There’s been discussion and some confusion about Zcash Community Grants (ZCG) and its role in governance. For clarity,
ZCG is focused on capital allocation not protocol governance.
ZCAP is a means for the Zcash Foundation to poll community members on various questions and to elect the ZCG.
The Zcash Foundation unilaterally controls ZCAP membership and rules for participation and engagement.
The community delegated 1/3 of the dev fund for grants under ZCG oversight, for a period of time.
The current ZCG fund allocation expires in 2028. It can be extended or changed before that time through the ZIP process.
If there is no clear community will, including as voiced by coin holders, the ZCG will no longer receive funding.
An alternative to ZCG can be proposed and realized, now or anytime in the future, with clear community support.
If coin holders do not believe in the ZCG model, it will die based on what is currently been encoded in the protocol.
The market decides whether or not there are any meaningful funds available for grants. If they leave, the value of ZEC trends down. If it trends down, less funding is available.
Changes to protocol consensus require broad community support - devs to implement changes, and then the market chooses which software to run (fork) and which one has value.
Anyone can submit a proposal and attempt to build broad community support for a better model. It’s up to you to determine whether or not ZCG as designed should continue to be worthy of the privilege and responsibility for allocating 1/3 of the dev fund.
Expanding on this, the miners choose which software to run. In the event of two active competing forks (two groups of miners running different software), the market then decides the value of each fork. Usually one fork goes to zero quickly, but sometimes rarely not (see BCH vs BTC).
Josh: Thanks for writing this up. I wanted to clarify one point in case the sequence of the statements leads to any confusion.
You’re right that anyone can propose a ZIP at any time to modify the Dev Fund. But the phrasing about ZCG losing its funding if there is “no clear community will” or if “coin holders do not believe in the ZCG model” might be interpreted in a way that wasn’t intended.
My understanding is that if a new ZIP is proposed and it doesn’t gain broad support among coinholders, ZCAP, ZAC, etc., nothing actually changes. ZIP 1016 would continue as written, which means ZCG keeps receiving 8% and the coinholder allocation remains at 12% until the next halving in November 2028.
In other words, the current Dev Fund allocation in ZIP 1016 continues automatically unless a new ZIP with broad consensus replaces it.
Vitalik, a long-time friend of Zcash and former ZCAP member, has weighed in today.
His classic article on pure coin voting governance is a must read. (TL;DR he thinks it is dangerous.) Article already linked to by @joshs and others, elsewhere.
Vitalik means well but he is a horrible decision maker, often takes away the wrong lessons from outcomes and fails to improve.
The Ethereum foundation is one of the worst run public funds systems in crypto. The engineers they need are underpaid, they spend excessively on unneeded R&D, and there is an entire administrative arm that gets paid quite a lot with unclear roles.
You would think that Vitalik had lost control to some sort of grifter governance council, but no, it came out that Vitalik is actually fully in control of Ethereum Foundation! He could fix their problems but he does not!
As a refugee of the Ethereum ecosystem, I hope that Zcash does not fall into the numerous failures modes that perpetuate Ethereum governance, which I am far too familiar with.
Vitalik is the last person I would want advice from on this matter, and I hope Zcash succeeds where he has failed.
Now that the 8% of block subsidy reserved for ZCG grants is worth a lot more than it was six months ago, there is scope for more experimentation again.
Yes, fixing the UX on coinholder voting, as currently used on the retrospective grants program,
is a no brainer.
But moving to pure coinholder voting for governance, without anything else? I don’t think so.
Instead, how about, as @frankbraun suggests, a futarchy-based system?
I expect a grant proposal to implement a futarchy-based market mechanism to help ZCG in its spending decisions, would be treated favourably.
Both the ZCG and coinholder allocations automatically end in Nov 2028 unless a new ZIP is implemented to follow it. Once ZIP 1016 expires at the halving, the default is that miners receive 100% of block rewards.
@joshs Thank you for the clarification on ZCG’s scope under ZIP 1016. ZCG’s mandate is capital allocation inside the funding model defined by ZIPs, not protocol governance.
My work stays inside that boundary. I am proposing one scoped upgrade within that mandate: a written verification standard for any custodian holding more than $5M equivalent for more than 12 months, using either an annual audit or quarterly read-only balance reporting.
It is mechanism-neutral and does not alter who votes or how governance decisions are made.
Me:
I expect a grant proposal to implement a futarchy-based market mechanism to help ZCG in its spending decisions, would be treated favourably.
thowar2:
…Futarchy requires a substantial lift requiring research, modeling, building tech and user interfaces. Some of these are not solved problems that can simply be copied by the Zcash ecosystem.
I think it’s a useful thing to discuss and ideate on, and perhaps is worthy of a research grant.
I’m glad we are in harmony about this. Heavy lifts do not usually deter Zcashers. I don’t however suggest that any existing Zcash devs be diverted to this right now..
Devs like money just like the rest of us. I am optimistic that an external team will come up with a proposal in the fullness of time. This is the kind of project that Zcash Community Grants is designed to support!
I think some good ideas for improving governance processes have already been mentioned in this thread.
Personally, I am not inclined to favor either THV or its opposite. Each has both advantages and obvious disadvantages, and they also depend on the context of the system in which they are used.
For example, if a PoS blockchain had an initial TDE distribution, THV would be categorically unsuitable for it, because it would be a profanation. Fortunately, Zcash went through market distribution. Not so long ago, the market even saw a price close to the founders’ reward price, which gives reason to claim that every coin holder was on equal terms with others (which is not the case with TDE distribution). Therefore, I am not so concerned about the well-known shortcomings of THV for Zcash, as I fully support the rights of holders, provided that there is a voting system with equal access for all holders. Currently, it is not equally accessible. In addition, given that large holders such as DAT/funds/treasuries are in custodial storage, I make a reasonable assumption that we are not threatened by excessive influence on the voting results of interested parties.
The only aspect that really concerns me about THV in Zcash is the level of expertise. This is because the effectiveness of decision-making by a community of experts is much higher than the effectiveness of dry decisions made by a large group of people who will not even delve deeply enough into the issue they are voting on. At best, this will turn into a vote by influencers, whose opinions will be taken into account first. At worst, it will simply be an intuitive vote.
In a system as complex as Zcash, such voting could also lead to negative consequences, such as stagnation and destructive decisions, due to possible malicious FUD attacks/distortion of facts. This is because influencers may not necessarily be from the Zcash community and may not necessarily be sufficiently knowledgeable.
I also believe that if we can arrive at a solution that takes the best of both worlds, we could have the most effective governance system for Zcash.
I am saying that the group of people who spend hours on this forum every day know more about Zcash than the unlimited group of people who bought ZEC for their portfolio along with other coins. Please do not narrow my answer down to ZCG.
Абсолютно согласен с вами. Так должно быть абсолютно везде, путем того что человек подтверждает любым образом свою компетентность в том вопросе в котором он принимает выбор.