a Zcash-adjacent commercial stake: I found no public evidence. That means either they hold ZEC privately, or they had different investment motivations.
Even if they may not have ZEC holdings, one possible deliverable is an R&D or development contract, which can give immediate contractual rights. For example they could specify protocol upgrades, wallet features, and so on. a16z explicitly made a privacy thesis in its October 2025 State of Crypto document, as an important market narrative.
Investors could also obtain a seat on the company’s board, enjoy information covenants, review or veto rights, in addition to a development goals or claims on the company’s future cash flows, if any. Company governance rights could influence roadmaps, or permissive licensing integration.
Some plausible examples would be; in-app rails to Gemini or Coinbase, clout for adjusting protocol block times or preserving tex addresses, a16z could seek integration or with other projects in their portfolio: for privacy, maybe nextgen mixnet Nym, XMTP, or stablecoin project Aleo.ⱽ Or, intriguingly, a16z crypto also invests in NEAR, which was being integrated into the Zodl wallet in 2025 when it was still Zashi. See also the ** footnote. I feel this alignment might be fruitful to investigate more.
A PR move also could fit for a firm the size of a16z (currently claiming over $100B+ under management across multiple funds), using ZEC as a fund-marketing asset.
Beyond these, interestingly, investment could be ascribed to regulatory strategy. This is harder to dismiss than it might appear at first.
The ZEC token is still in US financial regulatory ambiguity: it’s neither confirmed as a commodity nor confirmed as a security, though the SEC closed its Zcash Foundation investigation in January 2026 without enforcement.
The timeline is notable too. The ZODL funding round was public March 9 2026, just about one week before March 17, 2026, when the US SEC and CFTC jointly issued a 68-page release naming 16 assets as digital commodities. The VCs could have been positioning just ahead of a major liquidity event. But ZEC was not on the list. This means the token has no formal US federal classification.
Roughly five months later, the Grayscale ETF launched on August 25, 2026. With the ETF, a meaningful portion of ZEC is now in a regulated vehicle. Zcash’s core development has moved from a structure where a non-profit public-good mandate governed, to one where VC return expectations govern, which is a shift that introduces classification risks that the earlier structure avoided. ZEC operates in a regulatory gap that the ETF’s launch assumes will hold (The ETF’s operational machinery only works if it’s treated as a commodity), but the VC-funded protocol maintenance entity removes the nonprofit public-good mandate that previously served as a built-in defense against claims that ZEC should be regulated as a security.
The Howey Test states securities will have all of these criteria, as currently applied to digital assets: Investment of money, In a common enterprise, With a reasonable expectation of profits, Derived primarily from the efforts of others (and not the investor’s own efforts). It is the classic test for whether an asset is a security. If ZEC’s value depends primarily on the ongoing development and security work of a for-profit entity whose own investors expect financial returns from ZEC’s appreciation, that structure maps onto ‘investment in a common enterprise with profits derived from the efforts of others.’
The ETF’s regulatory status would likely have gained durability from the CLARITY Act, but the bill is now not going to pass in 2026.
Coinbase has direct exposure to ZEC’s classification. a16z is exposed overall to the regulatory framework: the commodity-vs-security taxonomy that governs their entire crypto portfolio.
The ZODL investment is a relatively small check for these entities to nudge an important variable in any future classification challenge. It could be an important secondary alignment: by backing the protocol developer, they ensure the protocol continues to look like a decentralized network (commodity) rather than a centralized product (security). This protects the ETF, exchange listings, and the broader classification framework some of the investors’ portfolios depend on.◊
Even if a challenge is unlikely to trigger a securities reclassification, this may change the risk profile for anyone relying on long-term protocol stability.
Related to regulation, the newly renamed US-targetted lobbying organization (Pretty Good Policy for Zcash aka PGPZ) whose chairman is Paul Brigner (@paulbrigner) is also ZODL’s Chief Policy Officer, and a ZCG board member. ZODL investor a16z’s Head of Regulatory and former US Department of Justice Digital Currency Counsel, and US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) Michele Korver sits on the board. I feel all these relationship dynamics are notable.
PGPZ is essentially a ZODL mouthpiece, directly descended from PGP* for Crypto, which was launched in 2022 by ECC, now ZODL. See some of my comments about this stuff here and here. Their $750,000 inaugural grant was passed unanimously by the once independent ZCG after being open for only 12 days, without any public facing discussion of their evaluation, though it was stated Paul recused himself.
How much ZEC do funders and funder-aligned interests hold? This is of course an impossible question to answer given the private nature of Zcash. The two we know of for sure are the cypherpunk corporation and Coinbase. As of May 2026, cypherpunk held a total of 314,185.7 ZEC (approaching 2% of the ZEC ever projected to be created.) Along with the approximately 445k ZEC managed by Coinbase for the ETF and taking into account the amount funded to ZODL, it might be very roughly estimated that the ZODL investors jointly hold about 10% or 11% of current and future ZEC tokens.
In conclusion, “seed funding” implies an equity round. The ZODL funding event was not that. The press release names investors in ZODL but does not disclose that they are major ZEC holders. That was a material omission. The event may have been an ecosystem subsidy, or one prong of a sophisticated capture, structured through a development company, or even a regulatory strategy.
Broadly speaking, there may be a conflict of interest, as ZODL now has a financial incentive to make decisions that benefit its investors’ ZEC holdings - now becoming very valuable - rather than purely the protocol’s long-term health.
Certainly, the price appreciation of ZEC has already enriched multiple powerful forces, plausibly to a magnitude of billions of dollars, engaging in authoritarian goals through governmental and financial means.
*SL is a Swiss non-profit, funded by donations. I previously highlighted the Winklevoss and Vitalik donations. Vitalik himself wrote about the danger of coin capture (in this tweet, and this one, while posting about the CROPS initiative for the Ethereum Foundation).
Beyond these, I did find a reference to funding from The Anoma Foundation “and anonymous donors”, in a mid-2024 blog post from @zooko. They are associated with the Namada blockchain, and had an original seed round with participation from Coinbase Ventures, who also backed ZODL. Anoma was seeking $1B valuation in 2024. Heliax is the associated software development firm. They were working to produce airdrop tooling for a Namada air drop (to ZEC addesses). The last post was from over a year ago, ending with suggesting a “public bounty for whoever finishes a qualifying implementation first.”
†For a perspective, in an interview @joshs said they spoke at an event hosted by Balaji Srinivasan (@balajis ), himself a ZODL investor:
“…Balaji [talks to me] afterwards and he’s like… Zcash is one of the most important projects in the world… Like, are you well-funded enough to get to the level of growth that we need to get to in order to make this dent in the universe? …no, we’re not. He said, all right, let’s fix it. So that’s when we started working on fixing it and started this kind of process of talking to third-party investors. And I was quite frankly surprised. I think many have been kind of realizing with AI, with the things that are going on with Bitcoin, we have this kind of existential threat as it relates to cryptocurrency, how important privacy was as a thesis to these major investors.”
The event seems to have been in early October 2025.
**Near Intents appears in the ECC Q2 2025 roadmap (alongside Maya DEX), where they were called DEXes, with features rolling out in beginning in August 2025. On this topic, after looking into it, I previously asked some questions about NEAR and KYC/AML in February 2026, while I was still actively developing around Zcash. These questions were never addressed by NEAR representatives, though they did say NEAR
enabled hundreds of millions of dollars to flow seamlessly into Zcash
which landed seven heart emojis, including from ZODL CEO @joshs and Shielded Labs Founder @aquietinvestor. On a related note, recently, a user has had an issue where NEAR apparently froze a transaction and has held their sizable balance for almost two months, currently without resolution. It appears now NEAR is not really a DEX. Because of the adoption and timing of this development priority, as well as the presence of this project in one of ZODL’s investor’s portfolios (a16z) I feel this angle might have significant importance to understanding the ECC exit.
***ZODL has protocol engineers, and develops free software. A flagship wallet adding fees could be quickly forked into a wallet that removed the fees - though the NEAR integration may turn out to be relevant to this idea.
§ I did find one well-done but unattributed article articulating this idea.
There is also a potentially supporting quote from Josh’s interview:
“…they had an allocation that they want to invest towards Zcash in the Zcash ecosystem. They were taking 75 to 90% of that, and they were buying or had planned to buy or will buy ZEC. And then the remainder 10 to 25 percent they funded they funded ZODL because they believe that there’s a symbiotic relationship between ZODL and and zcash…”
††Coinbase serves as custodian for the Grayscale Zcash ETF (ZCSH), holding ~444,600 ZEC as of September 4, 2026, representing more than 2% of the ZEC ever projected to be created. This may serve to support a just launched a ZEC-backed token on their ETH Layer 2 Base chain.
ⱽSuch a background might be behind the AGPL-3.0-only licensing of ZODL software:
zodl-android-wallet-sdk updated August 24 2026 - and instantiated Aug 7 2026 in the slipstream sync engine.
" you may use, study, modify, and redistribute ZODL Slipstream, but if you incorporate it into an application, the complete source of that application must be made available under the AGPL to its users, including users who interact with it over a network. If those terms don’t fit your project, commercial licenses are available…"
Emphasis theirs. That is, If you don’t want to open-source your entire app, you can buy a license from ZODL. The forked software Zapp recently had to re-license its entire app to AGPL-3.0-only because it statically links a library, as explained in their README.
This setup could create some revenue for ZODL, without centralizing control: a setup for desirable regulatory classification.
◊The original, November 2025 Grayscale S-3 SEC filing describes ZEC as having “features associated with several types of assets, most notably commodities and currencies,” and also lists a risk factor: “a determination that ZEC is a ‘security’ may adversely affect the value of ZEC and result in potentially extraordinary, nonrecurring expenses to, or termination of, the Trust.” Subsequent filings have conceded the undetermined status and have restricted some ‘back of house’ mechanisms (in-kind redemptions).
But I’ll be publishing soon enough.