Truly pseudonymous contributors & ZCG

As someone who was not able to run a sticker store of Zcash stickers while staying pseudonymous due to the many legal fences built around the protocol I am very keen to see where this conversation will go.

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I think we should stay open and flexible to all kinds of funding mechanics, but for now, I think we should explore whether there are projects to fund.

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Okay. So we need to advertise right? Asking the question to the largest audience possible. Twitter, forum, discord…

Next steps? Not an official statement but do we want to say something like the following and share it around?


Pseudonymous Grants

The current ZOMG grant process requires identity disclosure. We have been made aware that there may be some grant applicants not willing to disclose their identity. To provide avenues for people to receive small grants a group of Zcash user are working towards providing new avenues to receive grants. These will be funded by the Zcash community and voted on on by the its members.

If you have any grant proposals you would like funded please get in touch.

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In support of such efforts, I provide evidence that this has been an real issue all along:

I understand that legally constituted entities are subject to various rules. If I don’t get what I want here, I am not the type to be a jerk about it! Rather, I will politely disappear. Most likely, even as I continue quietly to use Zcash for my own privacy, I will drift away from the community towards places where I can do gainful work on cypherpunk terms.

How many others are likewise? How many potential contributions and contributors have the Zcash community lost this way?

I recognize that this is a difficult problem. I applaud efforts to solve it.

If I have any further opinions to offer on this subject, I will probably not offer them under this pseudonym—save for a note of practical importance: Discord is bad for free software projects, it is extremely hostile to Tor users, and it autobans anyone (with any IP address) who takes measures to prevent privacy-invasive fingerprinting (“telemetry”). I recommend that it be avoided for any discussions intended to attract strongly pseudonymous persons. I myself cannot engage in Discord discussions, since they instantly ban all of my accounts before I can even try to use them.

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Thanks for posting this.

I wish it were easier to work on Zcash and be paid while using a pseudonym.

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My experiences with gitcoin have been bewildering. Lots of blinking lights!!

I am excited about:

zingolabs has a page:

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Who runs free2z.cash? Is it @earthrise’s project?

Skyler (@skyl). Here’s the link to his grant proposal:

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Thank you @aquietinvestor

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I agree that gitcoin “tries to do too much”, HOWEVER:

I think we could take the idea of “bounties” from gitcoin. I know that there’s kind of a list of “wanted” projects for Zcash (or at least there used to be a page about it somewhere), but it’d be cool if you had on grants.zfnd.org crowdsourced ideas, and a “Claim Grant” or something that can be advertised on job boards to devs to attract more developer talent.

Also, the foundation or whoever (maybe the community grants team but they deserve more money if they implement this) should try to start capturing emails more like gitcoin is doing.

I’m down for DAOs, but in the meantime, why not something simpler:

Someone trusted in the community offer themselves as a ‘fiscal sponsor’ for pseudonymous grantees?

In ‘normal’ grants, far away from cypherpunk land, ‘fiscal sponsorship’ allows for - e.g. - non-501(c)(3) entities to apply for and receive grants from private foundation which require grantees to have 501(c)(3) status.

Explanation: Fiscal Sponsorship for Nonprofits | National Council of Nonprofits

Generally:

The fiscal sponsor is:

  • The one who receives the money - i.e. is the legal grant recipient
  • The one legally bound to any terms of agreement attached to receiving the funds, if set by grantor (ZOMG)
  • The one who legally signs any legal grant agreement with grantor (ZOMG) (and/or in writing declares themselves as the fiscal sponsor of the applicant)
  • Not necessarily the entity carrying out the grant’s proposed project activities

The fiscal sponsee is:

  • The grant applicant (whose activities are not directly subject to any legal agreement with ZOMG)
  • The one actually carrying out the project
  • The one who agrees, non-legally just in a handshake agreement with fiscal sponsor, to actually do the work of the project / expend / manage the budget of the project

(Having KYC does not magically eliminate all risk in grants. Grants are always a risky activity with no guarantee of money back if the grantee does no work and runs with the money. Suing a bad grant recipient to get ZOMG’s money back is time consuming, expensive, and maybe impractical for many reasons.)

Could this concept be brought to this situation?

Let’s say a kind member of our community decides to fiscally sponsor someone’s approved Zcash grant and give their KYC. All KYC/AML boxes have been ticked at ZOMG’s end. No (general) deception is occurring here, AFAIK. Legally, what then happens with the grant money is after the fact of ZOMG’s granting. (But in some crazy AML twist, do ZOMG grantees have to do KYC with entities THEY transact with when expending grant funds? I highly doubt it, that would seem crippling and not normal at all.)

The sponsor pays out the ZEC to the person who is to carry out the grant project (the pseudonymous applicant), after which the project can start. From an AML/KYC perspective, this transaction perhaps is no different than any other outgoing expense in the course of carrying out of the grant project (in terms of the ZOMG legal agreement), like paying for supplies or outsourcing work to achieve the project.

I have not read the relevant jurisdiction AML/KYC law, but perhaps ZOMG could be legally covered, due to what’s declared / agreed to by any fiscal sponsors acting as legal grant recipients. Perhaps only minor amendments / additions might be needed, if anything.

Can ZOMG bring this up at next meeting / check with lawyers if it can work?

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Thanks for your question. I have added it to the agenda for our next meeting, which is scheduled for Monday, July 25th.

One thing to note: KYC/AML is not about reducing or eliminating the types of risk you mention above. Financial institutions and other organizations are required to comply with KYC/AML laws because it is believed to reduce the risk of identify theft, money laundering, financial fraud, and the financing of criminal or terrorist organizations. For example, the OFAC sanctions list prohibits financial transactions with specific countries (e.g. Cuba, Iran, and North Korea), entities, and individuals. KYC helps the Zcash Foundation ensure it is complying with prevailing US laws and regulations.

I don’t think there’s anyway to get around it (other than a DAO or moving ZCG offshore). I’m speculating here, but even if there was a fiscal sponsor who served as an intermediary between the Foundation and the grant recipient as you propose above, that intermediary would still be subject to the same requirements. The burden would simply shift from the Foundation performing the KYC check to the intermediary performing it.

It’s a great question, and I’m glad you asked it. We don’t have an immediate answer for you, but will do some research and follow up with you at some point in the next week or two.

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I am deeply interested in this topic.

I miss no opportunity to remind the world that “Satoshi Nakamoto” was a pseudonymous developer—and Satoshi never did KYC. Satoshi expressed some interest in applying zero-knowledge proofs to Bitcoin. But Satoshi would be ineligible to receive a Zcash grant that requires KYC—by all available evidence, I reasonably presume that he would refuse to do KYC. Food for thought.

I myself have inquired about Zcash grants before. I was ineligible at the threshold, because there is only one way that I do “KYC”—no compromises! If there were some means for me even to reach discussing the merits of what I could do for a grant, then I would very much be interested.


Thanks for thinking about this. I have mused over similar ideas. It looked to me like a transparent strawman for money transmittal. Maybe I’m wrong—I hope so; but if so, I’d want to hear it not only from a lawyer, but from a lawyer who had experience handling those types of cases. For the protection of both the paying organization, and the clearly identifiable individual (or other organization?) serving as what you call a “fiscal sponsor”.

That is entirely inapplicable here. That is about satisfying the requirements of § 501(c)(3) of the U.S. Internal Revenue Code—not so-called “AML” stuff (and not acting as a money transmitter). It is only an arrangement for making donations tax-deductable. And it only contemplates clearly identifiable parties.


I have thought about this—in practical terms, because I would like to arrange funding for more pseudonymous Bitcoin Core developers. My conclusion is that it would need the philanthropic backing of a pseudonymous wealthy Bitcoiner. Those exist. So, do it with no legally constituted organizations involved—not even “offshore”, whatever that means.

The problem here is that ZEC seigniorage money flows into organizations subject to certain laws. And because of that, there is sharply reduced incentive for wealthy individuals to make munificent gifts. Why should they?

That is why I never discussed it here before. I thought of it. I have had counterpart discussions in Bitcoinland. It seemed like a non-starter here, although I’d be pleased to be wrong about that.


Question: What are the practical prospects for changing things so that at least some portion of ZEC seigniorage initially flows directly to something other than a U.S.-based organization? (The question of to what? is a separate issue, and a difficult one; I will not reach it now.)

Not to argue with you here—to the contrary, I appreciate your supportive attitude. I understand that a U.S.-based legally constituted organization is in a predicament here. That said, I do need to get up on my soapbox about an important point:

The usual list of evils allegedly prevented by “KYC/AML” is just as wrong as the usual arguments against uncompromised strong encryption: The Four Horsemen of the Cryptocalypse.

It is as wrong as the “if you have nothing to hide” argument about privacy.

It needs pushback, because KYC is an attack on the freedom for which Bitcoin was invented by a strongly pseudonymous developer: “Satoshi Nakamoto”.

I have never done anything wrong with my money. I refuse KYC on principle. So should everybody.

#endif /* SOAPBOX */
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But a fiscal sponsor might not themselves be legally required to perform a KYC like ZOMG is. If a fiscal sponsor were in an OFAC-allowed jurisdiction which had no AML/KYC laws (or even if they did have their own similar law), perhaps it could work, if a minor addition were made to the existing agreement.

If ZOMG added a well-worded, simple clause - a broad one (no need to actually mention ‘in the case of fiscal sponsorship’), covering all recipients - that in the use of grant funds, recipient agrees to themself comply with any relevant KYC/AML laws (and/or agrees to apply due diligence/duty of care, as defined in a certain compliant way), then perhaps it could technically fit the US-centric requirements. ZOMG has done its duty of care, in terms of the agreement. (A lawyer will also probably tell you to take other precautions to avoid liability, which you probably already do - if someone looks fishy, don’t fund it.)

And if you don’t already have such a catch-all term in the agreement, maybe you should, it’ll make AML/KYC compliance more robust in any case. :slight_smile:

(I did quick check and couldn’t find any ZOMG grant agreement template in public.)

Just to reiterate: in ‘normal’ grants, a ‘fiscal sponsor’ is in fact the grant recipient, not just an ‘intermediary’. It’s common for someone else to write and submit the application, and/or do the project’s work, and/or be (eventually) paid for it. All that matters is who legally signs the grant agreement, and what that agreement comprehensively needs to cover. Strangely I can’t easily find any material about ‘AML’ / ‘KYC’ in the context of ‘normal’ grants.

For sure, all needs to be checked with lawyers, and potentially in more than one area of law. Thanks very much for adding it to meeting. :slight_smile:

I appreciate it could take some money to consult lawyers (and effort for committee to study the concept of fiscal sponsorship and come to understand it and feel comfortable approving it - perhaps a lawyer familiar with US grants-related laws could help explain and advise), but IMO it’ll be worth this effort because clearly many useful projects are just waiting to happen once this hurdle is overcome. :slight_smile:

Cypherpunks aren’t necessarily tax evaders, we just like default privacy and anonymity, including from governments. We might pay our taxes, but would we divulge how we made our money to the government, unless we absolutely had to (e.g. if audited)? Preferably, not. :slight_smile:

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@aquietinvestor (ZCG) and I (ZF) worked together to research and respond to this question. An external subject matter expert was also consulted.

@Zchurn, we both appreciate your question (on behalf of our teams) and we’re always open to look at alternative ways of approaching common processes and challenges.

Fiscal sponsorship, as traditionally defined, is not applicable to ZCG’s funding process for multiple reasons, but we can use the concept of fiscal sponsorship to accomplish the same outcome.

Something akin to fiscal sponsorship has always been available to all grant requestors: as long as one person on a team (the “Fiduciary”) is willing to provide their personal information for KYC purposes then the rest of the team can remain anonymous. ZCG (and previously ZOMG) has funded several teams that have utilized this approach to ensure anonymity for all but one team member. Any additional KYC (or KYC-like) steps required by the Fiduciary’s jurisdiction are the responsibility of the Fiduciary. This approach allows ZF, on behalf of ZCG, to be in compliance with applicable laws while providing for some flexibility and anonymity on the grantee side.

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That’s great, thank you @aquietinvestor and @Alex_ZF!

This is doable, and a similar conception to fiscal sponsor, and the legal differences are clear. A fiduciary has to be seen as someone actually partly carrying out the project.

So: a fiduciary ‘angel’ - a ‘KYC angel’ - can simply consider themselves a ‘manager’ of the grant project (once approved). Minimal involvement in the role can be voluntary, since not much effort or time is required to fill out the paperwork and send a scanned ID etc. They would be motivated to donate that time to help make a worthwhile project happen.

(And, an anonymous grant applicant should accept the funds being initially paid into the project angel’s ZEC wallet, if need be. The worst that would happen is they don’t spend the time doing the core project work if they’re not paid upfront by their angel. Grants always have immediate work paid upfront.)

This quite swift response gives me confidence that Zcash’s flexibility and transparency of communications from governance makes it a healthy ecosystem for anyone in the world to contribute to. This is pragmatic, and it speaks volumes. Thank you. Cypherpunks, get your ideas ready!!

So:

Who wants to be our first KYC angel? Attach your legal name (privately) to a successful anonymous applicant?

To be safe, probably a fiduciary shouldn’t be somone on the board or in core legal administration of Zcash Foundation and related governance bodies, or anyone significantly legally related to them (e.g. spouse / relative etc.). Hopefully, the community is large enough that someone at arm’s length will step up and give this a try. Be a cypherpunk ally! :heart:

I myself have a really good idea for a small project that I would commit to if funded. If anyone wants to PM me we could start a private conversation including via PGP or on Signal etc.

Thanks again for opening up this pathway. There is so much good that can be contributed by anonymous people to the world, because I know that I am good. And I’m not the only one.

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So no one is willing to be a KYC angel? Sad.

The community is too small. 90% lurkers and 10% active rule… there is only a handful of active community members… less than 100 probably…

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But truly excellent teams in governance…it shows how much can happen with so few (and professional remuneration/attitude). I guess I’ll give up on contributing as a potential grant applicant but at least I helped show the way for others if they can manage to find a KYC angel.

If anyone wants to PM, I’m sure I’ll check back on forums at some point.

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I’ll be at Zcon3 and will see if any one has any ideas about this, or if I can find someone (or someone who knows someone) willing to step up and be a KYC angel.

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