ZIP: 1003
Title: 20% Split Evenly Between the ECC and the Zcash Foundation, and a Voting System Mandate
Owners: aristarchus (zcash forums)
Status: Obsolete
Category: Consensus Process
Created: 2019-06-19
License: MIT
Discussions-To: <https://forum.zcashcommunity.com/t/dev-fund-proposal-20-split-between-the-ecc-and-the-foundation/33862>

Terminology

The key words "MUST", "MUST NOT", "SHOULD", and "SHOULD NOT" in this document are to be interpreted as described in BCP 14 1 when, and only when, they appear in all capitals.

For clarity in this ZIP I define these terms:

2nd Halvening period
the 4-year period of time, roughly from October 2020 to October 2024, during which at most 5,250,000 ZEC will be minted.
3rd Halvening period
the 4-year period of time roughly from October 2024 to October 2028.
DF%
Dev Fund Percentage, the portion of newly minted ZEC in each block reserved for a development fund.

Abstract

This proposal would allocate a 20% Dev Fund Percentage to be split evenly between the Electric Coin Company (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 development 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.

Motivation

Strengths of this proposal:

  1. Simple to implement. I would rather developers spend time scaling Zcash rather than implementing the development 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 development 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.

Requirements and Specification

  1. DF% MUST be 20 percent, split evenly between ECC and the Zcash Foundation during the 2nd Halvening period.
  2. The Dev Fund MUST only be spent on research, development and adoption of Zcash.
  3. A voting system for development funding MUST be built and implemented in order to be used during the 3rd Halvening period.

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

These requirements would apply to both ECC and the Zcash 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 technology 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 the State of the Zcash Foundation report 2.

Requirements Specifically for the ECC

Motivated by the Zcash Foundation’s proposal that the ECC become a non-profit 3, 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 development 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 development 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 the start of the 3rd Halvening period, the 20% of funds intended to go to the ‘voting development fund’ should instead not be minted.

References

1 Information on BCP 14 — "RFC 2119: Key words for use in RFCs to Indicate Requirement Levels" and "RFC 8174: Ambiguity of Uppercase vs Lowercase in RFC 2119 Key Words"
2 The State of the Zcash Foundation in 2019. Zcash Foundation blog, January 31, 2019.
3 Zcash Foundation Guidance on Dev Fund Proposals. Zcash Foundation blog, August 6, 2019.

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