The Future of Zcash Ecosystem Development Funding

by the Zcash Foundation Board

Over the past few months, members of the Zcash community have begun discussing what should happen after the current Dev Fund sunsets in late 2024. The Zcash Foundation (ZF) looks forward to supporting the Zcash community in debating and deciding whether or not to institute a new ecosystem funding mechanism. 

As a party to the Zcash Trademark Donation and License Agreement, ZF is committed to enacting the clear consensus of the Zcash community when it comes to approving and implementing proposed changes to the Zcash protocol (aka network upgrades). The introduction of a new funding mechanism to replace (or extend) the current Dev Fund falls within this remit, as it would involve a change to the Zcash protocol.

Therefore, ZF proposes that we follow a similar approach to the tried and tested process that resulted in the creation and adoption of ZIP 1014. 

History Lesson: How the first Dev Fund was created

During 2019, the Zcash community began discussions about what should happen after the end of the Founders Reward in late 2020. In August 2019, the Zcash Foundation set forth a process and timeline, and described how it would assess community sentiment towards proposals. 

Community members drafted twenty proposals. Following extensive community debate, these twenty were whittled down to thirteen (preserved in the Zcash ZIPs repository, as ZIPs 1001 thru 1013), which were presented to the community in November 2019. 

Community sentiment was gathered using three mechanisms: 


ZF also invited miners to signal their sentiment but no miners did so. 

The results of the ZCAP (CGP), forum (F), and staked poll (CH) can be found here (with credit to ECC for creating the graphic). 

ZF and ECC worked together to draft a new, mutually-agreeable proposal based on the proposals that had received the most support from the community. 

The result was a draft of ZIP 1014, which proposed instituting a Dev Fund, consisting of 20% of newly minted coins and lasting until the next halving event (projected for late 2024). 

In January 2020, two mechanisms were used to assess community sentiment regarding ZIP 1014, and to decide on some final details, including how the Dev Fund should be divided among its recipients. 

The Zcash Foundation conducted a combined poll of users who participated in the forum poll during the first round of community sentiment gathering, alongside the pre-existing Zcash Community Advisory Panel. This combined group numbered 119, and 88 voted in the poll, which approved ZIP 1014 by 77 votes to 11. 

A staked poll of coinholders was coordinated by Zooko and Andrew Miller, in which 24 distinct Zcash addresses staked over 119,000 ZEC for the purposes of the poll. All but one of the participants in this poll (representing 99.9% of the staked coins) voted to approve ZIP 1014.

ZF and ECC subsequently agreed that ZIP 1014 should be implemented in the Zcash protocol, and it duly activated in November 2020. 

Process and Timeline for Submitting Proposals

Both ZF and ECC agree that it is desirable to gain clarity regarding the future of funding in the Zcash ecosystem sooner, rather than later. Therefore, we aim to conduct a first round of community sentiment gathering by polling ZCAP in December (alongside the Zcash Community Grants election). 

With that in mind, teams and organisations that are interested in receiving protocol funding should publicly announce their interest as soon as possible. 

As with the process that led to ZIP 1014, we invite community members to post proposals to the Zcash community forums, in the form of a draft ZIP for review and discussion by the community.

We will consult with the ZIP editors on whether they are willing to provide editorial feedback on the draft ZIPs (something that Daira and str4d did last time, and which was very useful in clarifying the proposals), and, if so, what deadline would be appropriate for submitting pull requests to the ZIPs Github repo in time for a December round of community sentiment gathering. 

We will host community calls where specific proposals can be discussed, and the community can ask questions of those who are putting forward proposals. 

After the first round of voting, we will assess the results and, if necessary, do further rounds of proposal revision and sentiment-gathering, in order to zero in on a proposal that we are confident represents the clear consensus of the Zcash community

While we don’t currently intend to formally analyze sentiment beyond the ZCAP poll, we are interested to hear suggestions and ideas  for other means of assessing community sentiment, and we will consider other forms of community feedback collected by other parties if it is valuable and informative, and was collected in good faith.

If you have suggestions or ideas, please post them to the Zcash Community Forum, in the Governance category.

A Note on Impartiality

We at the Zcash Foundation believe that the work we have carried out over the past few years has been of benefit to Zcash and the Zcash community. We hope that the Zcash community agrees, and is willing to continue funding the work of the Foundation.

However, for the avoidance of any doubt, if the Zcash community decides that the Dev Fund should end and not be replaced (or that it should be replaced but that ZF should not receive any funding), ZF will support that decision, and do what is necessary to enact it (including implementing the new consensus rules in Zebra). 

If the Zcash community does decide to create a new Dev Fund, ZF recommends furthering the decentralization of the Zcash ecosystem by increasing the number of Dev Fund recipients, with at least one recipient in a jurisdiction outside the United States. We also recommend that any new recipients should be nonprofit entities with tax-exempt status, that are subject to legally-enforceable governance requirements similar to those required of  501(c)(3) organizations (e.g. prohibition of private inurement, restrictions on excessive executive compensation, financial disclosure requirements to ensure transparency and accountability). 

We look forward to helping the Zcash community reach consensus on this important decision, which will have a far-reaching impact on the future of Zcash!