ZIP: 1006 Title: Development Fund of 10% to a 2-of-3 Multisig with Community-Involved Third Entity Owners: James Todaro <firstname.lastname@example.org> Joseph Todaro <email@example.com> Credits: Mario Laul Chris Burniske Status: Draft Category: Consensus / Process Created: 2019-08-31 License: MIT Discussions-To: <https://forum.zcashcommunity.com/t/blocktown-development-fund-proposal-10-to-a-2-of-3-multisig-with-community-involved-third-entity/34782>
The key words “MUST”, “SHOULD”, “SHOULD NOT”, and “MAY” in this document are to be interpreted as described in RFC 2119. 1
The additional terms below are to be interpreted as follows:
This proposal puts forward the financing mechanism and fundamental rules of governance for the creation of a Zcash Development Fund.
The governance rules of the Third Entity MUST include the following:
Prior to any transfer of funds from the Zcash Development Fund, the ECC, ZF, and Third Entity MUST specify, approve, and make public the final rules on applying for and receiving funding from the Zcash Development Fund, including the details of the decision-making process for approving or rejecting funding requests. These rules MUST apply equally to all Applicants, including the ECC, ZF, and Third Entity, and MUST include the following:
Any decision to alter the governance of the Zcash Development Fund as described in this proposal and in final detail by the ECC, ZF, and Third Entity MUST involve the Zcash community at large, similar to the process outlined in the ZF’s August 6, 2019 statement 2. All transfers from the Zcash Development Fund MUST be in full accordance with the requirements described in this proposal.
The Zcash network is scheduled to undergo its first halving in October 2020, per current protocol specifications. At the time of the first halving, the codebase dictates that the Founder’s Reward, which consists of 20% of the ZEC from every block reward, will be terminated. Without codebase modification, for example in the upcoming NU4 Network Upgrade, 100% of block rewards would be claimed by miners after the first halving.
The two organizations presently leading development and maintenance of the Zcash network receive funds from the Founder’s Reward. These organizations, the ECC and ZF, have recently requested a source of funding after the first halving in order to continue operations for the foreseeable future. The source of funds could theoretically be from either a modification to the codebase dictating a Zcash Development Fund from block rewards or, alternatively, from external sources. The ECC has indicated though that it would “wind down or pivot” rather than accept funding from any sources that would give “special interests” control over the ECC 3.
Based on the ECC’s demands, the block reward appears to be the most agreeable source of resources for a Zcash Development Fund.
This proposal, originally published in the Zcash Community Forum on August 14, 2019 4 and formalized further in a blog post on August 23, 2019 5, outlines the funding mechanism and governance of such a Zcash Development Fund. Herein, we propose a feature of NU4 whereby 10% of the ZEC from every new block reward between the first halving and second halving would be directly deposited in a Zcash Development Fund.
For the period between the launch of the Zcash network in 2016 and the first halving, there has been a centralized 20% fee known as the Founder’s Reward taken from the block reward. Other active ZIP drafts advocate a Zcash Development Fund of 20% allocation from the block reward after the first halving. We believe that a cumulative eight years of centralized fees from the block reward at the identical rate of 20% would ultimately result in a narrow community that accepts the likelihood of a perpetual 20% fee on the Zcash network.
With a Zcash Development Fund that is only 10% of the block reward, a precedent will be set that a large centralized fund is not indefinite and will decrease faster than simply the rate of block reward halvings. Although this proposal specifically addresses the period between the first and second halving, this proposed feature may set a precedent whereby the percent fee from block rewards allocated to a Zcash Development Fund continually decreases every halving, e.g. 20% (FR) from 2016-2020, 10% from 2020-2024, 5% from 2024-2028, 2.5% from 2028-2032 (effectively quartering the ZEC allocated to a development fund every four years). We believe that this social contract could restore the community’s faith in the decentralization of Zcash as the network incentives align more closely with that of Bitcoin’s over time. Alternatively, it is not unreasonable for the Zcash governance system to elect a 0% allocation for the Zcash Development Fund upon the second halving. For a more detailed exploration regarding the selection of 10%, please review the blog post ‘Proposal for 10% Dev Fund in Zcash 2020 Network Upgrade’ 6.
Of note, we are not suggesting or implying that the funding from the Founder’s Reward and a Zcash Development Fund would be managed in a similar way or have similar directives. The Zcash Development Fund feature that we propose for NU4 does not allocate any funds to former angel investors, VCs or vested employees. Furthermore, the Zcash Development Fund would be subject to more explicit and transparent rules of governance, as outlined in the Specification section of this proposal.
The rationale behind this proposal is as follows:
Recognized objections to this proposal include:
Aspects of this proposal, particularly the Terminology and Specification sections, were adapted and expanded definitions and concepts put forth in Placeholder’s dev fund proposal from August 22, 2019 8.
|1||Key words for use in RFCs to Indicate Requirement Levels|
|2||Zcash Foundation Guidance on Dev Fund Proposals. Zcash Foundation blog, August 6, 2019.|
|3||ECC Initial Assessment of Community Proposals. Electric Coin Company blog, August 26, 2019.|
|4||Proposal for the Zcash 2020 Network Upgrade (topic on the Zcash community forum).|
|5||Blocktown Proposal for Zcash 2020 Network Upgrade. Blocktown Capital, August 23, 2019.|
|6||Proposal for 10% Dev Fund in Zcash 2020 Network Upgrade. Blocktown Capital, August 14, 2019.|
|7||Executive Summary: Blocktown Proposal for Zcash 2020 Network Upgrade. Blocktown Capital, August 15, 2019.|
|8||Dev Fund Proposal: 20% to a 2-of-3 multisig with community-involved governance (topic on the Zcash community forum).|
|9||The Zcash Network Upgrade Pipeline. Electric Coin Company blog, December 3, 2018.|