A Look at the Zcash Dev Fund Process – Josh Cinncinati

My name is Josh Cincinnati. I'm the executive director of the Zcash Foundation. Uh yay. Thank you. Thank you, folks.

Um and I'm here to talk about the Zcash dev fund process. Um as many of you may know, uh and actually, how many people here are familiar with Zcash? That is awesome cuz that saves me a lot of time I don't have to talk about the dev fund process. Um so, to those of you who are familiar with Zcash, uh there was this concept of the founders reward that existed right when Zcash existed. And it was a novel concept at the time, um meant to incentive align and promote development of uh the Zcash protocol back in 2016.

Um and as one of the I think more forward-thinking pieces of that involved uh setting aside an endowment for the Zcash Foundation um to exist, uh which received a portion of uh of that founders reward in addition to setting aside money for strategic reserve for the Electric Coin Company. Um and the expectations way back when in 2017 was that this founders reward, which was a you might view it as like a vested block reward-based um uh funding model uh for the early participants in uh in Zcash, the expectation was that it would be a bootstrapping mechanism that um it would help set up the foundation, and then the foundation would eventually convert over to a donor-based nonprofit model. Um uh while the ECC would use the money to build and grow the protocol and eventually uh develop a different business plan. So, that was the expectation back in 2017. Um and what I'm going to try to do, which is really difficult in the context of not having any slides and uh and given that there's there's been 9 months, 10 months of frenzy discussion around the Zcash dev fund, is I'm going to try and give you in 20 minutes an overview of what that process looked like.

Um so, let's start with 2018. So, in 2018, the Electric Coin Company had delivered sapling, which was one of the most amazing uh pieces of research put into production uh in zero-knowledge uh uh distributed zero-knowledge systems. Uh it enabled all sorts of things that are now the foundation of uh of where we expect the future of Zcash to go, including mobile wallets, hardware wallet support, uh fast uh pri- fast generation of zero-knowledge uh uh of the fast generation of shielded transactions. Um and all the while, they were really the main uh stewards of the Zcash protocol and doing the the lion's share of development and and work. And as that process was happening, the foundation was starting to dip its toes into grants uh and disbursements to the community on the small scale.

And we even had our own first uh attempt at a governance process meant to try and solicit and understand community will in the Zcash ecosystem. So, that first governance process was advisory, but effectively gave the foundation enough information to help elect two new board members and uh also decide our mascot, which is a fun ze- zeal of of zebras, uh which I was very happy about. Um but that that uh process ended up being sort of the the the start of what would prove to be a much more involved governance process in 2019. So, the other thing that changed uh in 2018 is originally the anticipation around and this all will connect to the dev fund in a minute, but there was this expectation that the ECC would be donating uh the trademark to the foundation and that the foundation would have ultimate unilateral control over the mark. Uh and at the time in 2017, 2016, that was believed to be the right course of action.

But as 2018 came around and the ECC and foundation started uh talking more about the future of the mark and the future of who has the legal authority to call something Zcash, um we realized that any single organization having control of that would be a net negative for the ecosystem, uh particularly as we move toward more contentious upgrade situations and scenarios. So, in 2018, we had a discussion uh we started a discussion with the ECC about this possibility of sharing ownership of the trademark uh in a novel and new interesting way. Um And and that I I unfortunately you can't see from the slide, but I have a slide here of a screenshot of me presenting about two of two multisig at Devcon 4 cuz I've always wanted to put a slide of me presenting at an Ethereum conference at an Ethereum conference. So, it's too bad. You can imagine it though.

Be great. Um but the idea fundamentally that I presented back in 2018 was that the ECC and the foundation were going to migrate to a two of two multisig model of of off-chain governance, where both organizations have equal footing in both deciding the community will um and making those informed legal decisions about what constitutes Zcash. So, at the end of 2018, we started to hear discussions and rumors emerging from the community about the possibility of a new dev fund. Uh you might view it as a continuation of the original founders reward, um but in reality, it's it's a much more constrained uh discussion around uh funding of public goods through either the ECC, the Foundation, the Zcash Foundation, or other other third parties. And I started personally hearing about interest in pursuing this model uh in late 2018.

So, then 2019 rolls around and oof, what a year. What a year uh 2019 was. Um the very first thing that happened in January of 2019 is uh a very uh dedicated, involved community member who colloquially knows goes by mine Zcash um uh ended up posting a thread about the future of Zcash in 2020 uh and started asking some really tough questions about, well, how are we going to continue to fund fund this work? Um what was also happening simultaneously in early 2019 is that the original founders reward uh the distribution was actually being changed as a in order to help continue funding the ECC, which was the first indicator um to I think people widely in the community that the ECC might require future funding to continue its work. Um and the and the foundation itself was was uh uh uh I think downstream of of that solution as a result of being um of of its funding being uh uh pledges from original founding founders reward recipients.

So, what's also happened simultaneously in 2019 as this discussion becomes more serious uh and the Zcash community forum, things start to heat up. Uh there's a a new pseudonymous account named Aristarchus submitted what I considered to be the first official dev fund proposal uh around June. Uh and then what actually happened uh simultaneously as this discussion was heating up is that another long-time community member who saw this discussion emerging and actually still um you know, felt like uh uh felt like a dev fund would be a mistake for the ecosystem ended up engaging in what was called the first friendly fork of the of the Zcash blockchain. So, he announced Ycash and effectively uh you know, exercised his right to voluntary exit before we even got to a point where we discussed uh the dev fund. So, uh in May 2019, uh the Zcash Foundation board, now aware of all this discussion going on, uh we make sort of two two decisions.

One is to uh wasn't really a decision, but more that we start opening up the discussion within the foundation board to figure out how we're going to approach the dev fund going forward, um how we're going to react to the community suggesting these proposals. Um and then we also reaffirmed our belief in the two of two governance model uh primarily through negotiating the trademark agreement with the ECC, which was still ongoing. Um so, in June and July of 2019, we have Zcon1. Uh there's a governance workshop that we wind up engaging in at Zcon1 that also uh presents a lot of great uh feedback that the foundation winds up using in helping to define guardrails and guidelines for the future dev fund discussion. Uh and then we on the foundation also realize that we have to start professionalizing and providing uh guidance for the existing discussions that were emerging in the community.

Um so, all of that leads to a post that the foundation made in August 2019 uh providing guidance to the community about how we were going to evaluate uh dev fund proposals, how we were going to collect community sentiment to make sure that the proposals people were discussing uh and eventually deciding on had a degree of community support in them uh among among other things. So, in that article, which I I I you know, again, there have screenshots that you can't see, but um it's something that I'm both personally very proud of and I think was really the framework, the scaffolding from which all of the uh all of the Zcash dev fund discussion sort of followed uh followed suit. So, one thing that we reaffirm in that post is that uh in order for any of this discussion to work, that what counts as Zcash um is legally speaking that whoever holds the trademark and how the trademark is decided. Um more practically speaking, users themselves wind up deciding what is Zcash by exercising their right to run the software that defines the the Zcash protocol. Uh in that post, we also offered the foundation's perspective on the dev fund.

Uh we mentioned the possibility of not having a dev fund, but then also mentioned like what the possible consequences would be to that kind of action. Um we established timelines for proposals and community sentiment collection, uh which was informed by that governance workshop. And then after that sentiment collection, we reaffirmed that the the foundation would evaluate those proposals based off community support and uh how we seek to pursue our mission of supporting Zcash uh protocol, and then eventually reconciling if there are any differences with the ECC. So, this all sounds well and good, but ultimately what matters here um like for us as we were setting up this uh this process is that the trademark um is is really the uh is the is the guardian of the legal guardian for what defines Zcash. And because we were operating uh under the idea that we were going to be engaging in this two-of-two multisig with the ECC, that's that's how we would move forward uh to to make sure they were making the right decision.

So, um there's like a SpongeBob meme that you can't see that says a few moments later. And then uh uh unfortunately uh that that two-of-two multisig agreement uh at at around early September of 2019, those discussions break down after um the ECC uh who is the sole owner of the trademark uh at that point uh decided that because there were all these new governance ideas emerging, that it would make sense to hold off on awarding the trademark uh until we figure out like what governance mechanism is going to dictate the way the dev fund work. Now, from the foundation perspective, uh you know, we viewed this as uh a mistake and we wanted to promote uh and protect the Zcash community. So, we ended up pushing back quite hard on this and decided that for all of the timelines that we suggested, for all the community sentiment collection that we suggested, we're just not going to do it until the ECC uh comes back to the negotiating table uh and then starts to uh resolve this trademark dispute. So, in September and October 2019, there's a picture of me and Zooko golf clapping at Zcon that you can't see on the slide, but basically those two months involved a lot of discussion between me and Zooko uh and some lawyers and some board members and some team members and a lot of back and forth um and that resulted in a delay to the timeline that we were suggesting for the dev fund process.

But the silver lining to that delay is that we wound up getting a great deal more discussion on the Zcash community forum, which it ended up in you know, incorporating probably close to thousands of posts across 13 distinct proposals uh for a new kind of Zcash dev fund, and it was really encouraging to see. What was also very encouraging is after uh that conflict, in November 2019, we had a breakthrough with the ECC. We uh the ECC agreed to donate the mark to the foundation, but still uh maintained a degree of control in accordance with the two-of-two multisig model that we had established um with this caveat that both organizations will only enforce the mark if it represents what is called the clear community uh will. Uh and that trademark agreement is a dry if interesting read, and you can go on to the Zcash Foundation website to go check it out if you'd like. But I'm really proud um I'm proud of us coming back to the table and reaching that uh consensus and agreement, because it paved the way for us to have a legitimate community controlled process around around the uh dev fund.

So, uh that all out of the way, in December of 2019, we end up engaging in the three different kinds of community sentiment collection. Uh a community advisory panel, which we had set up from the foundation initially, uh forum users, people who were the ones contributing to all of those proposals and submitting those proposals to begin with, in addition to participants on the forum, and minor sigling uh signaling, excuse me. Uh The results of those polls, unfortunately, miners didn't actually participate at all. Um and some communication that we had with the miners suggested that they were ultimately indifferent to uh a dev fund uh because in their view, as long as the research and development still was getting funded across Zcash, uh then then it would still be valuable for them to continue to secure the network. Uh and you know, obviously within reason.

I think if like the dev fund wound up being 90% of the mining reward, they would probably be upset. Um but anyway, we were sort of surprised by that. But the forum and community advisory panel did contribute a great deal of sentiment, and one ZIP uh you know, Zcash improvement proposal emerged as the um as seemed to be the winner. but there was enough disagreement and discussion in the community that we at the foundation uh decided that it would be best, based off of that discussion, to hold another another poll process um to try and figure out some of the final facets of this winning ZIP. Um and you know, December 2019 being what it is, we get really really close to running that poll, but the holidays roll around and everyone is extremely worn and burnt out from all of this governancing.

Uh so, we decide to put you know, uh pause a little bit. Uh and and so, we reemerge 2020 suitably recharged. Poll the community again, this time merging the forum users and the community advisory panel into one group comprising 119 different participants uh who then voted on this final final ZIP. And happily, for both the foundation and the ECC's perspective, we reach a degree of consensus and convergence. Um there's one like lingering issue uh that we are still resolving between the ECC and ZF, but actually, I'm pretty sure we're going to resolve that today.

Uh Zooko is giving me a thumbs up, so that is fully resolved. So, we'll have we'll have consensus and convergence. And it was like I really can't stress enough how poorly a job I just did in explaining this process, because it was eight to nine months of discussion and development and emergent phenomenon in the community. And I really like if you want to dive into the rabbit hole, I encourage you to go on to the Zcash community forum, go see all of the posts that were made by the ECC and the Zcash Foundation. It's like it's it's kind of it's one of the most interesting governance off-chain governance uh uh I think scenarios of the last couple of years.

Um So, the the key takeaway for me from this process, and not even talking about the features of the ZIP themselves, which I view as as being like a really healthy compromise that incorp incorporated a great deal of the best features of a number of the other proposals, um the you know, is is that legitimacy matters above all else when approaching this kind of process. And the best way to get that kind of legitimacy is to uh engage with the community and pre-commit to the output of a process that the community themselves deems as legitimate. Now, that might mean that the process is, you know, not all-encompassing. It might not incorporate every community voice, but as long as everyone broadly speaking in your uh project, in your ecosystem, feels like the process itself is fair and that they can trust the output, then you as an organization or as an ecosystem participant in that process can stand behind whatever the results are. And pre-committing to that ensures a degree of legitimacy that wouldn't exist otherwise.

And I I have to like applaud uh everyone in the Zcash community, because I think we did a great job of that. Um although there's always room for improvement in everything that we do. And ultimately, um despite the fact that we've reached this convergence um you know, on on what the ZIP will dictate, the real test of this process is going to be the results when the hard fork upgrade of Zcash happens and when users choose to run uh consensus-compatible software that uh enshrines these the new dev fund rules um into the network. And that we won't, you know, we won't really know until November whether that's like fully ratified that way. Um Okay, I have no idea if I'm over or under time.

Uh I'm I'm good. Okay. Well, in that case, uh I want to thank thanks to everybody for listening. Thank you. Thanks.

And yeah, feel free to find me afterwards, ask some questions. Happy happy to field them. Thank you.