Why I Believe Zodlers Pay For Development

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 Zodlers-Pay Model

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).

Flaws with this Model

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.

Why I Believe Issuance Schedule, Supply Cap, and Valuations are Red Herrings

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.)

Alternative Beliefs/Models

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?

Moral Implications

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.

Giving Zodlers Voice

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.

Wrapping Up

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?



Here’s an alternative model:

Wealth is being created by ECC, ZF, ZCG, and other unpaid Zcash community members, in the form of new technology, products, and services. The ZEC that I’m zodling represents a share of the wealth that has been created so far. The wealth in 1 ZEC is represented by “what can I buy with 1 ZEC?”

By zodling, I’m taking on risk and expecting to be paid by the community members and organizations contributing to Zcash, through their wealth-creation efforts, which increases the value of my share.

Suppose my investment time horizon is longer than the entire issuance schedule. Then I’m not really paying Dev Fund recipients or miners, because shorter-term drops in price due to miners and DevFundees liquidating their ZEC don’t affect the ultimate outcome of my investment: what I can buy with 1 ZEC at the end of my horizon.

What I am doing is assessing the wealth-creation performance of the entire community (not just Dev Fund recipients), which gives me a probability distribution over the ZEC price 50 years from now. If I’m acting in a wealth-maximizing way, I’ll buy when my expected return is positive and sell when my expected return is negative. The risk that I’m taking on by zodling comes from (a) the lower-end of that probability distribution and (b) the chance that I’m wrong about my probability distribution.

For shorter time horizons, the model is mostly the same, but it’s more complicated because I need to add in another probability distribution that describes everyone’s (not just issuance recipients) selling-vs-buying-vs-zodling behavior and how that affects the price at the end of my horizon. Still, I end up with a probability distribution over coin prices at the end of my horizon, and that drives my buying and selling behavior.

A belief that issuance recipients will liquidate their ZEC lowers the average of my probability distribution, which, if everyone acts in this wealth-maximizing way, lowers the coin price, which can equivalently be seen as zodlers paying the issuance recipients. (And on a micro scale, USD Dev Fund salaries are literally paid by the person on the other side of the trade who now owns ZEC.)

This model has a lot of the same moral implications as the Zodlers-Pay model, and it also includes future zodlers. A future zodler is either someone who doesn’t yet know about Zcash, or someone who knows about Zcash yet has decided not to buy because their future-coin-price probability distribution is expecting negative returns against the current price. It also includes “mixed-zodlers”: people who zodl but only with a tiny % of their own total wealth.

In this model, zodlers are an important source of information: current-zodlers should be good at telling you what they think you’re doing right, because they believe wealth is being created and the price will rise, and future-zodlers should be good at telling you what they think you could be doing better, because they believe not enough wealth is being created and the price will fall. And the shifts in both types of zodlers’ probability distributions can give information in both directions, too. Those shifts are reflected in the current coin price behind a lot of random noise.

A weakness of this model is that it assumes zodlers are wealth-maximizing and not, e.g. holding ZEC just to contribute to a social good or to keep a balance for actual payments use. It also assumes that the coin price is correlated with wealth, which makes sense if we define “wealth” in this context to mean “what can I buy with 1 ZEC?”

(Of course nobody except traders with too much time on their hands are actually calculating probability distributions, most zodlers’ “probability distributions” are just an intuitive sense of the project’s prospects.)

tl;dr: If Zcash fails spectacularly and the ZEC price drops to $0, zodlers have paid the dev fund recipients. If Zcash moons and ZEC is worth $1,000,000, the Zcash developers have paid the zodlers. What will actually happen could be anywhere between these two extremes, and on short time horizons “who is paying who” is not well-defined, except in that zodlers are exposing themselves to risk. Actual gains or losses experienced by zodlers are determined by a very complicated market system, major factors in which are the Zcash community’s ability to create new wealth and the prices at which issuance recipients are willing to sell ZEC.

edit: okay I’m done making edits to this comment lol


Some similarities between the two models are:

  1. Zodlers are an important source of information.
  2. We bare some kind of moral duty towards zodlers: in the Zodlers-Pay model it’s because they are paying us, and in the Zodlers-Invest model it’s because they are taking on risk. Those duties include (a) ensuring zodlers are as-informed-as-possible about risk and projected wealth creation and (b) working to maximize the wealth created and transferred to zodlers and minimize the wealth destroyed or transferred away from zodlers.
  3. Zodlers have power. In Zodlers-Pay, they could exit and “stop paying us.” In Zodlers-Invest, they can lose confidence, which lowers their price targets, which slashes our budgets.

Some differences are:

  1. In the Zodlers-Pay model, stakeholders are current and future ZEC holders. In the Zodlers-Invest model, the scope of stakeholders is broadened to everyone, including people who will never buy ZEC. Those are “future-zodlers” whose expected returns never go positive. They are an important source of information too, particularly about what we could be doing better. They too have power, through their continued decision to not buy ZEC.
  2. In Zodlers-Pay, wealth comes from zodlers. In Zodlers-Invest, wealth comes from zodlers and is created by the Zcash community.

The primary stakeholders are ZEC holders. That seems indisputable. If ZEC goes to 0 it’s game over. Where does funding come from if ZEC is 0? Everyone should be focused on this working for ZEC based private money. ZEC employees, miners, and developers are also stakeholders as well as the outside communities. If there is a conflict between personal and the mission, the mission should win.

The mission first and foremost should be to increase the value of ZEC. Everything else is secondary in my view. If the mission is not to increase the value of ZEC, then it should be made clear to people. There are three primary ways to destroy the value of ZEC:

  1. increase supply without offsetting economic value. since ZEC has fixed supply. This is kinda solved (see 2 below).

  2. give away technology for free. Effectively this could enable more supply because competing coins can offer the same benefits as ZEC which means more supply of coins. Giving away core
    technology effectively cancels out the benefits of 21m coins and worse for ZEC holders.

  3. failing to create the technology needed for digitize money to be useful. a) secure b) reliable/trustworthy c) speed of transactions d) useable and accepted e) fund projects that don’t deliver value. Ultimately over time, this could lead to running out of money.

  4. I see it as a fiduciary duty more than a moral duty. ZEC is money. it’s not penicillin. Doing things to benefit society is a great goal. But if we as ZEC holders are at risk of losing our hard earned savings by funding anyone’s personal agenda that diverges or hurts ZEC value, there is an inherent conflict. Choose to increase ZEC value and live to fight another day to further your agenda. And if ZEC increases in value, people who risk their money on ZEC can fund agendas with their money.

  5. The duty is to maximize the value of ZEC first and foremost. Anyone buying ZEC is buying into the privacy thesis. The issue seems no consensus on what will enhance the value of ZEC outside of privacy. And then how do we decide as a group. One way is to develop a voting mechanism. a) small issues just get decided without a vote b) minor/major could be based on coin ownership 50% plus needed for minor and 2/3rds for major or something like this. only people who vote get counted. Maybe something like 10,000, 20,000, 50,000 coins needed to get a development project on the table for a vote.

  6. I agree anyone buying or holding ZEC is funding development given that is how the money is ultimately converted into salaries paying people for development.


Well said, @Jgx7.

Didn’t @valkenburgh publicly say this on stage? Too many professors treating this project as their pay-pig for funding and research so they can be a big time academic scholar.

This coin needs less theory, more practicality.


I might be missing your angle, but I agree payment is maybe the wrong word. At the end of the day, folks need to survive by spending /ZEC/BTC/ETH/ATOM / AVAX /,... etc..., in some fashion. A question I ask myself is how much, insert some wealth metric here, does it take to insure privacy ( aka freedom )? The funny thing is, the answer to this is deeply personal and potentially unique to individuals around the world. Perhaps, and its simply a guess, ZEC’s poor performance is a both a reflection on who holds the majority of the supply ( US / UK )($) , AND the amount of freedom in these places being relatively good as to not cause more folks to ask more questions / focus on how they could obtain more freedom. Places who actually need freedom tools probably have a much, much, harder time obtaining ZEC, and yet those folks would be most likely be die hard zolders.

I have more thoughts but this one popped up and I wrote it down. Great post!


Ooh, great point.

The zodlers-pay model said nothing about wealth creation! (Or destruction.) It’s only about transfers due to issuance.

IMO, wealth creation/destruction is orthogonal, but obviously hugely important, and defines important stakeholders.

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I just want to clarify I never intended to claim zodlers are the only stakeholders! This is why I tried to point out people who need something Zcash can provide, and people who contribute many different things are all stakeholders in the intro:

But now that I’ve read your model, I agree my very next statement is too strong:

Now I think it’s more like “zodlers are the moment to moment source of funding for network operation and development, but anyone who contributes in any way to make Zcash better is the source of wealth creation over time.”

(Tangent: “contributing” can mean all the active community building and tech dev, but can also, simply mean “using Zcash”, because the more Zcashers one can interact with, the more valuable Zcash is.)

There’s one other concern I have about my post: I think a lot of people might assume “zodlers” are only people who sit on ZEC without transacting, “diamond hands” or whatnot, but I mean a much broader category that would include someone who is just occasionally transacting. I basically mean “people holding or transacting directly or indirectly in ZEC.” In fact, maybe the term zodler is just wrong here, but I like having some word for an identity because “user” or “consumer” sounds bland and depersonalizing.


Indeed, it’s a good idea to emphasize this point. From my perspective, “Zodlers” encompass not only the existing investors but also new investors who are convinced of the network’s direction, newly awarded grants, and upcoming developments before opening long-term positions on ZEC.

In one way, new investors directly acquire hedged coins following the approval of a grant.


Trying to come up with a pithy phrase that avoids the confusion of zodlers paying, I’d expect everyone to at least agree that “Zodlers are loaning their wealth to the development efforts” or “Zodlers are betting their wealth on the development efforts.”

(I’d be interested to hear any arguments that even these statements aren’t true!)

  • Where does the value of the DF come from?
  • What moral obligations stem from this source of value?

The market makers (exchanges) are discovering price. The overwhelming number of exchanges force users to transfer Zec into an exchange controlled address in order to discover price. These exchanges become huge Zec holders, the exchange is not leasing wealth or value and have little moral obligations which is derived from a technical risk management strategy, should not gain disproportionate influence.
The value creation to sustain the DF comes from building confidence that the zcash network is available. Maintenance and survival of the network will allow connectivity, economic activity and DF funding.