Zcash Proof of Stake Megathread 🧵

First of all, I want to thank @nathan-at-least for openly and honestly publishing the full range of directions and questions. I have already expressed a number of my thoughts on Twitter. I admit that in some places I was off the scale, but I deleted everything superfluous and unconstructive. In the end, he himself asked me to speak on this article and I should have understood that all this was written for the purpose of open discussion. However, I have a false confidence that when ECC publishes material, this is already a solved issue. But this is not true, and we have witnessed an open discussion earlier in each of the cases. Moreover, we even saw a reasonable rejection of the concept of premature implementation of ZSA, due to potential threats to network security. Perhaps this is an incorrect distortion of my perception of people whom I consider my authorities.

So, in continuation of my thoughts on this article.

The article says that the target setting is that any non-zero balance (> $1) will receive a reward. I believe this poses a security risk to the current emissions model in which there is an emissions cap.
I will try to direct my thought. The advantages of this proposal are obvious to everyone: maximum decentralization, maximum equality between participants. Of course, this will clearly become a popular offer among community members. However, let’s think about why the Ethereum network chose 32 coins as a base for validators. Not at all because it created additional demand for ETH. Vitalik basically doesn’t care about the price of the coin - everyone could note that. The fact is that equidistant remuneration in some aspect is not a market competition for the right of a validator and can cause a long-term security threat. Especially in the case of Zcash for the period when the issue will be close to the end. If we consider the PoW emission in bitcoin, then I do not need to explain that everything in this algorithm is focused on the fiercest competition for the right to find a block. The whole industry developed on this competition. Billions of dollars annually. However, it seems to me that if we create conditions in which everyone can receive remuneration in proportion to their balance in accordance with the total remuneration from the commission (PoS), then at the end of the emission cycle this remuneration (received exclusively from commissions in the network) will be so small that the incentive for all such validators will not be enough to maintain network security. In the case of PoW, the reward is distributed among the mining participants. If the reward is not enough (due to a drop in price), the market distributes it itself - some participants leave the process of finding a block, the most effective participants remain, but the holders do not influence these processes. Incentives are redistributed by the market. If there is a lack of incentive from PoS validators, the coin will rather lose value in the eyes of small holders and instead of holding you will get a sale with a hyperbolic drop in incentives from the smallest holders to the largest. However, in the case when it is necessary to accumulate some balance for validation, the remuneration will be redistributed exclusively among these participants. The specific weight of the remuneration will be sufficient for any price scenarios and the amount will be valuable in itself, since it gives the holder an exclusive right to remuneration. Such a network will be slightly less decentralized, but more resistant to price shocks and for a period when the issue will be significantly reduced.

In fact, what is written above is a secondary question. And all I’m worried about is maintaining a strict issue limit of 21 million coins, while maintaining incentives to maintain network security.


Great reply Art

I’d propose that we meme the validator ZEC staked requirement at 2.1 coins. In the current valuation that is not a cost prohibitive level ~$150

In the future supposing Zcash coins at $500 it remains accessible.

Hello! I will not suggest specific size. I know Nathan understands this issue, but I don’t have the resources to model specific parameters. I just pitched this idea to work within their research group in order to find a possible solution to keep the hard emission limit.

The second area of ​​possible consideration for decisions to maintain a hard emission limit is to review the size of the commission. I believe that the current fee of 0.0001 ZEС for shielded transactions is an interim solution that is great for many years to come. However, when the issuance will reaches a certain critical height, I consider it reasonable to switch to market commissions that are able to compete with standard generally accepted commissions for popular payment networks. For example, from 0.1% to 0.3% of the amount of a paid transaction (in case we arrange to implement the concept of money for Zcash by then). It is my deep conviction that the system proposed by Satoshi is able to have a hard limit of 21 million coins and provide a proper reward for maintaining consensus of network. Especially given the fact that we are talking about a significant reduction of costs in PoS case. Given that any validator has an obligation to use shielded addresses (I hope that transparent addresses will be completely unclaimed by then) we will no longer need to have a fixed commission and therefore the commission can be tied to the amount of the transaction without revealing confidential information about the transaction.

Frankly, I could not even imagine that the topic of discussing the preservation of the emission limit could ever arise. This is a fundamental characteristic of the coin, which has a much stronger effect on the status of Zcash than the consensus algorithm. We can configure the network as we like, but sacrifice in the form of this characteristic is the most undesirable scenario for the absolute majority of holders.

@nathan-at-least when choosing a compromise solution, I suggest proceeding from the principle of sufficient competitive advantage. It will be difficult for us to compete in the cryptocurrency space with only one characteristic “privacy”, despite the fact that this is our basic characteristic as the main competitive advantage. In terms of priorities, in my opinion, the second most important advantage of Zcash is the limit of 21 million coins. While bitcoin has not faced a collapse of consensus due to this characteristic in view of transactional stagnation, we must protect this key characteristic by all means, which allows us to attract people from the bitcoin community. Collapse has not yet been proven, and many of us, even the young ones, may not even live to see it. Theoretical reasoning will always lose out to practical knowledge. I believe, as well as many, that the low cost of transactions is also considered our priority, but it is enough for it to be the lowest of all, and not extremely low, so much so that it sacrifices other key characteristics.

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To your emission rate point, I 1000% agree that the total cap should not be modified

for the rate of emission I see the current 10-12% through Nov 2024 as a potentially existential destructor for Zcash’s ability to succeed. Will ECC, ZF, and ZCG remain well capitalized? Yes.

But what will happen to the Zcash coin value, and all of the ZEC holders? If we are forced into another prolonged price depression, the community will once again bleed 50% or more. People leave and don’t return, merchants stop using Zcash, wallets or new wallets stop being built, full nodes turn off. We have to accept that there is not an eternally open door to step through in order to succeed - if critical mass adoption isn’t reached within the decade for private digital money, it may never happen :frowning:

All that is left over are the Secular institutional ASIC miners that secure and sell… They have no skin in the game but for themselves (take a look at how extreme the Zcash network hashrate volatility is, if you don’t believe me)

I propose that

  1. Cut the Block count halving number in half (resulting in a halving later this year, and then in 2024, 2026, etc)
  2. Adding a lower limit int to prevent the emission rate… from ever dropping below 1% annually

The outcome would be a quick slowdown of the distribution of cheap and easily accessed (via PoW miners) Zcash now, while the project is in its infancy and is Pre-Proof of Stake.

The lower limit of 1% annual emission (compared to existing supply) creates a uniform, long tail for supply distribution to Validators and ecosystem development and community funds for centuries into the future.

a crude mock up

Date reached Reward Era ZEC/block Start Supply Supply Increase End ZEC % of Limit
At Nov 2020 halving 3 to 4 6.25 13 million 62%
2021 Nov 4 3.125 14m 1m 67%
2022 Nov 4 to 5 3.125 15m 1m 72%
2023 Nov 5 1.56 15.5m 0.5m 75%
2024 Nov 5 to 6 1.56 16m 0.5m 77%
2025 Nov 6 0.75 16.25 0.25 78
2026 Nov 6 to 7 0.75 16.5 0.25 79
2027 Nov 7 .5 16.70 0.2 80
2028 Nov 7 to 8 .5 16.9 0.2 81
2029 Nov 8 .4 17 0.1 81.5
2030 Nov 8 to 9 .4 17.1 0.1 82

Miners acquire their equipment for some economic calculation. I do not recommend changing anything before moving to PoS, as the result of the change can be unpredictable. For example, miners will go to a coin that competes according to the algorithm, and we will lose a large share of the hashrate. In fact, the roadmap plan, if it is still relevant, in which Zcash switches to a PoS hybrid model as early as next year, and in 2024 to PoS already solves the issue of emissions which cannot be called excessive, if only because bitcoin has gone through the same route.

The bear market is the same for everyone. No more people come out of Zсash than from any other coin. Personally, the price issue is the least of my worries at this stage, until we have passed the second halving and entered a new bullish cycle.

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We tried, remember? Equihash was supposed to be ASIC resistant. That failed partly because of a technical mistake we (mainly me) made with the parameters; one of the very few mistakes we made. But also, ASIC-resistance in the long term is exceptionally difficult.


True! I love projects like vertcoin that have been battling since 2014 :+1:


Sorry for a necro bump, but I can’t resist: as I continue learning more about the whole cryptocurrency world and know more about PoW vs. PoS (by experiencing the differences first-hand as an end user), I want to comment on how encouraging it is to see Zcash willing to change and innovate in such big ways when the improvement is clear and obvious.

PoS really makes things easier, faster, cheaper, and on the balance of things, safer, more reliable (on multiple fronts), and more ‘free’. Maybe there’s weaknesses I don’t know about, I haven’t read into the staking system very much - e.g. whether there’s concerns about easier centralisation by making the rich have all the power vs. the poor (which is a terrible situation from a cypherpunk perspective) - but what I do know is that Monero has been having major problems with one particular mining pool having 51% of the mining power, AKA it’s been prone to a devastating 51% attack on multiple occasions. So isn’t that interesting.

Not to make fun of them wantonly - decentralisation is hard. But perhaps staking makes it easier for people to join vs. mining in the end, and it’s actually more egalitarian, or, it pans out to have similar level of accessibility where people join in ‘staking pools’ vs. ‘mining pools’. (Kind of like DAOs to manage balances of power in the control of a coin.)

(Below is tangential / off-topic):

That Monero is so stuck in its ways shows that if Zcash keeps on innovating and improving, it might just become irresistible to a certain number of Monero users at some point. :slight_smile:

There’s almost nothing Zcash now has as a downside vs. Monero. (E.g. ‘trusted setup’ is now over - they can no longer complain about that.) Personally I think the dev tax thing has had extraordinary results. Economically participating in that doesn’t take any of my ‘freedoms’ away - and it’s no more centralised than agreeing to use software made by a small dev team in the absence of a dev tax. And as for decentralised governance? I haven’t looked into ZEC governance much nor compared it to XMR, but again it doesn’t feel like it’s taking away my freedoms to have extremely private transactions with other people on the Internet. It’s fully open-source, and communication is amazingly transparent. The obsession with decentralisation can veer into religion and theory - theology, not reality. Don’t get me wrong though, I do agree with it 100%.

So apart from more adoption needed of shielded payments among vendors of things on the Internet, there’s only one major privacy hole I’ve identified in the Unified Address design (though it’s relegatable by applying extra OPSEC practices), which is that people can still send you ‘shielding’ transactions to your Z-address or new U-address (exposing incoming transaction amount), even if you want ZEC to be default fully shielded in both directions, no matter what. I got very upset when I discovered that (and I want to apologise for that), but the fact remains that Zcash is far better than anything else, if the user has done their research - or now in Halo 2 and UA era, even if they haven’t. I just hope the ‘shielding’ hole is fixed one day. That’s what Monero community will latch onto to still claim that Zcash isn’t a legitimate privacy coin.

Forge on, heroes!


@SexDrugsAndZcash and I have DMed about the supply inflation hinderance - it has been pointed out to me that based on a late 2020 Messari analysis Zcash will be emitting lower than 10% soon and by 2024’s halving the rate will be near 8.5%

Although that is still dangerously high, I grant the correction to my first assertion that the rate would remain in the 10-12% area up to the next halving. If the transition to Proof of Stake is serious, I believe that we also need a serious debate around the current, rapid emission of coins to Proof of Work miners also.

@Zchurn 100% agree with you, great remarks


There is no way back. In my country, I record an alarmingly zero demand for Zcash’s ASICs with a very low price of devices in anticipation of switching to PoS and in conditions of low payback.


I think I need to clarify.
Apparently due to the fact that Zcash has funds (here I am not questioning the expediency of having them, but stating a fact) and these funds have the necessary monthly operating costs, the price of the coin will always experience some downward pressure. Contrary to the widespread belief that miners are always selling, this is absolutely not true. I communicate directly with the miners and I know very well that the miners do not sell below the profitability price. Now the price is here. Moreover, the people with whom I communicate in Irkutsk (and this is a huge number of ASICs with the cheapest industrial electricity in the world, about 2 cents in dollars) stopped selling Zсash from the level of ~60-70$. They can afford it and for them this price is no longer interesting for sale. Yes, it’s still profitable in terms of electricity costs, but it’s just not a business, taking into account capital costs at the start. However, the price due to certain reasons is slightly below these levels today. Therefore, the demand for the Z-series antminer is completely absent today. At the same time, prices for devices are very lower than six months ago. Miners prefer Whatsminers for bitcoin at discounted prices because they are significantly more cost-effective, even with double consumption from Z15. This is a small dive into the practice of mining from the real world.

What I wanted to say with this for everyone … After a while, I came to the conclusion that by staying on PoW, due to the change in many of the input parameters that Bitcoin had, Zcash is unlikely to repeat the same model of giant hashrate growth, while as long is successful Bitcoin.


Thanks for additional insights, quite interesting.

I am glad you speak a truth I also accept. Zcash has near-zero odds to defacto experience a growth cycle like Bitcoin

There is in a basic existential sense, only going to be one Bitcoin - the true first mover, it has unequivocal brand and narrative strength, and it is the default asset for the vast majority of new crypto participants

I am also discouraged when I see ZEC people here in the forums romantically telling themselves to simply ride this out one more cycle, because its our turn next to do what Bitcoin 2015-2017 did…

it is not that predictable


I meant to a greater extent, of course, the impossibility of repeating the hashrate bitcoin’s model, but I did not mean the price model.

Without any romanticization, I am absolutely convinced that Zcash will be a huge success. And it is very well calculated. There is a lot to say here, but I will touch on a few theses.

In terms of price, we still have a model and factors exactly the same as bitcoin. Conditions are supply and demand. We know for sure that the supply will decrease in accordance with the emission schedule*. The halving of emissions occurs once every 4 years - it’s not too fast, but not too slow either. This is quite enough to update the technology stack, to increase the community, for regulatory and economic adaptation to the new cycle of price growth. When these events occur in a new milestone and the market becomes more resilient, halving occurs. The lack of supply pushes the price up and the price increase attracts (like first-class advertising) new users to the community. Most of them will never declare their interest (these are readers). Some part of the enthusiasts will declare themselves (these are writers like you and me). A small part will become active developers (small due to their specialization). Thus, the community will expand by increasing the demand for the coin. And everything will repeat the same way as with bitcoin. To what extent this will be a significant increase, I will not speculate, this is fortune-telling, but there is something that we can predict.

There are some metrics that allow me to say that Zcash has strong financial support among supporters, despite the fact that it is inaudible. Much more powerful than, for example, Monroe or Dash, despite the fact that it seems that everything is the opposite.


Pay attention to the last column. This is an issue in dollar terms. This means the product of the number of coins issued per day by the current price. Compare it with other popular coins. I think this is an indicator of net demand (excluding trading volumes). This is how much money per day people are willing to spend collectively to support various coins. You may object that we do not know how many coins have not been sold. But unsold coins are also a demand - only from the seller (miner in our case). That is, sellers are not ready to sell at the current price, which means they believe that the current price is lower than the one they would like to receive. In this sense, a miner is no different from the holder who decides to sell him coins at current prices to return part of the investment or continue to hold.

Then why do we hear only “monero monero” in all social networks and it seems to us that it is much more than Zcash. I will assume that the financial capabilities of Zcash investors are much greater, but they is no desire to talk about it out loud at all. As a rule, people who have a lot of money do not behave like those who bought ten coins and constantly demand something from the price chart. Rich people do not make their lives dependent on the price of one asset. They just make a decision about investments and wait for the return as long as it takes. For them, this is not a lottery ticket, they know that life is long, and a good investment is a long process. They don’t need to write about it in social networks, all this noise is not important to them. Most of the visitors to my YouTube channel about Zcash are people over 35 years old.

(This is for example statistics for the last 7 days. (it looks like this representative authority decided to check my content :grimacing:)

Why do I claim that the average portrait of an investor in zcash is a more financially literate person? Simply because it has turned more into a confrontation between cryptanarchy VS cryptoregulation. And it is quite obvious who has any success in regulation direction and it is quite obvious the division into use in the darknet versus use in flexa. A rich investor will never bet on anarchy.

  • Let’s assume that for some reason, due to the argumentation of the long-term safety of the chain, the emission will become infinite.
    I had a conversation with a friend. He told me, “This is unbelievable! it destroys a lot of what I thought was the value of Zcash.” Yes, the very fact of the change looks extremely sad. And it will be just a killer factor for many. However, as @nathan-at-least correctly noted in his article, all your preferences are a set of compromises. And the point of view from which we look at this set of compromises may also matter. For example, I was prepared and gave a friend the following argument: what if, with an infinite issue, the total issue of coins at the moment in 40 years will be less than with the current issue schedule with a limit of 21 million? The friend thought about it, and after he said that it would suit him, but it’s still a substitution of concepts and where is the guarantee that everything will not change again for some reason.
    Yes, this is something that concerns me to the same extent. So I still hope that we won’t have to give up the limit.

After thinking about this longer, and viewing the great Zcon talks about what are the motivating ideas behind the evolution to PoS, I have identified one cynically comical future outcome.

We successfully make it to PoS which mitigates against all of the wasted energy debating the Environmental costs of PoW… the current albatross around our necks.

But we wind up having swapped albatrosses, and we’re now all haunted about having to rehash the same exact debate (debunking of false talking points) related to the assertion that PoS creates centralization rather than decentralization.

Based on my anecdotal experience so far, it is impossible to avoid running into misinformed PoW maximalists who have been indoctrinated to believe that PoS intrinsically creates a centralization issue (I use strong wording because those folks have clearly not given a clear and fair evaluation to the technical definitions and economics underlying the pro-PoS assertions, by Zooko, Nate, et al)

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For reference here is one perspective:

I really like the current Ethereum tokenomics. Despite the expected current decline, due to the profit taking of those who came in anticipating the merger, the immediate prospects for ETH look very optimistic due to the approaching shortage of coins. I think that ETH will overtake Bitcoin in terms of capitalization and take first place over the next year. After that, ZEC will be re-evaluated while waiting for the transition to PoS.


Given that this entire conversation about proof of stake (recently) has come about and been driven largely by some false narrative of PoS will save the environment or something similar (I posted a pretty wicked rant a while back, caution Radical “to the moon” thread - #4433 by Autotunafish ) it may be worth re-evaluating the idea and whether the current state of the conversation that centers around economics is even justified.