Unscrambling an Egg: Decentralization and the Zcash Foundation by Josh Cincinnati (Devcon4)

[Music] all right hello everybody thank you for choosing to wait with me for Vlad's talk I appreciate it but I'm I'm here today to talk a little bit about decentralization and the Z cash foundation as you don't know me my name is Josh Cincinnati you may have seen me on Twitter you may have seen me write some rather sarcastic white papers from time to time but my main job and what I'm really focused on is helping to distribute power in the Z cash protocol by running the Z cash Foundation so there's a specter haunting cryptocurrencies it's the specter of are we decentralized yet.com so this is something from Jackson Palmer who has made a rather welcome addition to the suite of data that we have on whether something should be decentralized or not it actually was mentioned in another Z cash Foundation board members talked earlier and it's it's a great piece of data it tells us a lot about some of the features that we care about when it comes to decentralization but it doesn't truly answer the question it provides us with intuition and heuristics and it leads I think a lot of us to realize that like that term is sort of overloaded it's a common theme it's not novel for me to say this but it does seem like it's a bit of a Shibboleth in our community and so I'm afraid that I kind of did a bad job with my title I made a bit of a misnomer in reality first off like an unscrambled egg is far more centralized than a scrambled one because you can tell by the fork in the scrambled egg but beyond that it's really not about decentralization at all it's about how we build a foundation for Z cash the protocol to grow and develop beyond the conflict excuse me beyond the confines of an individual company so the question that we have to ask ourselves is what are we really after like what's what's the goal for z cash and in particular the Z cash foundation we're dedicated to building Internet payment and privacy infrastructure for the public good with a particular focus on the Z cash protocol so what really matters to us is that mission matters very deeply to us at the foundation and what that means strategically is that we're meant to be a check and balance on the Z cash companies power full stop so earlier today in Zuko's talk I think he asked how many people were familiar with Z cash I'm gonna do the same thing how many people are familiar with Z cash hands raised great ok I'm not going to go over the history then but how many people are familiar with the fact that there is a Z cash foundation and that it is a separate entity from the Z cash company ok ok we're doing ok that's that's not bad there seems to be confusion around that generally but just to snapshot a little bit of that history after the Z cash company was founded and after the protocol was launched a segment of the founders reward that was part of the Zach distribution mechanism was granted by some of the early earlier recipients in donated to the Z cash foundation to create this this nonprofit and the idea of course being that we would help distribute power so what does that mean for us starting out well in 2017 we had some real low bar goals no scandals and when you dispersed some exploratory grants we only had I was only part-time at the time the only part-time employee there so that was like a reasonable set of goals for us back then so then the question becomes what was the Z cash company's role responsibilities and was literally everything else literally everything you can possibly imagine protocol development ecosystem partnership and growth everything was on the company side and in the middle we all had to confuse everyone by having Z cash in the foundation and company name so mission accomplished but where where do we need to go and where are we going from this year onwards so thankfully we've expanded a bit on the foundation side and we're still in the process of dispersing more grants to more ecosystem participants stay tuned for next week for our grant disbursements we've been experimenting with different governance structures incubating them you might say I apologize in advance I'm a new dad so the dad jokes are gonna come then the the other piece that we're going that we've been working on is actually hosting and supporting meetups and Zeke on 0 and also something that's new that we're getting into is researching speculative cryptography that could benefit anyone that's working on on privacy in crypto systems so the Z cache company has still maintained a fair amount of control over Z cache D supermajority of protocol roadmap and feature development and also other sort of broader ecosystem development and partnership opportunities but in the middle like we're still helping to we're both working on building open source libraries and wallets and the foundation is going to be taking a much more involved role in moving forward with protocol and future development particularly next year but why are those roles distributed the way they are and what what underlies them what motivates them what incentivizes them we love incentives and cryptocurrencies in this case it's fairly well delineate advance to a pretty pretty stark corporate language and bylaws in the Z cache company there is a fiduciary duty to shareholders as a for-profit and the foundation it's a duty of care as as a non-profit the board is tasked with making sure that the foundation is is still in line and guided tour their mission the other thing that's rather interesting that I think will help to explain how even foundations in particular us-based nonprofits that pass the public support test can be more can actually help encourage even more disbursement of power and I'll get into that a little bit later but in the middle we still have a common shared ideology which is do good by advancing privacy everywhere particularly in payments and internet payment infrastructure and to maintain and grow and grow Z cash so why aren't there more stakeholders with more Venn diagrams well the lazy answer is this is the template I got from DEFCON 4 and they didn't have three circles for me to use but the actual answer is that in a lot of political history in particular there seems to be a stabilizing force around bimodal power distributions you see it all the time for better or for worse but in general these these sorts of distributions lead to Stabler periods of development and and and more advancement in society they're really powerful particularly if you can design a bimodal power distribution that has inherent gridlock where you have common goals and aims but there are places where you might not completely agree and in those cases it's not just powerful but it's empowering it enables participants who may not have a seat at the table at one particular structure or whether you're if you're not an employee of the Z cash company but maybe you're an open-source contributor that can get a grant from the Z cash foundation there are ways for the foundation to offer an opportunity to effectively roll up a lot of user voice and user will into our organization and to be the counterbalance to the company so there's obviously an American balance of sort of bias here from from me and in effect if you wanted to make an American political analogy if political discourse was civil and mutually respectful you could you could say that the Z cash company is much like the Senate and that it's a smaller or in this case bigger organization but but definitely like represents the smaller will of people whereas the House of Representatives represents the broader will of a community but maybe a more familiar analogy for everyone whose cryptocurrency focus would suffice which is you could view this as governance by two of two multi-sig and it's it's actually like a I think a real powerful mental model for people who are familiar with multi signature transactions because that makes it very easy to understand like how things can move forward how protocols can be developed when you have these two parties that have similar aims but maybe when there's conflict there's actually no way for us to go forward in a particular feature or protocol development and I also view this as being kind of a fundamental feature and a lot of these bimodal power distributions and in fact that you'll you'll wind up seeing a lot of this behavior even represented within organizations themselves but to be intellectually honest it is still currently more like one of one because the Z cash company still controls a great deal of protocol development and and support but that's changing one of the things that I was really really excited about was the announcement earlier this week that we had the foundation are gonna be partnering with parity to develop develop a completely independent implementation of from the Z cash company that will be under foundation control after it's developed beyond that we've had these experiments that we've been incubating particularly our governance panel experiment was a really interesting way for us to try and get the voices of the community but it had a lot of flaws namely there is sort of a necessary identifying and identifiable element to the people that were participating and we as the foundation had to be arbiters of who could and couldn't participate but thanks to thanks to sapling hopefully becoming much more widely used and deployed particularly shielded transactions there's an opportunity for us to start to pull community members based off of the shielded transaction pool where no one has to reveal their identity but we can still understand in great detail the will of the community through the people that actually hold Z cash in in the shielded pool and that really excites me personally I I don't think that as many as discussed in sort of pure like carbon vote style situations it's very difficult to not have those systems be gamed so I I don't imagine that it'll be the end-all be-all of what in what we use as a foundation to describe what how we move forward but I think it's going to be a useful piece of data as we as we go there's the grants for the ecosystem development there's a future trademark agreement with the company that will be very important in determining what gets called Z cash and that's something that I think will have a very very strong analog to that idea of - of - multi-sig and then finally there are zip process improvements where we're going to be working diligently to take the product roadmap and feature discussion that currently really happens behind closed doors and make it more open so what's the point of talking about all this in the context of the foundation and why why am i speaking to you about it well it's actually quite prescriptive for people here that have projects that they're working on you really should consider a us-based 501 C 3 now look I I know that we're all here to dismantle the government and that's great and all and all for it but at the in the meantime I think it's important to recognize that we shouldn't dismiss hundreds of years of bureaucratic legal tradition that helps us understand how we can organize and reach consensus I actually like I was hearing Cory dr. oz talk about law being an additional arrow in the quiver that we have this is exactly the kind of mentality we have and he expressed it much more eloquently than I so I want everyone to have that in the back of their mind when they think about about how they should structure their projects and and just to get a little bit more detail about why public charities in particular are very very good for this one is as I mentioned there's a long legal tradition it removes some ambiguity not in the technology that you're building but certainly in what sort of duties that your board might have and how you organize - is that conflict of interest policies obviously are not perfect but they are certainly better than not having those transparency requirements 501c3 you're actually mandated to you know report when a board member refuses themselves from a discussion because of a conflict of interest at least we do in our bylaws and then there plenty there's just plenty of history of successful software and protocol focused 501 C 3s obviously the the ones that come to mind are some folks that are here from the e FF and from the Internet Archive but they're there many others and and also above and beyond that like there are norms for nonprofit pay that mean that you're basically going to be self selecting for people that are intrinsically motivated for your mission this is working for a non-profit is not a way to get rich it's a way to change something that you want to see changed in the world and lastly and something that we are gonna have to deal with after our founders reward endowment runs out there's this concept of this public support test in public charities that's actually really really powerful because effectively what it mandates and you don't have to read all that text but it really means that you have to get a long tail of your donations from members from from donations of individual donors people that are interested in your mission and want you to succeed and and that basically demands that you you have to listen to you the people that you're trying to serve and whatever whatever nonprofit you're in so in order for us to remain a public charity we have to do this and I think it's exactly the kind of accountability that will help other projects that are looking into you know looking into trying to distribute power that this is one wonderful way to do it but as mentioned I don't know that bimodal power distribution is Neph is necessarily the goal this is sort of an arbitrary view of how distributed power is forgiven cryptocurrency I think we all want to live in a world where where it's very clear that there is no central power structure that can that can dictate how we interact with the systems that were involved in whether it's payments or computation or anything else except for Doge the dogecoin hasn't changed for like two years because it's perfect and every Sheba that I've ever met is a self sovereign Sheba so thank you yes finally there we go I knew something would get some chuckles just one thing so the takeaway for aetherium or projects building on ethereum or anyone getting involved in encrypted currencies I think there's this fascination with novelty in our space and it's merited right like we're building these new systems they're kind of amazing everything that they've done is amazing and I it's incredible that that everything has has blossomed and grown and it's really wonderful space for experimentation but don't don't throw out all of this combined history that that can really help dictate how you how you structure accountability and incentives in in in the tools that you're building and and that's where there are all these tried-and-true governance models and even though a lot of us are not big fans of authoritarian States there are tools that these states provide to encourage the legal enforcement of some of these incentives and it's worth exploring them and finally if you have to have centralization for speeds sake I really believe at the the case as is the case with Zee cash that what we're doing to have a foundation as a counterbalance as a focal point for other viewpoints is is something that is tremendously important and can be really powerful for eventually reaching that state where yes you can claim that you are decentralized so thank you all very much i blaze through that I feel free if there are any questions I'm happy to take them [Applause] oh it was just like legal fees really so like ten or twenty thousand dollars I can you talk a little more about how Zeke has foundations thinks about the distribution of power versus resources because there's obviously we're in the blockchain space and yeah there's a tremendous amount of capital that's in the Zika ecosystem in to what to what role is the Zika foundation in charge of distributing that yeah and and how and and how do you think about that versus power versus yeah yeah that's a that's a great question I think in large part the grant process is supposed to be a method for us to engage particularly in that capital redistribution where we have resources that we have the foundation are not allocating as effectively as members of the community might be and we need to be able to find them and give them an opportunity to develop core pieces of infrastructure that can be a part of the Zika ecosystem and hopefully also help to distribute some of the power as a result so a good example of that is we are going to be funded in the past mobile wallets and having a mobile wallet that is not controlled by a company or the foundation is a great way to add another piece of distributive distribution to to the network of power distribution rather but a lot of them need capital and that's what the grant process is really supposed to supposed to help with I have to admit like in terms of being a little bit self-critical the current grant process is structured on in such a way that it really mirrors like an academic style grant grant committee and as a result of this first mint process is a little bit too slow I think I'm okay with the idea of nonprofits acting slower to to distribute those are just slower in general but it's still a little bit too slow for us and my hope is that we're gonna be partnering with some folks to actually build a more streamlined grant grant platform and bounty platform that will help with that too what about you know like the the biggest revenue generator in the Hashi Coast is the founders reward right right and and is that going to be like that's obviously a governance question of how that founders who were guys distributed yeah this ecosystem yeah and that's probably the most sustainable way to fund effort and on an ongoing basis yeah is there is there anything like that where there's a sustainable model where the foundation can fund something through the community yeah well I think a lot of that a lot of that depends on how so if you're if you're building a project that has a founders reward you're effectively engaging in a social contract with miners and users that you are going to create a certain carve out for for resources that should be dedicated to a given ecosystem and then the question becomes well how do you you know distribute them effectively and to be honest like the foundation it was somewhat of a foregone conclusion on how the founders were reward would be distributed because the foundation didn't exist when that decision was made but it was made as a result of in my view I think people who are looking far ahead at what needed to happen to help distribute power and those individual recipients of the founders reward came together and said we want to donate to create this foundation that's completely separate from the company and it's a rather sizable amount of of Zach it's roughly 1.4 percent of G cash that will ever be mined you know that the the full supply schedule will go to the foundation and and so the onus is on us for coming up with a better method for distributing those grants right now we have a voluntary grant review committee it's very academic it's a little slow my view is that there's a way to create more community involvement that will not necessarily involve anything fancy like on Shane but really just a platform that we run that enables people to fund projects they want to see with the possibility of getting foundation support later on yeah thanks oh hello a great talk and I'm referring to the scale that you showed us I can't help but notice that the privacy protocols are a little bit more centralized yeah do you think there is a correlation between the degree of privacy and the degree of decentralization maybe but I actually would so that's a great question but I would reframe it not in terms of privacy but in terms of cryptographic expertise necessary to execute a privacy coin because truth be told I mean doing doing this stuff right is very very difficult and very esoteric and it's hard to find the right people to do it and I mean so many kudos to the Z cache company because it's one of the brightest group of cryptographers that I've I've ever seen and I think it's it's very very difficult to find people of that of that calibre but a lot of that is also an education problem and it's something that we at the foundation are also somewhat tasked with trying to open up more opportunities for people to learn about these technologies so they can become contributors but it's very very difficult to contribute to to any sort of like you know snark development or ring signature development or or grin or MIM belen Bowl it's like it's just hard and so it that necessarily makes a smaller pool and they're also younger projects so it takes time can you share a specific example of tension that was resolved using this by model governance a specific example I would say that there's so III won't give us I'll give it a specific enough example is that better oh I'm sorry specific enough examples so you can mask it and ambiguity a bit yeah yeah okay I'll do that so there's a case where I think the come the company and the foundation we were chatting about the possibility of distributing Zee cash to to people in places that are at risk and I think it's very important important thing to do and it's very critical that we figure out a way a way to do it right but there was a case where really the foundation didn't feel quite as comfortable doing it and there was as a result lack of a joint effort on doing it that that way I will say that there also to bring a hypothetical future case up let's say that in the future that we have a version of Z cash that's promoted by the company that has some degree of a feature that is controversial that some people in the community say they don't want and we hear that feedback and we on the foundation side we collect it and we say we can't support this because of this feedback in the ecosystem at large so in that case if when we have our future sort of trademark agreement there is this possibility where the company and the foundation will come together and we will try to figure out how to make that feature work and if we can't then effectively it's like nothing can move forward that in that no neither the foundation nor the company will be able to enforce the trademark on whatever whatever fourth the company wanted to do and then the main you know whatever maintain non fork version would not be allowed to be called Z cash by trademark law now that that trademark agreement is something that we're still trying to put in place but it's something that is I think very meaningful to determining how people view what is considered like the the authentic chain going forward and that is like maybe not a very it might not be a very like satisfactory answer for a lot of people but I think that there's far more protection and going that route than just letting the company who again I deeply admire and respect but having any any organization that has unilateral control over the direction of a protocol is is just it's it's bad design so yeah yeah hello so recently we've seen a bit license approved exchanges as Gemini list in Z cash as one of their coins and I have a question as if you believe the company structure of Z cash has boosted in terms of area in terms of other privacy coins like Manero oh do you like that the company structure has helped other other yeah do you go in regulation absolutely because I think particularly with other privacy coin projects because of the lack of maybe a legal entity it's it's very unusual it's not like it's not like you'll see a narrow contributor being invited - you know - unfortunately actually like I think there should be more of a more openness and exchanges being willing to talk to individual contributors but I think it helps when you have some Authority that you can point to and say yes these are the people that I go to to talk to about privacy coins because they are a company that's represented and I know how to deal with companies as an American company myself on the I think it'll get trickier as the foundation and and companies start to distribute more of that power but part of our goal is to try and figure out how to delineate those things going forward one more question if you don't mind do you do you know if there are any very noticeable or significant downsides to choosing the company route for the cash well I mean I think the the big downside is really one that's purely of perception I think like I I again in my interactions with everyone of the company it there's not a more I mean the theorem is actually pretty close but there's not a more open and welcoming and kind group of people that are also just wicked smart and that that is the company but when you have a for-profit entity that is creating a protocol that they've knowingly want to be decentralized it leads to viewpoints and perspectives that I think can be can be difficult to try and argue against because of the kind of crypto anarchic roots of all these systems that we're building but my hope is that everything that we're doing on the foundation side will change that thank you yeah thanks cool well I think we've got a minute left and synthetic Oh so how do you manage the conflicting goals of let's say marketing something versus educating a community like how do you bridge that gap because I've noticed some cryptocurrencies kind of jumped the shark a little bit while some have invested heavily in Community Development and education yeah so actually I mean it's it's really it's as clear as the way you frame the question for the difficulty is deciding what's marketing and what's education really that's that's ultimately what it is and and and really what will wind up happening is right now there's very little interaction between the company and the foundation but there's occasionally something comes up that says oh there's this opportunity to engage with this company on on this thing and effectively it's up to my you know the Foundation Board a five-person board and amede as the executive director representing the board to decide whether that falls in line with our mission to actually educate or if it's just you know marketing or business development and so if we if we basically disagree on approach then the company can do what they independently want and similarly if if the company disagrees with our approach on a particular partnership like that's fine but we're gonna go our way cool all right and I'm done thank you all very much really appreciate your time Thanks you