Hi Zeeps,
I have received questions about the dev fund decision process and my grant-based idea.
1. Dev Fund: July Decision for November Activation
Why do we need to decide by the end of July?
If a new development fund is to be activated in November, it must be decided this summer. This will allow enough time for engineering and audits, migration to testnet with an activation height set, and then adoption by exchanges and miners well ahead of a November activation.
How will the community decide?
There must be clear social consensus across the community. To achieve this, the ZF, ECC, and others may run polls or surveys in different forms (ZCAP or ZAC polling, forum polling, etc.). Ultimate consensus occurs by what software the majority of nodes choose to run.
What happens without clear social consensus for a new dev fund or the structure of a new dev fund?
The current development fund expires in November as planned.
If no dev fund exists, what will happen to ECC, ZF, and ZCG (and the downstream grant recipients)?
They must raise money through outside sources or ramp down over time.
2. Grant-based: 2025 and forward
What is your proposal for this year?
The summary is here. I recommend extending the current development allocation for one year with a mandate that the community move to a decentralized grants-based model no later than November 2025.
Why a grants-based model over the status quo or something similar?
The current model is brittle, too centralized, and not sufficiently decentralized. Here’s a summary of today’s model with a better future for Zcash.
| Extending Today’s Model | Grants-based Model |
|---|---|
| Apathy where the community doesn’t push for better outcomes because they don’t feel empowered | Engagement where the community has more voice and more opportunity. |
| Ineffectiveness where organizations aren’t pressured to deliver | Achievement where organizations must deliver tangible outcomes |
| Misallocation where organizations only deliver what they want | Alignment where the community’s voice is continually reflected based on where they allocate funds |
| Centralization and Fragility where a few funded organizations control direction and can be captured or shut down | Decentralization and Agility where funding is based on more voices and can be adapted as more voices enter or leave the ecosystem |
| Easy Regulatory Targeting: today ECC and ZF are both under SEC subpoena, opening the community to a myriad of risks | Resilience: a legion of participants around the world who are driving Zcash forward |
| Deviancy where the goodness and health of specific organizations can change or erode over time | Accountability where the community can easily change course based on who is delivering and how |
I posted a more complete rationale on our blog.
What does a grants-based model look like?
A possible model is posted here, at the top of this thread. The remaining FAQ is based on this model. In summary, the dev fund is placed in a multi-sig wallet. Keys are distributed to various independent community participants. A majority of key holders (k/n) must sign a transaction to signal affirmation for any decision. Decisions include support for a grant, adding or removing key holders, and disbursements. It might also include protocol changes. It might look something like what is shown in the following diagram. This is just an example of potential participating decision bodies.
How does a grant get approved?
A grant request is posted to a central location, like the forum. Each member of the Zcash Funding Bloc independently determines whether a grant should be approved. Once a member approves a grant, they sign their key. A grant is not approved until a majority has signed. Funds are not dispersed at this time.
How are funds dispersed?
A grant will likely include milestones and accountability requirements. Once those are proven, members are asked to sign their key to release funding. The funds will not be dispersed until a majority has signed.
Are there different types of grants?
Yes. A grant might fund an entire organization’s operating expenses for a year or a specific project. It could be anything, really. It’s up to all the members to decide whether the grant best supports the best interests of Zcash.
For small grants, say less than $100k, a small grants body (such as ZCG) could unilaterally decide to fund the grant up to a cap. Someone might even apply for a grant to create their own grant pool!
Who decides who gets a key to participate in decision-making?
Anyone can ask to become a member. The majority of existing members must approve new membership by signing their key.
Do coin holders get a say?
Coin-holders are envisioned as having the means to vote on their coins, which would, in turn, sign their key.
Could some members have more than one key?
It’s possible, but we want to avoid a concentration of power.
What happens if a key holder misbehaves or ceases to exist?
The other members could vote to remove their key.
Can signers delegate responsibilities?
Members may choose their own method of making a decision. For example, in a DAO, voting members may make a decision.
Can this also be used for protocol governance?
Yes.
Are there any legal issues with this type of structure?
There may be issues with providing grants to certain parties or limiting decision-making power to too few parties. Further research is needed.
Does this help with current regulatory issues?
It removes centralization and jurisdictional risks, including risks where organizations need to cease operations. It also distributes power, which would be of benefit. Further research should be conducted.
What steps will ECC take next?
We will write ZIPs for community consideration, conduct research on legal and regulatory risks, and continue gathering community feedback.