[ZIP 1003] Dev Fund Proposal: 20% split between the ECC and the Foundation

1 - Header

ZIP: unassigned.

Title: Dev Fund: 20% Split Evenly Between the ECC and the Zcash Foundation, and a Voting System Mandate

Advocate: Aristarchus (aristarchus on zcash forums)

ZIP Status: Draft

Category: Process

Created: 2019-06-19

License: MIT

2 - Terminology

To understand this ZIP it is critical that people understand the right terminology so their requirements can be quickly checked.

The key words “MUST”, “MUST NOT”, “REQUIRED”, “SHALL”, “SHALL NOT”, “SHOULD”, “SHOULD NOT”, “RECOMMENDED”, “MAY”, and "OPTIONAL"

Have special meaning and people should familiarise themselves with it. - https://tools.ietf.org/html/rfc2119

For clarity in this zip I define these terms:

  • 2nd Halvening period - the 4-year period of time, roughly from October 2020 - October 2024, during which at most 5,250,000 ZEC will be minted
  • DF% - Dev Fund Percentage, the portion of newly minted ZEC in each block reserved for a dev fund

3 - Abstract

This proposal would allocate a 20% Dev Fund Percentage to be split evenly between the ECC and the Zcash Foundation during the 2nd Halvening period. This proposal aims to be simple to implement, without a single point of failure, and comes with mandates for transparency, accountability and a mandate to build a dev fund voting mechanism to be used during the 3rd Halvening period. This proposal is designed to strike a balance between ensuring that high quality development work can continue uninterrupted, with the need to further decentralize Zcash development funding as soon as possible.

4 - Motivation

Strengths of this proposal:

  1. Simple to implement. I would rather developers spend time scaling Zcash rather than implementing the dev funding mechanism.
  2. Developers will have several years to work on a great decentralized development funding voting mechanism.
  3. 20% is a large enough percentage that there should be enough dev funding for many different Zec price scenarios. To those who want to decrease this percentage: Overpaying for security is a gift to miners, to the detriment of every other stakeholder in the Zcash community. I will even make the strong statement that intentionally overpaying the miners for security is stealing from the other stakeholders.
  4. With two entities receiving funds there is no single point of failure.

5 - Requirements

  1. DF% must be 20 percent, split evenly between company and foundation for years 5-8.
  2. Dev Fund must only to be spent on research, development and adoption of zcash
  3. A voting system for dev funding must be built and implemented after year 8.

6 - Specification

Voting System Requirements

Here are the general properties of the mandated voting mechanism. I don’t want to specify the technical implementation details, since I believe this is a job suited for the engineers building this system.

  1. Voting should be private.
  2. Only Zec holders can vote.
  3. Voting should happen on-chain.
  4. In order to vote, you must lock your zec so it cannot be spent for a period of time. This is to force the voters to have ‘skin in the game’ and prevent someone nefarious from buying a lot of zec just before an election and then dumping it immediately after.
  5. Voters can choose how long to lock their zec, and their voting power is proportional to the time that the zec is locked. For example, someone who votes with 10 zec and locks it for 6 months would have the same voting power as someone who votes with 20 zec and locks it for 3 months. Of course there must be a maximum lock time, perhaps a year, to prevent anyone from getting ‘infinite’ voting power by locking their zec permanently.
  6. The final results of the vote should be transparent to and verifiable by everyone.
  7. The system should be totally open and allow anyone/any organization to compete for funding to develop zcash.

Transparency and Accountability for the ECC and the Zcash Foundation

There requirements would apply to both the company and the foundation. The mandate is to adhere to these accountability requirements originally put forward by the foundation:

  • Monthly public developer calls, detailing current technical roadmap and updates
  • Quarterly tech roadmap reports and updates
  • Quarterly financial reports, detailing spending levels/burn rate and cash/ZEC on hand
  • A yearly, audited financial report akin to the Form 990 for US-based nonprofits
  • Yearly reviews of organization performance, along the lines of our “State of the Zcash Foundation” report

Requirements Specifically for the ECC

Motivated by the Foundation’s proposal that the ECC become a non-profit ( https://www.zfnd.org/blog/dev-fund-guidance-and-timeline/), I am going to list general requirements for the ECC to abide by if they choose to receive funds and work on behalf of zec holders.

  1. Because I share the foundation’s concern that the ECC could be “beholden to its shareholders”, I am mandating that the ECC should be working in the service of the Zcash community and shall serve no other masters . The original investors/founders who are not still working in the service of the Zcash community should not have control over the use of the new dev funds.
  2. The revenue received from the Dev Fund should not be used to give further rewards to, even indirectly, the investors, founders, or shareholders of the ECC, who are not working on Zcash after the first halving. They have already received the founders reward and this new dev fund is not supposed to further benefit them .
  3. The ECC should offer competitive pay and a stake in upside of the success of Zcash as a way to attract the best and brightest . I do want the ECC be able to maintain a world class team capable of competing with the tech giants of the world (Google, Apple etc.).
  4. The ECC should continue to engage with regulators and advocate for privacy preserving technology. The legal structure of the ECC must not hamper these critical efforts in any way.

I am not mandating non-profit status for the ECC. Maybe that is the best legal structure, maybe something else is better.

Finally, in the event that the voting system isn’t implemented by year 8, the 20% of funds intended to go to the ‘voting dev fund’ should by default be sent to an escrow address controlled by the Foundation, and the Foundation will hold the funds in escrow until the voting system is actually implemented.

References

[1] “State of the Zcash Foundation” report

[2] https://www.zfnd.org/blog/dev-fund-guidance-and-timeline/

Changelog:

  • 2019-06-19 initial post
  • 2019-26-07 listed three strengths of this proposal
  • 2019-08-13 Voting System Requirements
  • 2019-08-20 Requirements Specifically for the ECC
  • 2019-08-29 update to be more like a zip draft
  • 2019-11-08 removed burn address proposal, replaced with Foundation escrow
13 Likes

It looks like a few people have liked this proposal but no one has commented on it yet. Maybe this is a good sign that there is no vehement opposition to this very simple plan?

We don’t have a lot of time to decide about the future of Zcash development funding, since the NU4 deadline is fast approaching. I think that missing the deadline would potentially shake investor confidence in the Zcash funding model, which is one of the best things about Zcash, imho.

My own opinion is that we should choose something very simple, similar to this plan, and continue with the discussion of more formal processes for allocating dev funding for the future. I like reading some of the more complex proposals that have been put forward, but prefer something very simple at this stage of Zcash development.

1 Like

Theres 9 other proposals on this forum

There is no need to have the opposition comment, these people made other proposals and/or commented there.

But after you asked for comments i will take the time to comment yours and why i think it’s not a good proposal at all:

Why 20%? It’s mentioned that about $1 million is needed per month. At current exchange rate 20% would create about $2.5M, not even calculating a possible price jum after halving.

1.) How do you control this with a for-profit-company?
2.) What about advisors? Shares & Bonuses to employess? How much for the CEO?
3.) Just in theory, at a for-profit-company every expensive could be spent under the “camouflage” of research, adoption & development, even $100k wages/saleries for the employees, just as an example.

Any other changes or does the rest stay as weith the founders reward? Especially towards how the Founders Reward distribution was organized. Means the recpipients donate to the ECC, how would this be organized with your proposal?

And as a site note, why only “milking” the miners?
I have read your statement on twitter that the holders pay as well due inflation, but that was only true with the original founders reward. With a new dev fund/fee nothing changes for the holders, but the miners pay for further funding alone as the inflation rate won’t change with a new dev fee.

Why not a voting system for 2020 at the introduction of a possible new dev found so the community might get a vote on what should be researched, developed, done? Why such a huge period 5.5 years from today for a more or less simple voting system. I mean even the biggest shitcoins today have a voting system in place, these might be far from perfect but sounds still better than 5.5 years without a voting system at all.

Your proposal is everything else but not simple. Sure, sounds simple as you didn’t go deeper into some possible issues. Ones you get/dig deeper, like my questions/concerns it’s everything else but simple…

Actually some other proposals i have read look simpler compared to this one …

1 Like

Hi @boxalex,

Thanks for the feedback. I’m curious, are you a miner? I trying to understand why you don’t like the 20% figure. As a zec holder, I actually am not worried if we ‘overpay’ slightly for research and development. I would much rather overpay for r&d and than underpay and not have enough funds for development.

From my perspective as a zec holder, I only want to pay enough to the miners to be sure that the chain is secure. Anything beyond that is, in my opinion, wasted zec that would be better spent on r&d.

If we choose to only pay 10% of block reward for r&d, then we are saying that we don’t think the chain would be sufficiently secure with 80% of block rewards going to miners. I realize chain security is on a spectrum, but I would rather double the r&d budget and decrease the chain security by only 90% to 80% block rewards.

Regarding the simplicity of my proposal, I think that the idea is to trust that the ECC and Foundation will continue to act responsibly, at least for the next 4 years. I believe they have done a pretty good job so far, don’t you?

Finally, I don’t think the build a good voting is simple at all. I would rather trust the ECC and the foundation for 4 years than have a bad voting system.

1 Like

I know, I have read them and replied to some of them. I was curious why my very simple proposal wasn’t getting as much attention as the others.

2 Likes

Ex miner. I don’t mine anymore since December 2018.

Read my proposal and you might get an idea why i’am not for a 20% dev fee but a lower one…

Of course you are not after you are not paying for it.

I’am as well not concerned with the US government debts because i don’t pay a cent as a non-US citizien and i’am as well not worried if you guys raise your taxes even higher.

Makes me remind 2 german sayings:
1.) Trust is for fools
2.) Trusting is good, control (checking/monitoring) is better.

2 Problems i see:
1.) The less block rewards the more centralization towards low-electricity mining regions, especially China.
2.) The less mining rewards the higher an incentive to abuse the system.
3.) Why taking something away from someone that does a job (miners). Why not taking away from someone something who doesn’t do anything? Don’t get me wrong, i’am not against a dev fee, but against a mandatory dev fee towards only 1 group of the Zcash community while the other groups (traders, holders, etc. pay just … nothing…

NO, i don’t think they did all over. IF we talk about the team they have, superb, no doubt here, it’s top notch. IF we talk about cryptography, top notch as well, but that’s it.

  • I have made many posts arguing that the foundation is too laggy for my taste. I like them all, nice guys and girls, but they are lagging in my opinion.
  • About the ECC. I can’t say great job to a Founders reward design of an estiminated $300-$400M by 2020 which resulted in a temporary deficit for development and only a smaller fraction of the whole amount of the founder reward alligned directly into research & development. That’s not right!
  • The inflation design is terrible, one of the reasons this design causes even for the founders reward a huge stall.
  • Let asics mine on the network was a huge mistake. While i myself was an asic miner and with full power was pro-asic, it was a mistake, easy and simple as that, resulting in huge loss of the community.
  • The list goes on and on but i don’t want to de-rail your proposal and stop here. So in short the devs are top, everything else way less to say it diplomaticly.

You have a point here with a good voting system. But as said, trust is one thing and nobody ever should trust blind whomever. In my proposal i advocate having the foundation as the recepient which than can allocate funds to the ECC for example for given developments. That’s simply because a foundation can be controlled easier, doesn’t have the huge for-profit pressure and i think the foundation is closer to the community than the company.
It’s ok if you trust endless someone while talking about several 100’s of millions of founders reward and multi million to come dev fees, i’am for more control and transparency.

1 Like

I’am not sure, but my guess is because it doesn’t get a bit deeper, or at least that’ my impression and i wouldn’t have answered/commented without having you asked for.

Could even be, some others, very similar to yours are more appealing for discussion or leave more room for improvement and “fine tuning”

Actually my personal opinion is that your proposal is just and only an extended founders reward. Same percentage, same payer (miners), again not voting, again no community involved, again no control, again just based on trust, again everything the same. Only difference it “SHOULD” be used not for advisors and for research and developement, but without a mechanism to check it you never will know if this happened or not, hence your proposal in my opinion is the nearest to just a renamed founders reward.

I think we disagree on who is paying for this. I think the ZEC holders (all of us) are paying the miners for security through inflation. The zec holders can also choose to pay for research and development. The miners are certainly not paying for anything, they are among the recipients of zec block rewards. I suspect that this fundamental point is the root of a lot of the disagreements on this forum.

Anyway, I came up this proposal thinking that maximum simplicity is important at this stage. :slight_smile:

2 Likes

I payed my fair share as a miner, believe me. Not only in hardware, but also on Hodling a coin that since Asics are on the chain gets dropped like a Hot potatoes. Still willing to pay the devs, but not the way it was.

1 Like

You could as well turn it around. The miners are daily decreasing the inflation as we get day by day nearer the max. supply.
Your argument would be true IF there was an unlimited supply of ZEC, as it’s limited holders are not paying more than they did allready under the Founders reward.

Simple mathematics in my opinion. IF you disagree show me the formula how a new dev fee affects the inflation negatively for ZEC holders?
On the other side the miners have been promised after the 4th year a mining reward of 100%. IF this promise is broken they will get with your proposal only 80%, hence they are paying for it.

That’s a very bold conclusion. Just because they get cut and less block rewards is in my opinion exactly this, they pay for it.

IF someone cuts my promised reward after day X and uses this for something else i call it paying for it.

Everybody is well aware that miners are as well recipients, but again, if you cut only from one group a piece than yes, i personally think, even as a not miner, it’s not the fairest way if a promise towards them gets broken.

Now let’s make another proposal. Increase the ZEC max. supply with 20%, about 4.2M ZEC that go for development and research, and change the protocol this way. Everybody and his grandma in this case would pay for the dev fee. Feel free to combine this with a replacement from POW to POS so some extra staking bonus bucks can be made that get into R&D as well.

I guess even simpler proposal than yours doesn’t fit your taste. Let me guess, it would make you pay through devaluation your current ZEC holdings?
But should this really matter if you on the other side the funding for futher development is garanteed? And after year 8 we can of course release another batch of 1M-2M ZEC, easy and simple.

Actually thinking about it, indeed, this might be worth another proposal.

1 Like

It doesn’t seem super clearly specified unless I missed but where exactly is the 20% coming from? You differentiate between holders and miners, is it a part of the block reward or is it a donation?

The 20% refers to 20 percent of the newly minted zec in each block.

2 Likes

Hello, could you please follow my request on Proposal authors, please read: Help making ZIPs ?

That will help me and ZIP editors know which forum proposals we can help turn into ZIPs.

Thanks again for your contribution!

2 Likes

Done. Thank you! 20 char

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Thank you for joining to share your thoughts!

@aristarchus would you be willing to consider incorporating an opt-in opt-out measure?
Assuming it’s a fixed 20% the amount of zcash paid out won’t change only the hashrate of the network for that. period of time (preferably short rounds)
Such a proposal I believe would be supported by the foundation if chosen and could allow the ECC to retain its current business classification i.e. minimally disruptive
Theres more to it but I plan to modify my currently “dead” proposal so it would be almost identical to this one except containing the opt in opt out measure

@Autotunafish Can you describe the exact mechanism of this opt-in opt-out measure? Also what is your motivation for this?

In general, I am open to modifying my proposal in response to good ideas from other community members, but I do want my funding proposal to be very simple to implement.

3 Likes

Yes, Im at work right now so please allow me a few hours, dont have the time presently : )

2 Likes

Basically it gives the miner the option to participate in the mining the dev fee or not and where they choose to opt out would simply not mine for the dev fee, they’re machine would idle until the dev fee round ended (basically they save the electricity they would have used)
Like mentioned above, if the % is fixed then the amount donated isnt affected but the hashrate
The motivation is to provide as close to guaranteed funding model as possible w/o causing excessive disruption to the existing community and I believe this achieves it, the Foundation (I believe) would support it and the ECC would at least be not unsupportive

1 Like