ZF hold $16m USD in assets

General
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According to ZF’s Q2 financial statement ZF hold $16m in liquid assets. This doesn’t sit well with me as I’m a firm believer that the Zcash community and it’s funded entities should be using all the resources at their disposal to better Zcash and to position Zcash for the next mass adoption/usage phase. But then it occured to me that maybe I should simply ask the question.

@Dodger

  • Why is ZF sitting on $16m in liquid assets?
  • Does ZF have any plans for using these assets?
  • What could/should ZF use these assets for?

During the last crypto hype/adoption phase many people in the community vocalised their concerns that Zcash didn’t gain their “fair share” of user adoption and investment. We saw some prominent Zcash community members either silently move away from the Zcash ecosystem or some much more vocally resign from prominent possitions due to the lack of adoption and price appreciation of ZEC.

My concern is that ZF is sitting on $16m in assets. In 2-5years when the next crypto hype/adoption phase occurs my worry is history will repeat itself and Zcash won’t capture enough “adoption”. When we look back at what went wrong I’ll point out that ZF, ECC, and ZCG were sitting on large piles of cash. $10s of millions in assets that could have been spent doing any large number of things that would have helped drive adoption during this hype/adoption phase.

We know the next adoption phase is coming and we know it’s going to take time and money to prepare for it. We need to start now!

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The ZCG holds ZEC primarily. And at this time, the current USD balance held is less than the future grant liabilities.

Source: Zcash Community Grants Dashboard - Google Sheets

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Thanks for the correction. Point I was trying to make still holds.

When we look back at what went wrong I’ll point out that ZF, ECC, and ZCG were sitting on large piles of cash ZEC.

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If we posit that ZEC is a valuable asset in the future, then liquidating current ZEC holdings at a badly discounted valuation is financially poor behavior. I’m happy to see the ZF and ECC attempting to ride out this price depression, without selling everything and the kitchen sink.

To your point about liquid that is not the correct term, there is not sufficient buy side liquidity across the largest ZEC-USD markets to support a market order for 16 million dollars worth anywhere close to the spot ZEC price. To responsibly liquidate their large ZEC position into USD (with the hope to realize value somewhere near 50-55 dollars per coin) would require month(s) of small batch selling. This is speculation also depending on where the ZF custodian or market maker is.

@Dodger are the ZF ZEC holdings liquidated OTC, Binance, Coinbase, Kraken, Gemini?

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Ouch, this means the ZCG is technically insolvent at the moment with ZEC being at such a depressed price (as liabilities of the future exceed asset valuations)

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@noamchom ZCG is not “technically insolvent”. You’re reading that incorrectly.

As of 10/03, ZCG holds $7,989,810 worth of ZEC. Outstanding grant liabilities are $2,632,318 of which approximately 94% is hedged (i.e. ZEC has already been converted to USD to cover the liabilities) and only $156,954 is unhedged (i.e. still held in ZEC).

Said differently, ZCG’s treasury is roughly worth $10.6M (combined total of ZEC and USD holdings). Of that $10.6M, $2.6M is encumbered (i.e. restricted to cover existing liabilities), leaving ZCG with an unencumbered balance of roughly $7.9M.

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Thanks and with that detail you’re correct ZCG is nowhere close to insolvency

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ZF hold about $6.3m USD. I’m not suggesting ZF liquidate $16m worth of ZEC today. :person_shrugging:

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Yeah, the majority of ZF’s assets are ZEC, so the value of our assets fluctuates with the market. It was over $38m at the end of Q1, and it looks like it’ll be under $14m at end of Q3.

When it comes to setting our budget, one of my primary objectives is to ensure that ZF’s expenditure is sustainable, and that we can weather market fluctuations and crypto winters. I don’t want to be forced to abruptly curtail our activities and/or lay people off if the ZECUSD price dips for a few months. Also, in the event of a “black swan” event, I’d like to be able to sustain our current team and operations for a year, so we have time to adapt to whatever new circumstances we face.

With all that said, we are spending more now than at any point in ZF’s history (and, at the current market price, we’re spending more than the USD value of the ZEC we receive from the Dev Fund). We spent ~85% more during the first three quarters of 2022 than we did during the same period last year, and I expect to present a 2023 budget for the board’s approval that will be higher than this year’s.

My other primary objective is to spend money where we are confident that it will have a meaningful, positive impact. To my mind, there’s no point in just spending money so we can say “Look how much we’re spending!”.

I agree 100% that we want to prepare for and build towards the next adoption phase. If it came tomorrow, with the current performance issues, the user experience would be awful and we’d be screwed. With Zebra and FROST, we’re laying the groundwork and establishing solid foundations that we - and, more importantly, others - can build upon.

Would I like to have more income and a bigger “cushion” so we could spend more and deliver faster while maintaining the same runway? Absolutely!

But, as things stand, I think we have the right approach for now.

However, it’s worth highlighting that the board approves the budget, and nominations for a seat on the board are still open for another 45 minutes or so, so if you think we’re being too conservative and should be spending more (or on different things), I urge you to nominate yourself!

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Hi @Dodger, FROST has been in the works for years now. Could you give us a timeline when it’s ready? Other coins are already using it why not zcash?

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@Dodger the issue here is ZF is not transparent. Everything you say just leads to more questions.

Evidence 1 - ZF posted strategic objectives only when asked

I search blogs and quarterly report but was unable to find this information.

Evidence 2 - What has ZF done to make Zcash smarter

No roadmap, no discussions on the topic, and no mention of it in the quarterly report. Why don’t I see any mention of this if it’s as fundamental as a strategic objective? Apparently budget issues?

Evidence 3 - Zcash has $16m is assets which includes over $6m in USD

If ZF sold only 10,000ZEC today, that would leave ZF with almost $7m USD. That’s enough to fund ZF for 2 years even if the price of ZEC went to $0! That seems crazy conservative to me. I’m not a business person so I started this thread. Hopefully @dodger will respond right and it’ll clear this all up.

@dodger does that mean we have $9m to invest on your strategic priorities like “making Zcash smarter?”. I understand it’s not as simple as that but can’t we think up some inventive way to use those assets constructively? We don’t have to use them all up TODAY. But maybe a plan for them would be good? Maybe ZF is speculating the price of ZEC will go up? If that’s an active choice ZF is making and ZF should be transparent about it. I’m of the opinion almost everyone here (including myself) is far too bias that the price of ZEC will go up in the long term so we should be conservative when making decisions based on the “hope” ZEC will go up. Maybe I’m over correcting for that bias we all have?

Evidence 4 - The board approves the budget

My assumption was ZF proposes a budget to the board and the board either approves of rejects it. But you’re right. The board are probably doing a lot of deep thinking on the operation and budget of ZF. Let me check the meeting minutes.

Directors present: Andrew Miller, Ian Miers, Amber Baldet, Peter Van Valkenburgh, Jack Gavigan

Foundation employees also present: Alex Bornstein (Secretary)

Topics discussed:

  1. Approved May board meeting minutes.
  2. Discussed the state of the Foundation’s finances.
  3. Discussed hiring progress, and potential for further team expansion.
  4. Conducted meeting prep for a future joint board meeting.
  5. Discussed potential board members.

Well that’s incredibly vague. But maybe it’s good news? Was there any deep thinking here? Which team is ZF expanding? Or was the outcome “no expansion”? Who knows. Not me! Any details @Dodger? Or are you suggesting I need to contact the current board members to find out more?

@Dodger PLEASE PLEASE PLEASE. I hope you can understand my frustration. When I have these questions about ECC I go to their blog and find out ALL the information. For ZCG I can go to the meeting minutes and find out an incredible amount of detail about their reasoning to spend or not spend funds. Sometime even including which way the members voted. Congrats ZCG! ZF on the other hand, the organisation that’s meant to be the most community focused, is by far the least transparent. WTF? I appreciate you taking the time to answer my questions but I simply shouldn’t need to ask them in the first place. In my mind it’s a major failure of ZF.

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If you believe a new Zcash node implementation (Zebra) and an obscure signature scheme (FROST) is going to drive the next phase of adoption, then I have a bridge to sell you.

The Zcash Foundation seems to be building for the platonic ideal of privacy/cryptography, rather than a practical, utility-driven model. Sadly, this kind of fanciful thinking will relegate Zcash to a future as a glorified research project. The Foundation is LARPing around as if they are advancing human freedom, meanwhile other projects continue to drive real adoption and get used by real humans :frowning:

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uh, hello? zeek has always been a profcoin.

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I hate to say that I agree with this sentiment. Zcash has never had an initial adoption phase so what is the matter in speculating about a next phase? The native asset - ZEC - is on a prolonged death march to the history book of crypto assets that could have been more :frowning:

ZEC needs to break an inertia point and demonstrate itself as a valuable digital asset, otherwise all of these efforts will become what the chipmunk suggested: a glorified research project lacking adoption by real humans

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Better to have this conversation in 3-6 months when a true bottom has been reached.

No amount of money is going to make someone adopt something in a mass sell off.

We are about to witness a lot of projects go to zero. Ones that even used all their money the way you think Zcash should be.

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The future value of ZEC is a function of the current allocation.

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Hiya! I like your enthusiasm for expanding adoption!

I’ve personally invested a bit of time getting people to adopt zcash. Unfortunately I recommended a entry point that was unstably supported and ceased to function.

I am now working full-time on a more stable option, so that I can recommend that to users! We’re close to offering stable Orchard support:

Are you working on projects that will expand use/adoption? If you mention them to me, I will do by best to spread the word and collaborate.

On that note, you might be interested in the popular:

platform that @skyl is developing. Perhaps you could use it to promote zcash, or a zcash-specific project that you aim to increase adoption with!

Go zcash!

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@GGuy FYI, pages 5 and 7 of our latest quarterly report were inspired by your feedback. Keep it coming!

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@Dodger thank you for listening :heart:

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Quite prescient! The value of ZEC keeps falling lower and lower, hopefully we achieve a bottom in the Spring of 2023. Zcash core mission is at risk of abandonment if our native asset keeps going lower perpetually :frowning: