ZIP 1014-1: Proposed Amendment to the “MG Slice (Major Grants)” Section

Governance
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Below is a draft amendment to the “MG Slice (Major Grants)” Section of ZIP 1014 as discussed in the second meeting of the ZOMG-ZIP 1014 Independent Review Committee. Please review and provide any comments by December 10. Following the comment period, I will incorporate the community’s feedback into a final version of the ZIP 1014 Amendment, which the Zcash Community Advisory Panel (ZCAP) will vote on in the upcoming Helios poll that convenes on December 20.

Objective: The ZIP 1014 Amendment allows ZOMG a discretionary budget subject to 501(c)(3) restrictions that permits committee members to allocate financial resources from the MG Slice to make itself more efficient and effective.

Background: The ZIP 1014 Amendment attempts to address and resolve some of the issues brought up by current/previous ZOMG members, primarily Chris Burniske and ML. It is also consistent with the results of the community sentiment poll I conducted on the forum in early September and the non-binding coin-holder poll conducted by the Electric Coin Company.

Summary Points: The ZIP 1014 Amendment accomplishes the following:

  • Gives ZOMG more independence and autonomy without turning it into an independent operating company.
  • Allows ZOMG to use its own funds for activities such as contracting services for support, promoting the Major Grants program, and attending conferences and networking events.
  • Maintains ZF’s role in terms of administering and disbursing ZOMG’s funds.
  • Reduces the friction between ZF and ZOMG.
  • Alleviates some of the financial and administrative burden on ZF.
  • Maintains the integrity of ZIP 1014.
  • Does not disturb the balance of power between ECC and ZF.

Open Question: Per the amendment, ZOMG’s discretionary budget is subject to a monetary cap of $500,000 per year. This amount seems reasonable today; however, we don’t want to be in a situation where we need to amend the ZIP in the future to adjust the amount upward. Is there a better way to write this provision into the ZIP? For example, should the amount be inflation or index adjusted?

Note: The original version of ZIP 1014 is located here. The amendment is below; new language is in bold and present in subparagraphs 1, 4, and 8.

ZIP 1014-1: Proposed Amendment

MG slice (Major Grants)

This slice of the Dev Fund is intended to fund independent teams entering the Zcash ecosystem, to perform major ongoing development (or other work) for the public good of the Zcash ecosystem, to the extent that such teams are available and effective.

The funds SHALL be received and administered by ZF. ZF MUST disburse them as “Major Grants”, but subject to the following additional constraints:

  1. These funds MUST only be used to issue Major Grants to external parties that are independent of ZF, with the exception of the provisions specified in subparagraph 8. They MUST NOT be used by ZF for its internal operations and direct expenses. Additionally, BP, ECC, and ZF are ineligible to receive Major Grants.
  2. Major Grants SHOULD support well-specified work proposed by the grantee, at reasonable market-rate costs. They can be of any duration or ongoing without a duration limit. Grants of indefinite duration SHOULD have semiannual review points for continuation of funding.
  3. Priority SHOULD be given to Major Grants that bolster teams with substantial (current or prospective) continual existence, and set them up for long-term success, subject to the usual grant award considerations (impact, ability, risks, team, cost-effectiveness, etc.). Priority SHOULD be given to Major Grants that support ecosystem growth, for example through mentorship, coaching, technical resources, creating entrepreneurial opportunities, etc. If one proposal substantially duplicates another’s plans, priority SHOULD be given to the originator of the plans.
  4. Major Grants and the MG Slice SHOULD be restricted to furthering the Zcash cryptocurrency and its ecosystem (which is more specific than furthering financial privacy in general) as permitted under Section 501(c)(3).
  5. Major Grants awards are subject to approval by a five-seat Major Grant Review Committee. The Major Grant Review Committee SHALL be selected by the ZF’s Community Advisory Panel or successor process.
  6. The Major Grant Review Committee’s funding decisions will be final, requiring no approval from the ZF Board, but are subject to veto if the Foundation judges them to violate U.S. law or the ZF’s reporting requirements and other (current or future) obligations under U.S. IRS 501(c)(3).
  7. Major Grant Review Committee members SHALL have a one-year term and MAY sit for reelection. The Major Grant Review Committee is subject to the same conflict of interest policy that governs the ZF Board of Directors (i.e. they MUST recuse themselves when voting on proposals where they have a financial interest). At most one person with association with the BP/ECC, and at most one person with association with the ZF, are allowed to sit on the Major Grant Review Committee. “Association” here means: having a financial interest, full-time employment, being an officer, being a director, or having an immediate family relationship with any of the above. The ZF SHALL continue to operate the Community Advisory Panel and SHOULD work toward making it more representative and independent (more on that below).
  8. The Major Grants Review Committee SHALL receive an allocation from the MG Slice to support the activities of the Major Grants program. These funds MUST be administered by ZF. The Major Grants Review Committee MAY use these funds in its sole discretion as permitted under Section 501(c)(3) for any purpose consistent with its mandate to advance the usability, security, privacy, and adoption of the Zcash cryptocurrency and to support the public good of the Zcash ecosystem, including but not limited to contracting services for administrative and operational assistance, promoting the Major Grants program, attending conferences, hosting networking events and information sessions, ecosystem-related travel expenses, research, or any other reasonable purpose not specified herein. Use of these funds MUST NOT cause an undue administrative, operational, or legal burden to ZF. The total amount allocated to the Major Grants Review Committee SHALL be determined by ZF’s Community Advisory Panel.

ZF SHALL recognize the MG slice of the Dev Fund as a Restricted Fund donation under the above constraints (suitably formalized), and keep separate accounting of its balance and usage under its Transparency and Accountability obligations defined below.

ZF SHALL strive to define target metrics and key performance indicators, and the Major Grant Review Committee SHOULD utilize these in its funding decisions.

12/14 EDIT: I updated the following language in subparagraph 8 of the ZIP amendment:

I replaced:

The total amount allocated to the Major Grants Review Committee SHALL be subject to a monetary cap of $500,000 per year.

With this:

The total amount allocated to the Major Grants Review Committee SHALL be determined by ZF’s Community Advisory Panel.

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Thanks for putting in the work for this @aquietinvestor ! Overall I think this is a fantastic step in the right direction.

The only areas I think could use refinement are:

In my opinion this terminology is too broad. Traveling to Tahiti to hold a information session and paying for open-ended research is a good way to sink large costs without a tangible benefit for Zcash end users.

I would personally limit that section to operational support and better define “any reasonable purpose”

This also seems pretty high. If ZOMG had a budget of $100,000 to support it last year I think the majority of the operational issues would have been taken care of. Plus keep in mind that ZF still has a dedicated person ( @decentralistdan ) to support it in the future so thier annual wage wouldn’t need to be included in that calculation.

Just my quick 0.00002 ZEC.

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ZOMG already has a built-in accountability mechanism to reign in out-of-scope spending: annual elections.

In the most recent Independent Review Committee meeting, @ml_sudo 's frustration with ZOMG’s hands being tied is absolutely palpable.

ZOMG should be unleashed. Literally, take off the leash. Cut out the middlemen, as Satoshi intended – just re-read the very first page of the bitcoin whitepaper. Let capital freely meet up with labor and create wonderful things!

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In response to Shawn’s commentary, I personally don’t have an issue with this as written. It’d still require the group to decide it, and sure, the majority could be malicious and put self over Zcash, but I’m much more inclined to believe ZOMG members wouldn’t do so. If this remains a concern, I’d be more in favor of reducing the monetary allocation, therefore reducing temptation and making every usage of it much more scrutinized. Besides, as you say, 100k USD would be sufficient, so reducing it shouldn’t be its own problem (though I couldn’t comment on what it should be reduced to).

As for the discretionary budget potentially needing to be adjusted, we could allow the ZF to raise it. The problem with that is it arguably goes backwards on the movement to gain independence and autonomy. Considering the ZF would only be allowed to raise it however, not limit it, it’s not really an additional power over ZOMG. Otherwise, the community needs to vote in a non-binding advisory only poll which ZF would then implement, making ZF the deciding factor regardless.

While I do also believe any discussion on this should’ve happened much sooner, and it just didn’t come to mind for me personally until reading through the above and discussions about gray areas, I will say I personally despise subparagraph 4 for being ambiguous and limiting, except for the fact it’s completely non-binding meaning it’s solely ambiguous and scaring off potentially valid proposals. I could name a couple of examples of why it can be problematic, yet I don’t believe it’s the right time to actually discuss modifications since they’re not necessary (see non-binding), so going further in depth would be pointless.

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I actually would like to put forward a change to subparagraph 4, despite being late to do so, based on a discussion I had earlier.

Major Grants and the MG Slice SHOULD be restricted to the benefit of the Zcash cryptocurrency and its ecosystem (which is more specific than furthering financial privacy in general) as permitted under Section 501(c)(3).

It replaces one word with three in order to offer more flexibility to the ZOMG in its action, with the historical example being Arti. Arti does not directly further Zcash and is primarily just an advancement for Tor which Zebra will be able to optimally hook into. That said, regardless of ZOMG’s involvement, Arti was intended to be easily integrated (though ZOMG’s grant did offer inroads with Arti to ensure a clean integration when the time comes). Because of this, Arti’s funding is arguably against subparagraph 4, with debate possible both for and against, though that’s also irrelevant as it isn’t a requirement thanks to the usage of the word “SHOULD”. Using “to the benefit of” makes it clear that works such as Arti aren’t in conflict with any section of the ZIP, without the potential for such debate.

While this may seem like a minor nitpick, I would argue Arti is directly beneficial to Zcash yet does not directly further Zcash to emphasize why I want this change. I’m sure discussion can be had over this, including discussion where even if it’s valid it’s not the time, and even if’s valid and the right time it’s not needed so it’s best to avoid any further contention over it. I do believe it’d be a valuable change though.

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FWIW I’d advocate and vote to keep the large ($500,000) cap and broadness of subparagraph 8.

There’s a psychological aspect to all this as well. Some people are happier and produce better outcomes when they feel valued and trusted. I don’t want a ZOMG member to wasting time thinking about this ever again.

The probability of a 51% attack on the ZOMG is low IMO.

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Having a higher cap is better than keeping lower cap. It doesn’t mean they “need” to spend it.

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10%? Open to more.

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Thanks to everyone who has provided comments. I appreciate your feedback.

@shawn Thank you for your response. I appreciate your view as a ZOMG member and a well-respected OG community member. I’d like to hear what the other ZOMG members think about the amendment proposal. I have contact information for ML and Hudson and will reach out to them. Would you be willing to contact Chris and Holmes, forward them this post, and ask them to provide feedback? I don’t have their contact information and it looks like they’re not on the forum very often.

I originally planned on presenting ZCAP with one amendment and giving the option to approve, reject, or abstain. However, based on the feedback I’ve received so far, it might make sense to have two amendment versions: one version similar to the current amendment and a second version with a lower cap and additional restrictions. ZCAP would have four options: (1) accept version 1, (2) accept version 2, (3) reject, and (4) abstain. I’ll wait for more comments before I draft the language for a second amendment, but I think including it as an option might make sense.

If you have not already done so, please review the proposed amendment to ZIP 1014 and let me know if you have any feedback.

Thanks!

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With the growing interest in creating RFPs by existing and prospective ZOMG members, has there been any consideration around who would take the responsibility to create, draft, review and post the RFP? And then follow up with contributors to test, evaluate and stamp the RFP as complete?

The foundation of several cryptocurrencies usually have a think tank to formalize goals and work with service providers/protocols/partners, whomever with the RFP relates to, to achieve the goal of finalizing the needs and getting stuff done. Is this an expectation from ZOMG members?

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@aiyadt the current plan (subject to discussion with the newly elected ZOMG members) is for ZF to administer the RFP process as part of our ZOMG operational support. We already have the infrastructure and templates ready to begin issuing RFPs. ZOMG will have a lead role in drafting the RFP SOWs, with outside expert assistance if needed, and they will be solely responsible for selecting the grant(s) awarded as a result of the RFP process. We still have quite a bit to discuss around exactly how the process will work but the foundational support for issuing RFPs is in place if/when the new committee decides this is part of the “toolkit” they’d like to utilize to attract interest in the grants program.

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I like the idea of indexing the budget in some way to market cap - as adoption and market cap increase in all likelihood the volume and scope of grants/rfps will similarly scale upwards potentially requiring more time and support.

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Thanks @aquietinvestor. These cover some of the major points we discussed.

A % amount of the ZOMG/MGRC funds disbursed seems like a better operating budget, subject to an absolute cap? 10% and a $1mn cap feel like good numbers. Eg if we have an $8mn inflow into Treasury, $800k is spendable. If we have $16mn, only $1mn is spendable.

Edit: Add a floor/minimum of $500k. This ensures that ZOMG has the resources to jumpstart things when the market / interest may be down.

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Is the 10% calculated off the preceding 12 months, market cap at time requested, or some other method? The price fluctuation over any given qtr could be significant and it would be nice for planning to know how much Q4 disbursement will be ahead of time vs waiting on market timing.

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It could be calculated off the preceding twelve months, or it could accrue monthly, on the first of each month, based off the average ZEC price of the preceding month.

@ml_sudo What are your thoughts on how the funds should accrue?

Does anyone else have any thoughts about the 10% / $1MM cap ML proposed?

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I think the 10% of treasury with $500k floor sounds great. I’m not sure I agree with a hard cap of $1m though. I think there does come a point where more doesn’t add to marginal utility in as straightforward of a way, especially if ZCASH moons. That said it wouldn’t be ideal to artificially cap expenses when a larger budget might be indicated to scale. Perhaps it might make sense to have an inflow threshhold where the percentage falls off in some marginal way.

So for instance up to $10m in the treasury would be 10%, thus $1m spendable, but after that the increase could be say, 5%. So $20m in the treasury would be 10% of the first $10m ($1m) + 5% of the next $10m (500k) for total of $1.5m.

Maybe it’s a bit too complicated, but it’s not hard to envision a scenario where Zcash Market Cap increases substantially and ZOMG is dealing with increasingly complex and ambitious proposals requiring additional support/expertise to engage with and evaluate. which can get very pricey if we want it to be done well.

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A few things to balance:
(a) keeping 10% as close to reality as possible
(b) having the certainty of earmarked funds to engage with people for future plans

(a) would skew us towards a more frequent schedule of assigning funds to the ZOMG e.g. monthly assignment.

(b) would skew us towards a less frequent schedule. This helps when we engage with potential contractors, conference organizers, etc. So a yearly schedule might be ideal.

On balance, perhaps a quarterly schedule would be a good middle ground.

Great questions/input, @dontpanicburns @aquietinvestor!

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I like to think about things in terms of ZEC. The accounting gets too complicated when trying to worry about funding in terms of fiat. However, I have done some math below to show what %'s would look like at current and 2021 low prices.

I’ve calculated that we have averaged roughly 1147 blocks per day since the last halving.

With .25 ZEC going to MG each block, we’re looking at 365 * 1147 = 418655 blocks per year * .25 ZEC = 104,664 ZEC to MG per year. Here’s what %'s look like based on yesterdays UTC Coinbase closing price of $173.99:

10% - 10,466 ZEC @ $1,820,979
5% - 5233 ZEC @ $910,490
3% - 3140 ZEC @ $546,314

If we were to see 2021 lows of ~$83 again (I don’t think we will with everything going on but for kicks) here’s what the funding would look like:

10% - 10,466 ZEC @ $868,678
5% - 5233 ZEC @ $434,339
3% - 3140 ZEC @ $260,620

I personally think 3% or 5% of the current incoming MG slice would be fine for what we’re discussing here. I also think the funds should be kept in ZEC. I would think this would incentivize the MG to spend it wisely, but also enable this budget to grow over time, and in proportion to the MG slice. I don’t think we need to worry about floors or caps. Instead we are subject to how well we deliver MG for the community and have the opportunity to enable Major Grants to continue functioning beyond the next halving if the community decides not to fund something like this from the staking reward beyond that point.

I think that keeping the operational budget in ZEC, like the MG slice, would enable longer term sustainability and reduce some of the complexity.

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The comment period will end in three days. If you haven’t already posted your feedback, please do so by the end of Friday.

Additionally, if you don’t have feedback per se, but you support or oppose this amendment, please comment below and let me know your reasons so I can better gauge sentiment around this initiative.

Thanks!

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It would be good to know what prospective members are thinking of — for operational spend. Be as descriptive as you can (example: I want to host a hackathon for L2 rollups on Zcash with prizes). It can be anything you want to pursue as ZOMG panel member that makes Zcash more attractive to developers & users.

cc @ZOMG-Candidate

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