Discussions are ramping up about whether or not Zcash should institute a successor to the Dev Fund and if so what it should look like.
One of the central themes I’ve seen the Zcash community grappling with is: who are the stakeholders in Zcash, what do they contribute, and how can we identify and work to meet their needs?
I believe it’s important to pay attention to both the “what do people contribute” as well as “what do people need”. People can contribute expertise, effort, social connectedness, and many other valuable qualities, but a very fundamental thing some people can contribute is economic wealth.
I want to describe why I believe zodlers (ZEC holders) are the primary source of economic wealth for Zcash’s network infrastructure and development, and to see if other views come out of this discussion. IMO, this is an important “principles discussion”, because it influences how different people approach governance questions more broadly. Sometimes I think it can really help a conversation to know if people are coming from different beliefs or share similar beliefs.
The way I understand the current Dev Fund is that zodlers provide development funding so long as they hold ZEC. (They are also the source of value for the consensus security provided by miners.)
This belief is definitely not universal, for example @dodger made an explicit argument against this at the Zcon3 Town Hall, which is why I felt it was important to share with the community.
As new ZEC is issued via consensus, it’s distributed to certain parties. In Zcash with the current Dev Fund that includes 80% to miners and 20% to Dev Fund recipient organizations. So those recipients now control a larger proportion of the supply than they did a moment ago. Likewise, everyone else who is holding ZEC now controls a smaller proportion of the available supply. When there is demand for ZEC, whoever holds unlocked liquid supply has the benefit of holding that ZEC and they can choose what to do with it (save it, spend it on goods or services, sell it for ETH, etc…).
My favorite definition of wealth is “having feasible/practical options”. When someone controls more of the supply of anything in constant demand, they have more options because of that, and more wealth. Likewise, when they give up some of that control of the supply (either directly through trade or indirectly through new supply issuance) they are diminishing their wealth (again for constant demand).
This model leads me to believe that it is only through the choice of everyone who acquires and holds ZEC that the Dev Fund has value, and so I consider those people to be funding the DF (and thus my current salary).
Ok, so that’s my model, what are some flaws in it? There are several:
The most important one, I think, is that this is not a universal view or belief. Some people explicitly disagree with it, and some people are just confused by it so they don’t know if they can/should believe it. That’s the biggest problem. If it made instant “common sense” to everyone, then it would remove one source of misunderstanding in Zcash governance. In fact, I often use the short hand “zodlers pay for development and mining”, but I don’t think “payment” is the appropriate word here, because the kind of wealth transfer I’m trying to elucidate in this post is very different from explicit payments and using that word just confuses people.
The second most important one, is “ok, so what do we do with that?” For one thing, any zodler can sell their ZEC at a moment’s notice, and likewise any newcomer can suddenly become a zodler. So this isn’t a stable constituency. It’s also an unknown group and likely to always be an unknown group due to prioritizing privacy. The main thing I believe I “should” do because of my zodlers-pay belief. I talk more about this in a section below because it’s a big topic.
Another flaw with this model is it’s all about “proportion of the active supply”, but says nothing about demand or the price, and in reality the price is what matters for paying bills. I don’t see this flaw as fatal, though, because for me the “moral implication” that my current salary comes from zodlers is true regardless of price fluctuations, and I still feel beholden to zodlers.
Another challenge comes from @dodger’s points in the video that the supply schedule is known so the price should be known, and therefore as new coins are issued, the value of current holders should not go down purely due to new coins.
I don’t see this criticism as compromising this model though, as I describe next.
Even though the issuance schedule and supply cap are known, what matters in this model is who has the control over the current supply and what they choose to do with it.
To emphasize this, we can ask: “where does the wealth come from that funds Ethereum stakers”?
Ethereum has an issuance schedule that is dynamic. It’s very likely to fit into some band, but as we predict into the future, we cannot know exactly where it will end up within this band. Also, there is no supply cap. IMO, the same model applies: ETH holders opt in to a system where they agree to relinquish some of their wealth with each block and stakers receive that value in return for their services. All of the participants control either a larger or smaller proportion of the supply, so they have correspondingly more/less wealth because they have corresponding greater/fewer options. So the fact that the issuance schedule or supply cap are known or unknown does not affect this model, as far as I can tell.
(Fun Extra Credit: now do the same exercise with USD.)
I’m really interested in finding alternatives to this model because it directly informs how I make my current choices (due to my DF-based salary) and it also seems fundamental to discussions about what Zcash should do when the current DF expires.
In particular I’m interested in two key questions:
- Where does the value of the DF come from?
- What moral obligations stem from this source of value?
Ok, given that I hold this belief, here’s how it informs my decision making:
It basically boils down to that I feel beholden to try to understand what current & potential future zodlers want / need and to prioritize that fairly high among other stakeholders when deciding how to improve Zcash.
This isn’t at all easy. We don’t know who all the zodlers are. Even if we know who they are today it can easily change. What if malicious actors acquire ZEC to “impair the mission”? What if zodlers don’t want what I consider “the mission”? How should we prioritize this amorphous group’s needs vs other stakeholders? What if we overweight wealthy zodlers over less wealthy zodlers?
If we set aside the questions about knowing who this group is, the other questions all seem to me not at all unique to Zcash, and in fact they apply every time anyone pays anyone else:
If someone offers to pay me to do something against my principles, I can/should say no. What if someone offers to pay me something that’s not directly against my principles but also does not feel to me to be making the world a better place? I might do that if I need the income. But what I really want to do is find someone who wants to pay me to do something I believe makes the world better.
So far this is the key essence of Zcash, not any of the tech or blockchain hype: zodlers want to pay others to make the world better by making technology that empowers individuals to protect their own wealth and to safely transact with others in a consensual manner.
The moral implications are somewhat abstract. Are there more tangible things I believe we should be doing?
We should seek to give zodlers more voice. Here are a few challenges to think through:
- If we give voice to all zodlers, does this “double-represent” any zodlers who already have a voice via working as DF recipients, posting on forums, showing up to meetings? Is there a way we can counteract that and give voice to currently underrepresented zodlers?
- If we give voice to zodlers weighted by coins, one advantage is this is sybil resistant. But among several disadvantages, there’s a risk that the concentration of ZEC holding misses out on important network effects. As an example: what if it turns out that most current zodlers live in India, but 90% of ZEC is held by Americans? Can we deploy a variety of different mechanisms with different sybil resistant trade-offs to try to measure and compensate for these kinds of downsides?
- How can we give voice to future zodlers? Just as a brainstorm, miners and stakers are stakeholders who aim to receive future ZEC, so that might be the easiest category to get feedback from. Another category are those seeking to receive ZEC payments for goods or services. They are explicitly aiming to receive future ZEC. Are there other categories, products, or techniques we could use to discover people who are likely to hold ZEC in the future?
In my opinion, we should be making progress on these kinds of questions in a few ways:
- Build ZEC-weighted coin-based polling mechanisms. The main short term goal here, IMO, is to get feedback from users who we aren’t currently hearing from.
- Build zodler polling mechanisms that make other Sybil resistance trade-offs. We don’t need every mechanisms to be global and perfect, IMO, and can do lots of experiements. For example what about the intersection of “coin-weighted voting for everyone with a bluesky account” or “polling for everyone on Github who proves they hold at least 1 ZEC” or “polling for everyone who uses X wallet that proves they’ve held at least 0.25 ZEC for at least 6 months”, etc… I’m personally totally fine with KYC-happy experiments like “poll every Coinbase exchange user who is a US citizen who has bought or sold ZEC in the past year”. (Just so long as we’re not over-weighting any of these cases.)
- Do user research to learn about who zolders are (while also grappling with privacy and consensuality):
- What is the distribution of primary languages of zodlers (through some polling, surveys, or other research methods)?
- How often do zodlers transact? What is the distribution of “transaction frequency” among zodlers?
- What proportion of zodlers hold more than half of their ZEC in a shielded pool, etc…?
- Do user research about what zodlers want.
So, this got a lot longer than I expected. Please chime in!
Do you agree with the Zodlers-Pay model, or do you have a different alternative?
Do you have ideas for improving zodler voice?