ZIP proposal: ZCFS (Zcash Community Funding System)

ZIP: XXX
Title: ZCFS (Zcash Community Funding System)
Author: Dimitris Apostolou <dimitris.apostolou@icloud.com>
Category: Consensus
Created: 2019-06-23
License: MIT

Abstract

This proposal specifies a change in the Founders Reward funding system by introducing a new funding mechanism called ZCFS (Zcash Community Funding System).

Motivation

The motivations for ZCFS are:

  • The Founders Reward is set to expire in 2020 and a new development fund will be required.

  • The Founders Reward has caused significant friction in the Zcash community and sparked forks due to disagreement with the fund’s structure.

  • There needs to be a more fair and decentralized funding mechanism.

Specification

This specification is a modification of the Monero Community Crowdfunding System (CCS) and is defined as follows:

  1. The Zcash protocol is changed so that 100% of mining rewards go to miners.

  2. An individual, team or company (for-profit or non-profit), henceforth ‘proposer’, has an idea to improve the Zcash ecosystem that requires funds.

  3. The proposer creates a ZCFS proposal in a modified version of the existing ZF Grants website, to be called the ZCFS website. The ZF Grants website already has the basic infrastructure for this mechanism and needs to be tweaked in order to facilitate this specification. The ZF Grants website will continue to operate in its current form.

  4. In the beginning of this protocol change, the Zcash Foundation is put in charge of the ZCFS.

  5. The Zcash Foundation is required to make ZCFS proposals for its own funding. If the community decides not to fund it, then the ownership of the ZCFS is transferred to the proposer who is instead funded by the community for that matter.

  6. After a ZCFS proposal has been created, the community discusses the pros and cons of the proposal, and offers feedback and critique.

  7. The proposer changes the proposal (if necessary), utilizing the feedback and critique of the community.

  8. Repeat steps 6 and 7 as needed.

  9. After the Zcash Foundation (or whoever has ownership of the ZCFS at the time) has determined that the community has reached loose consensus, the funding begins by ZEC holders who wish to donate.

  10. Once fully funded (not guaranteed), the proposer begins on the work, if they haven’t already.

  11. Milestones are completed and funds are disbursed upon their completion.

  12. After all milestones are completed, the proposal is locked and all info is retained for posterity.

Rules and Expectations

The ZCFS is intentionally left as informal as possible. This allows for flexibility of the system, and keeps things from being red taped into oblivion. However, there are some things you should understand, things that will be expected of you, as either a proposer or a donor, and a recommended way of structuring a proposal for maximum likelihood that your project will be funded.

For Donors

  1. The ZCFS is escrowed by the Zcash Foundation (or whoever has ownership of the ZCFS at the time). When you make a donation, you are releasing funds to them to disburse when they deem the community agrees that a milestone is complete. They do not do the work to verify donors, and the final decision for all disputes falls with them, although they do their best to follow community sentiment.

  2. In the event that a proposal is overfunded, unable to be completed, or otherwise put in a state where donated money will not be disbursed to the proposer, the default is that the remaining ZEC will be put in the ZF Grants fund.

  3. Refunds are extraordinarily rare. Donate accordingly.

  4. If the proposer disappears, no problem, someone else can pick up from their last milestone.

  5. Milestone and payout structures vary per proposal based on the proposer’s wishes. It is up to the donor to do their due diligence in whether or not they support the proposal in its entirety.

For Proposers

  1. There is no guarantee that your project will get past the community feedback stage, and if it does, there is no guarantee that it will be funded.

  2. You have to drum up support for your proposal during the feedback and funding stages. Do not expect others (especially the Zcash Foundation or other trusted members of the community) to do it for you. Others may share and support if they are excited about your project, but ultimately it is nobody’s responsibility but your own.

  3. It is expected that you provide updates on the progress of your proposal to the community. For every milestone completed there should be a written report put into your ZCFS proposal announcing its completion and the work done, but depending on the timeline of your project, it may be wise to update the community more frequently.

  4. All work must be licensed permissively at all stages of the proposal. There is no time where your work can be licensed under a restrictive license (even as you’re working on it). Your proposal will be terminated if this is not remedied.

  5. You may NOT under any circumstances include a donation address directly in your proposal. This circumvents the ZCFS, and can lead to scams.

  6. Your work on the project can begin before the proposal is fully funded but disbursment of funds is done only upon completion of milestones and only if the proposal is fully funded.

5 Likes

Would love to get feedback from @sgp on this since he has been living the Monero CCS for a while now and knows the pros and cons.

2 Likes

I personally like this proposal and i think your proposal has many aspects in it that i as well had in mind while creating the proposal below. I even think your and mine proposal could be combined …

2 Likes

We could theoretically do this through grants.zfnd.org, even.

3 Likes

Love to see the community dedicating time on ZIPs, really enjoy reading everybodys “homework” :smiley:

This is a very valid and well written proposal and with @boxalex 's are the most honest and fair so far.

Personal thought:

I do feel that the ECC should have a fixed percentage thoo… even a small 1% to not take them out entirly from the early stages of development, not that a 1 or 2% will bring in serious work, but their expertise and guidance is very precious IMHO. I’m very grateful for what has been done and don’t feel that the FR was a scam or that I partecipated without understanding their model of distribuition. The “contract” was clear and some great milestones have been made, all in all: the best “kickstarter campaign” I’ve ever partecipated too

2 Likes

I agree with this proposal. Anything that moves towards the free market deciding.

1 Like

Hey @sgp do you have some time to comment on this proposal? Your input (and Sarang’s if he wishes to chip in) is greatly appreciated.

1 Like

Thanks for this proposal!

Can you spell out for me and others unfamiliar with both systems how this ZCFS would differ from the current ZF Grants system?

1 Like

it will only require minor tweaks in order to support the spec. For example, the ability for someone else taking over a milestone if the original proposer disappears.

Basically, the infrastructure is already there. That’s the beauty of it.

1 Like

I like large parts of the governance side of this as the way of managing a pool of funds. Particularly the loose consensus and flexibility. But I have some questions about getting the pool of funds in the first place.

What wealth concentration is necessary in Zcash for this to be effective? I.e. for there to be anyone who would donate money.

Certainly, community funding works for Bitcoin. But we know there are a number of whales, not to mention devs who have enough money they never need to work again, supporting Bitcoin. Moreover, there are investors with deep positions where it is profitable for them to fund development and increase the price.

Is the same thing true in Monero? From the outside, it seems Monero also has deep pocketed whales.
Monero has a vibrant online community. Do we know how widely distributed the community funding sources are in Monero?

I feel these questions are important. Because maybe we have the right wealth distribution for this to work. On the other hand, maybe we look more like Grin which keeps begging for money and barely getting by. How do we know in advance?

2 Likes

I think there are enough investment companies & whales around that have large stakes of Zcash and a lot of interest that Zcash has success. Recent examples are Placeholder, Amentum and for sure many others.

1 Like

@rex4539

repeating myself and as my proposal changed to a new one with “opt-in” dev fee + other funding sources i still think your proposals and mine could/would be perfectly combined.

The current level of community donations to ZF Grants campaigns is a source of data, albeit a tentative one. For now, it doesn’t look like the Zcash community wants to kick in much for ecosystem projects. OTOH, it’s a new platform so low levels of activity are normal, and we’ll have a better sense of the response in a few months.

Speculation: If the funding dynamics of Zcash changed, the community at large might be more interested in contributing funds for development work and other projects. I suspect that the current attitude is something like, “You have all this money from the block rewards, so use it! We’re already funding you, and it’s your responsibility to pay for these projects.” I think that perspective is understandable, especially when coming from miners.

As @boxalex suggested, it’s possible that VC firms with ZEC positions would become interested in contributing to work that would increase the utility (and thus value) of Zcash, if there’s no ongoing funding stream that already handles that. Or they might write off the investment, it’s hard to say.

I don’t think donations / pledges will be enough to replace ECC’s current burn rate, though. Which is not to say that anyone has an obligation to sustain ECC’s staffing and spending levels, but it’s worth noting since the team does crucial work.

Placeholder and a number of VCs have amassed some ZEC. But I think they are unwilling to invest. There is a free rider problem that rational actors who can choose where to put there money are sensitive to. Why would placeholder fund development when they could just buy zec and play chicken until someone else funds dev? In contrast, I think for Bitcoin people have their heart in it and have money. And for Monero the wealth of the whales may be mostly locked up in Monero, so they don’t have other options.

1 Like

You named it allready, first of all it’s a new platform, not much too interesting grant proposals either. Let’s say you add some boomers there in case it’s the only funding source like 100x more scalability, Bolt++, and and and, this would change a lot very fast.

That’s not just speculation, it’s common sense and logic and let’s just name it as it is. It’s exactly that what happenes currently. Let’s be honest. Why should someone donate a ZEC here and there when there are indeed several millions available per month from the FR? Just logical that there is not much icentive.

Both are possibilities that are valid. So is the opt-in mechanism that foundation supports. There is no garantee miners will opt-in either. Actually, just in my opinion, the chance that VC firms opt-in here and there for real attractive proposals is way higher than maybe the miner opt-in option. We don’t know, but in a combined option, donations + opt-in we could get out a bit more.
And as said above, if there are boomers on the road-map i could bet the VC firms are the first who buy first stakes of ZEC and than push the realization of game changers, innovations, and such…

I agree, we don’t know. Hence there is nothing wrong in exploring additionally non-promise breaking funding sources, hence we i would love to see this proposal to be combined with my opt-in voluntary funding + some other possible sources.

Fair enough. But the same goes for the only possible option for the foundation “opt-in” dev fee. You have 0 garantee any miner will opt-in.

Actually there is always a scenario why firms like placeholder or even bigger ones should/could be interested in financing a given innovation/upgrade/whatever. It’s pure profit mathematics. Would you maybe invest 5% of your holdings into something if you have a big chance you make a 20% profit out of it? Of course we would do because that’s how crypto investing works. Why did the first VC’s invest into Zcash company? Because they had a good chance to make a profit, right? Did they make a good profit, they did of course. Do they regret it? No way. There is a lot of incentive for VCs to push grants.

Actually thinking about it, i would add some more competive factor to the whole developement process.

1 Like

Yeah, this is definitely a significant concern. The miners could also hold the development team(s) hostage by withholding funding, for example if significant funds were going to proof-of-stake research, which miners would plausibly oppose. Relying on miners’ benevolence more than we already do is risky, although we might be able to tinker with the incentives more and come up with a resilient system.

1 Like

Very valid point in my opinion. Hence an additionally founding system like the grant donation platform in @rex4539 proposal would be a more than good balance that there is no such chance.

Edit: Community and/or VC firms easly could push grants & proposals without being dependet on the mercy of asic miners and/or mining pools. Like switching to POS for example which could otherwise being embargoed by only opt-in funding. With @rex4539 proposals there are enough options to counter every possible hostage to miners scenario.

1 Like