The community around Zcash (ZEC) debates the options regarding the future of cryptocurrency, between sending 100% of the founders’ reward to miners or creating a new Development Fund using a portion of the new ones. emissions. They also study other alternatives.
The debate emerged on Wednesday, July 31 after Zooko Wilcox, CEO of Electric Coin Company (ECC), the firm behind Zcash, posted an extensive open letter in which he raised the possibility of create a new Development Fund to support future operations of cryptocurrency, focused on privacy.
Since the end of the Founders’ Reward was set for October 2020, Wilcox wrote in his letter that he hopes community members will decide to renew the Development Fund structure. The financing plan consists of allocating a certain percentage of future block reward coins to Zcash’s “basic support functions.”
According to Wilcox the funds are necessary for the software and business development, government and regulatory activities, and user support. Funding will also be needed for Zcash’s security audit, educational programs, and marketing.
The Zcash co-founder added that he hopes the community will decide to hire the Electric Coin Company to carry out maintenance work and improvements to the cryptocurrency protocol.
He also stated that he should not be the one to make the decision and believes that the community is likely to have to go through a difficult and messy decision-making process, but that, in his opinion, this is healthy. “The complexity and noise of the debate in the Zcash community right now is a good sign,” he wrote.
Last May, ECC announced that it rejected the proposal that was part of the next update of its network scheduled for October of this year. At the time Wilcox noted that “ultimately, we have decided that the opportunity costs for shipping from Split-FR outweigh the benefits.”
The Split-FR update, as they called it, proposed a change to the current consensus rules, which send part of the block reward (20% according to current Zcash protocol) to a Founders Reward account (FR for its acronym in English), single and rotating, managed by ECC. The change proposed that this amount be disaggregated in several different FR directions, to decentralize the administration of these resources.
Had the Split-FR amendment advanced, the FR would be distributed across three separate funds: the Zcash Foundation, the Zcash Company Dev Fund, and the Reward Fund. Each category would receive a proportion of that 20% of the block reward.
All this occurred even when the company management explained that Zcash is a decentralized community-based project, and that some of the activities related to cryptocurrency businesses may involve ECC.
In search of financing
In 2016 a group of professional investors contributed a total of USD 3 million to finance the initial development of the Zcash protocol.
Designed to follow the same schedule as Bitcoin, the maximum issue of Zcash’s native cryptocurrency, ZEC, is capped at 21 million.
At the end of the first four years of Zcash’s existence, it is expected that 2.1 million or 20% of the 10.5 million ZEC extracted, up to that moment, will be distributed to the founders of the project. The remaining 8.4 million cryptocurrencies will be delivered to miners.
In her letter Zooko Wilcox explained that Zcash’s early investors will receive a “small fraction” of ECC’s capital in exchange for their initial contribution of $ 3 million. In addition to the capital of the company, the first backers received a small percentage of the reward cryptocurrencies of the founders, which were paid during the first year of existence.
The first version of the cryptocurrency, called Zcash 1.0, was delivered on time and “under budget,” Wilcox noted. He also mentioned that Zcash has provided $ 10 billion of transactional value to its users.
Explaining how the original Development Fund for the cryptocurrency Zcash came about, Wilcox revealed that he and Nathan Wilcox, founder of ECC, bought a small part of the FR from some of the early investors. The coins acquired were used to fund Zcash’s ongoing operations, rather than being handed over to the founders.
That action was called The Strategic Reserve in our original blog posts, but it is a confusing name because it turns out that the money was not being held in reserve, it was used to fund ongoing operations! So sometimes I refer to that part of the coins as “The Dev Fund.”
Bryce “Zooko” Wilcox, CEO de Electric Coin Company (ECC).
Wilcox further noted that some of the Zcash founders, including himself, donated a portion of their rewards to a nonprofit called the Zcash Foundation. He claimed that he has donated approximately “half of all the wealth I expected to see in this world” to establish the Foundation.
According to Wilcox, the foundation is an independent entity that plays a key role in supporting decentralization of the Zcash community and to overall long-term stability.
The Zcash co-founder noted that the project funds have been managed properly, and that no ECC workers were laid off during the 2018 bear market expansion. Meanwhile, the organizations that support Dash, Steem and Ethereum Classic, among others, they were forced to lay off their workers due to lack of funds.
However, the ECC faced the cryptocurrency bear market of 2018, using 8% of the ZEC’s monthly issuances (instead of just 4%) to fund operations and pay employees, Wilcox noted.
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Future of Zcash Debate: New Development Fund or 100% Reward for Miners?