It’s been a while since we discussed governance and the future of the development fund. With NU6 just over a week away, we’re entering a one-year funding cycle that allocates 8% to ZCG, while 12% is set aside in a lockbox for future distribution.
All potential NU7 ZIPs have been submitted, and so any new ZIPs specifying how funds are disbursed from the lockbox could only potentially be part of NU8 — even if we reach consensus on distribution before NU7 activation. We typically need at least three months between network upgrades. Since there is a long lead time between specifying the changes that go into an upgrade, and when it activates, work on consecutive upgrades needs to be “pipelined”. Based on the current timeline, if NU7 activates in August 2025 the distribution mechanism could be in place as part of NU8 by November — but only if concrete proposals are available within the next three months.
Zcash governance has evolved from ECC-driven with community input, to a combination of ECC and ZF ZCAP, and more recently, to a broader, informal social consensus among diverse stakeholders. Here are the two proposals I’m aware of for our next steps:
The Zbloc – Governance decisions, including funding, would be made by votes among various stakeholders and coin holders.
Bicameral System – A dual-chamber system inspired by Optimism governance, with decision-making split between stakeholders and coin holders.
I hope we can discuss preferences in this thread as we work toward social consensus on the next steps. I also welcome AMAs, X spaces, and other ways to engage in dialogue about the pros and cons of each option. If you have a position on these or other ideas and are interested in live discussions, please let me know.
I plan to start surveying the ECC Caucus as early as January. If you’re not a member but wish to join, please reach out to @peacemonger.
Thank you for all your support, Zeeps. It’s been an incredible year, and I look forward to working together as we chart a course toward more decentralized governance and a vibrant ecosystem.
“Some of the challenges with pure coin-holder voting include significant risks of plutocracy and capture. A shift to a pure coin-weighted decision making introduces a great deal of risk to the project.”
But, where are the profitable Zcash businesses? A huge problem here is that it is too hard to name even three Zcash success stories.
Today there is little incentive for Zcash contributors to build profitable businesses. We need to rally around starting businesses that accept Zcash, and being their loyal customers.
Guaranteed funding from block rewards breaks the typical fundraising incentives, especially for a nonprofit. Entities need to be “hungry” to be productive, innovating to survive. They need to show their progress or potentially fail to fundraise further.
There’s not yet a sense of hunger around here.
The Linux Foundation, Bitcoin Foundation, and Monero’s CCS are great examples of voluntary fundraising that we should experiment with. No profitable businesses using your technology? No funding.
Requiring that all grants include a public donation Zcash address (with view key) would allow us to collect metrics on the community’s ability to self-fund, and to plot a path towards consensual funding: phasing out the developer block reward.
Let’s build profitable businesses and become known for our consensual generosity.
The objective of seeding the ecosystem with development resources has been captured by a small selected group. The inability to idenifity even a enterprise leader or small group of enterprise ready entities who have received funding directly or from the dev fund is a guide to a structural design flaw.
Design limitations:
The limited expectations for quantifiable metrics to measure success for grantees or direct recipients.
The limited number of individuals in guiding the distribution of resources has narrowed the scope for diversifying ideas an enterprising entities.
The caption of resources by a select group of entities who have believed the zcash development resources are a continuous budget and which have produced below market metrics on any measurement.
Limited feed back loop for some form of participation, in receiving development resources and content or user generation has been low.
Suggested Solutions:
All entities receiving funds directly must submit to financial transparency reporting.
All entities receiving funds directly must have term limits for board & executive positions.
Limit all future grants to 100 000 usd. Renewable to a maximum of four times.
All Zcash Community Grant members have term limits.
All Zcash Community Grant members conduct all future grant communications in a full transparent forum, (no backdoor deals).
All grantees provide more refined quantifiable metrics for development funds.
All grantees provide a minimal level of quantifiable community development work.
Shift the zcash community ecosystem funds and culture towards:
Directing development resources focused on small and medium size for profit enterprises using the Zcash Protocol an its attributes to solve real world challenges and creating jobs.
Let’s build profitable zec business with small grants to many small and medium businesses.
@decentralistdan and I are hosting a Twitter Spaces event to discuss the Zcash governance and funding proposals that have been put forth. The event is tentatively scheduled for Wednesday, December 4 at 12:00pm PST / 3:00pm EST / 8:00pm UTC. Other participants will include @joshs, @Dodger, and @squirrel from ZecHub. We also plan to invite a representative from a community developer group like QEDIT.
We will record the event for those who are unable to attend live. Community members are welcome to join to listen in, ask questions, and contribute thoughts and ideas. We’ll provide updated information and a link to the event next week.
Update: To ensure the upcoming community call is productive, @decentralistdan and I have decided to postpone it by one week to refine the agenda and scope of the discussion. The primary focus of this call will be the future of the Dev Fund and the development of new governance processes for allocating funding. Earlier this year, community discussions and polls resulted in ZIP 1015, which allocates 12% of funding to a protocol lockbox and 8% to ZCG for one year while the community develops a new non-direct funding model (NDFM).
The key takeaways from those polls and discussions were:
The community does not want specific organizations to be direct recipients of the Dev Fund.
Direct funding to organizations creates misaligned incentives and makes it difficult to hold entities accountable.
The community wants to transition to a grants-based, non-direct funding model (NDFM).
Any NDFM should require funding recipients to submit concrete proposals, compete for funding, provide transparent progress updates, and deliver on their promises in order to continue receiving funding.
The community wants to further decentralize governance.
Panels like ZCAP, ZAC, and others can help inform organizations about community sentiment, but they are not forms of governance themselves.
Polls indicate strong consensus against the Zcash Foundation unilaterally controlling governance and the network upgrade process through the trademark agreement.
The community must decide on and develop a disbursement mechanism and governance process for allocating funds.
These principles will guide our discussions on future governance models and are not up for debate or rehashing during the call.
Currently, two proposals have been introduced for consideration:
The Zcash Funding Bloc: Governance decisions, including funding allocations, would be determined by votes among ecosystem contributors, coinholders, and other stakeholders.
The Bicameral System: A dual-chamber governance model inspired by Optimism, splitting decision-making between coinholders and other stakeholders.
Since there has been limited discussion about these proposals so far, the first community call will focus on the benefits and drawbacks of the Zcash Funding Bloc. The call will be strictly moderated with a clear agenda (shared with participants in advance) outlining specific topics and questions to keep the discussion focused and productive.
Please let me know if you have any feedback on the above. Otherwise, I will provide the updated date and time of the call next week.
Futarchy is a very intriguing concept for sure. But at first glance I agree with the 2 main criticisms outlined:
It seems very vulnerable to rigging by deep pockets and it assumes that “the market is always right” which is highly debatable in itself (if the market was always right ZEC wouldn’t be trading at 50 bucks and BTC close to 100k and nobody would be piling onto Nvidia stock wich appears to have so much more downside risks than upside left). But it would be interesting to follow to see how it turns out in real conditions.
Of all the governance systems proposed here, the Zbloc seems to be the more rational, but how it would perform under strong adversarial conditions remains to be seen.
Good catch. I originally took that description from the OP, but you’re right, coinholders are obviously stakeholders. I’ve updated the above to say “…between coinholders and other stakeholders.”
For background, Optimism has two governing bodies: the Token House and the Citizen’s House. The Token House is made up of coinholders. It receives its own funding allocation and is responsible for decisions such as network upgrades, development initiatives, and the allocation of its funding pool. The Citizen’s House is somewhat similar to the existing ZCAP model and is composed of selected individuals and community members. It receives a separate allocation of funds specifically for retroactive grants and has veto power over protocol changes and network upgrades.
The objective of this structure is to create a balance of influence between coinholders and broader community representation.
The first “Zcash: The Future of Funding & Governance” Twitter spaces event has been scheduled for Wednesday, December 11 at 12:00pm PST / 3:00pm EST / 8:00pm UTC. Participants will include @Dodger, @joshs, @squirrel, @decentralistdan, and me. We will be discussing the benefits and drawbacks of the Zcash Funding Bloc. The event will be recorded for those unable to attend. Hope to see you there!
Interesting X space. Everybody made good points so it’s not easy to form a definitive judgement but my key takeway would be that the Zbloc, not being perfect in any way, is still much better than the actual governance system.
Looking forward to hear more about the Bicameral system later on.
