2020-01-07 03:04:07 -08:00
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::
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2020-01-07 03:26:28 -08:00
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ZIP: 1014
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2020-01-07 03:04:07 -08:00
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Title: Dev Fund to ECC + ZF + Major Grants
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2020-01-07 03:26:28 -08:00
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Owner: Josh Cincinnati <josh@zfnd.org>
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Original-Author: Eran Tromer
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Credits: Matt Luongo
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Howard Loo
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@aristarchus
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@dontbeevil
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2020-01-07 08:03:56 -08:00
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Daira Hopwood
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2020-01-07 10:29:42 -08:00
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George Tankersley
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2020-01-07 03:04:07 -08:00
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Status: Draft
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Category: Consensus / Process
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Created: 2019-11-10
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License: MIT
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2020-01-07 10:29:42 -08:00
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Discussions-To: <https://forum.zcashcommunity.com/t/community-sentiment-polling-results-nu4-and-draft-zip-1014/35560>
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2020-01-07 08:03:56 -08:00
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Terminology
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===========
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The key words "MUST", "MUST NOT", "SHALL", "SHALL NOT", "SHOULD", and "MAY"
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in this document are to be interpreted as described in RFC 2119. [#RFC2119]_
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2020-01-07 03:04:07 -08:00
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Abstract
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========
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2020-01-07 03:26:28 -08:00
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This proposal describes a structure for the Zcash Development Fund, to be
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enacted in Network Upgrade 4 and last for 4 years. This Dev Fund would consist
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of 20% of the block rewards, split into 3 slices:
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* 35% for the Electric Coin Company;
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* 25% for Zcash Foundation (for internal work and grants);
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* 40% for additional "Major Grants" for large-scale long-term projects (decided
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by the Zcash Foundation, with extra community input and scrutiny).
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Funding is capped at USD 700,000/month per slice. Governance and accountability
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are based on existing entities and legal mechanisms, and increasingly
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decentralized governance is encouraged.
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Motivation
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==========
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Starting at Zcash's first halving in October 2020, by default 100% of the block
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rewards will be allocated to miners, and no further funds will be automatically
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allocated to research, development, and outreach. Consequently, no substantial
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new funding may be available to existing teams dedicated to Zcash: the Electric
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Coin Company (ECC), the Zcash Foundation (ZF), and the many entities funded by
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the ZF grant program.
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There is a need to strike a balance between incentivizing the security of the
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consensus protocol (i.e., mining) versus other crucial aspects of the Zcash
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security and functionality, such as development and outreach.
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Furthermore, there is a need to balance the sustenance of ongoing work by the
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current teams dedicated to Zcash, with encouraging decentralization and growth
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of independent development teams.
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Requirements
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============
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The Dev Fund should encourage decentralization of the work and funding, by
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supporting new teams dedicated to Zcash.
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The Dev Fund should maintain the existing teams and capabilities in the Zcash
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ecosystem, unless and until concrete opportunities arise to create even greater
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value for the Zcash ecosystem.
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There should not be any single entity which is a single point of failure, i.e.,
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whose capture or failure will effectively prevent effective use of the funds.
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Major funding decisions should be based, to the extent feasible, on inputs from
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domain experts and pertinent stakeholders.
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The Dev Fund mechanism should not modify the monetary emission curve (and in
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particular, should not irrevocably burn coins).
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In case the value of ZEC jumps, the Dev Fund recipients should not be allowed
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to wastefully use excessive amounts of funds. Conversely, given market volatility
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and eventual halvings, it is desirable to create rainy-day reserves.
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The Dev Fund mechanism should not reduce users' financial privacy or security.
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In particular, it should not cause them to expose their coin holdings, nor
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cause them to maintain access to secret keys for much longer than they would
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otherwise. (This rules out some forms of voting, and of disbursing coins to
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past/future miners.)
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The new Dev Fund system should be simple to understand and realistic to
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implement. In particular, it should not assume the creation of new mechanisms
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(e.g., election systems) or entities (for governance or development) for its
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execution; but it should strive to support and use these once they are built.
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Comply with legal, regulatory, and taxation constraints in pertinent
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jurisdictions.
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Non-requirements
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================
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General on-chain governance is outside the scope of this proposal.
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Rigorous voting mechanisms (whether coin-weighted, holding-time-weighted or
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one-person-one-vote) are outside the scope of this proposal, though there is
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prescribed room for integrating them once available.
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Specification
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=============
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Dev Fund allocation
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-------------------
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Starting at the first Zcash halving in 2020, until the second halving in 2024,
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20% of the block rewards SHALL be allocated to a "Dev Fund" that consists of
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the following three slices:
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* 35% for the Electric Coin Company (denoted **ECC slice**);
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* 25% for the Zcash Foundation, for general use (denoted **ZF-GU slice**);
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* 40% for additional "Major Grants" for large-scale long-term projects
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(denoted **ZF-MG slice**).
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2020-01-07 10:29:42 -08:00
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The slices are described in more detail below. The fund flow will be implemented
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at the consensus-rule layer, by sending the corresponding ZEC to the designated
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address(es) for each block. This Dev Fund will end at the second halving (unless
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extended/modified by a future ZIP).
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ECC slice (Electric Coin Company)
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~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
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This slice of the Dev Fund will flow to ECC.
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ECC MUST undertake a firm obligation to use the Dev Fund only in support of the
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Zcash cryptocurrency and its community.
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In particular, ECC MUST commit to not distribute the Dev Fund proceeds to its
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partners ("shareholders"), other than:
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1. In fair-market-value compensation for specific new work (e.g., to employees
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and contractors).
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2. For covering pass-through tax obligations to partners caused by ECC's receipt
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of the Dev Fund.
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(ECC is encouraged to transition to a corporate structure that would avoid the
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latter taxes.)
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This obligation MUST be made irrevocable, e.g., within ECC's corporate
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governance structure (i.e., its Operating Agreement) or contractual obligations.
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ZF-GU slice (Zcash Foundation, for general use)
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~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
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This slice of the Dev Fund will flow to ZF, to be used at its discretion for
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any purpose within its mandate to support Zcash and financial privacy,
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including: development, education, support community communication online
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and via events, gathering community sentiment, and external awarding grants
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for all of the above.
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ZF-MG slice (Zcash Foundation, for major grants)
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~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
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This slice of the Dev Fund is intended to fund independent teams entering the
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Zcash ecosystem, to perform major ongoing development (or other work) for the
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public good of the Zcash ecosystem, to the extent that such teams are available
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and effective.
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The funds SHALL be received and administered by ZF. ZF MUST disburse them as
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"Major Grants", within the framework of ZF's grant program but subject to the
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following additional constraints:
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1. These funds MUST only be used to issue Major Grants to external parties
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that are independent of ZF. They MUST NOT be used by ZF for its internal
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operations and direct expenses.
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2. Major Grants SHOULD support well-specified work proposed by the grantee,
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at reasonable market-rate costs. They can be of any duration or ongoing
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without a duration limit. Grants of indefinite duration SHOULD have
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semiannual review points for continuation of funding.
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3. Major Grants may be issued to ECC only if there are no other proposals
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to perform the specified work with similar capabilities, effectiveness and
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cost. (The intent is that eventually ECC will not receive Major Grants.)
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4. Priority SHOULD be given to Major Grants that bolster teams with
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substantial (current or prospective) continual existence, and set them up
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for long-term success, subject to the usual grant award considerations
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(impact, ability, risks, team, cost-effectiveness, etc.). Priority SHOULD be
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given to Major Grants that support ecosystem growth through mentorship,
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coaching, technical resources, creating entrepreneurial opportunities, etc.
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If one proposal substantially duplicates another's plans, priority SHOULD be
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given to the originator of the plans.
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5. Major Grants SHOULD be awarded based on ZF's mission_ and values_, restricted
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to furthering of the Zcash cryptocurrency and its ecosystem (which is more
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specific than furthering financial privacy in general).
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6. Major Grants awards are subject to approval by a five-seat Major Grant
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Review Committee. The Major Grant Review Committee SHALL be selected by the
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ZF's Community Panel. The Major Grant Review Committee's funding
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decisions will be final, requiring no approval from the ZF Board, but are
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subject to veto if the Foundation judges them to violate the ZF's operating
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documents or U.S. law.
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7. Major Grant Review Committee members SHALL have a one-year term and MAY sit
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for reelection. The Major Grant Review Committee is subject to the same
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conflict of interest policy that governs the ZF Board of Directors
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(i.e. they MUST recuse themselves when voting on proposals where they have
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a financial interest). Additionally, no one with interest in or association
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with the ECC may sit on the Major Grant Review Committee --- since the ECC
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can be a beneficiary, this avoids those potential conflicts altogether.
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The ZF SHALL continue to operate the Community Panel and SHOULD work
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toward making it more representative and independent (more on that below).
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ZF SHALL recognize the ZF-MG slice of the Dev Fund as a Restricted Fund
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donation under the above constraints (suitably formalized), and keep separate
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accounting of its balance and usage under its `Transparency and Accountability`_
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obligations defined below.
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From grant proposers' side, proposals for such grants SHALL be submitted
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through ZF's usual grant process, allowing for public discussion and public
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funding. It is intended that small one-time grants will be funded by drawing
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on the ZF-GU slice (where they also compete with other ZF activities),
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whereas large or long-duration grants will be funded from the dedicated
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ZF-MG slice; though this is at ZF's discretion (e.g. if there are no Major
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Grant applications the ZF may opt to direct the ZF-MG to smaller grants).
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ZF SHALL strive to define target metrics and key performance indicators,
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and the Major Grant Review Committee SHOULD utilize these in its funding
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decisions.
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.. _mission: https://www.zfnd.org/about/#mission
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.. _values: https://www.zfnd.org/about/#values
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Direct-grant option
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'''''''''''''''''''
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It may be deemed better, operationally or legally, if the Major Grant funds
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are not accepted and disbursed by ZF, but rather directly assigned to the
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grantees. Thus, the following mechanism MAY be used in perpetuity for some
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or all grantees, if agreed upon by both ECC and ZF before NU4 activation:
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Prior to each Network Upgrade, the Foundation SHALL publish a list of
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grantees' addresses and the total number of Dev Fund ZEC per block they
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should receive. ECC and ZF SHALL implement this list in any implementations
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of the Zcash consensus rules they maintain. This decision will then be,
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effectively, ratified by the miners as the network upgrade activates.
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2020-01-11 16:23:28 -08:00
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Monthly Funding Cap and Volatility Reserve
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~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
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Each Dev Fund slice has a Monthly Funding Cap, initially USD 700,000 for each
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slice. At the end of each calendar month, the fair market value of the Dev
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Fund ZEC received during that month will be computed, and the excess over
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the Monthly Funding Cap SHALL be deposited into a dedicated Volatility Reserve
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account by the funds' recipient. ECC and ZF SHALL describe the methodology
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used to calculate fair market value in relevant reports described under
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`Transparency and Accountability`_.
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Each slice has its own separate Volatility Reserve account, owned and
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managed by the recipient (ECC or ZF), but limited in how it may be used
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(i.e., analogously to some types of retirement or trust accounts).
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Funds may be withdrawn from the Volatility Reserve account only by that same
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party, in months where the aforementioned monthly ZEC value falls short of
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the Monthly Funding Cap, and only to the extent needed to cover that shortfall.
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The Volatility Reserve may be kept as ZEC, or sold and held as fiat currency
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or investments (whose profits will remain in the Volatility Reserve).
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The Monthly Funding Cap SHALL NOT be changed other than by unanimous agreement
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of ZF, ECC, and the majority vote of the Community Panel. (In case of excessive
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accumulation of reserves, the community MAY condition an increase of the
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Monthly Funding Cap on the redirection of some of the reserves to a different
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entity, miners or an airdrop.)
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Dev Fund ZEC that has been received, not placed in the Volatility Reserve,
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and has not yet been used or disbursed, SHALL be kept by the corresponding
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party (as ZEC, or sold and invested) for later use under the terms of the
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corresponding slice.
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Note that grantees of Major Grants are not directly subject to the Monthly
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Funding Cap, and do not have to manage a Volatility Reserve account; this is
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addressed upstream by the Zcash Foundation, which awards these grants. The
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hope is that the Foundation-managed ZF-MG Volatility Reserve will ultimately
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form a large long-term "endowment" pool that cushions the volatility for the
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various grantees, so grantees can focus on their work instead of hedging
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short-term price risks.
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Irrevocable obligations to the above MUST be made by the recipients (e.g.,
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using their Operating Agreements or by receiving the slice as Restricted
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Funds).
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Transparency and Accountability
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-------------------------------
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Obligations
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~~~~~~~~~~~
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ECC, ZF, and Major Grant recipients (during and leading to their award period)
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SHALL all accept the following obligations:
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Ongoing public reporting requirements:
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* Quarterly reports, detailing future plans, execution on previous plans, and
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finances (balances, and spending broken down by major categories).
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* Monthly developer calls, or a brief report, on recent and forthcoming tasks.
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(Developer calls may be shared.)
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* Annual detailed review of the organization performance and future plans.
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* Annual financial report (IRS Form 990, or substantially similar information).
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These reports may be either organization-wide, or restricted to the income,
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expenses, and work associated with the receipt of Dev Fund.
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It is expected that ECC, ZF, and Major Grant recipients will be focused
|
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primarily (in their attention and resources) on Zcash. Thus, they MUST
|
2020-01-07 03:04:07 -08:00
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promptly disclose:
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* Any major activity they perform (even if not supported by the Dev Fund) that
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is not in the interest of the general Zcash ecosystem.
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* Any conflict of interest with the general success of the Zcash ecosystem.
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ECC, ZF, and grant recipients MUST promptly disclose any security or privacy
|
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risks that may affect users of Zcash (by responsible disclosure under
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confidence to the pertinent developers, where applicable).
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ECC's reports, and ZF's annual report on its non-grant operations, SHOULD be
|
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at least as detailed as grant proposals/reports submitted by other funded
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|
parties, and satisfy similar levels of public scrutiny.
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|
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All substantial software whose development was funded by the Dev Fund SHOULD
|
2020-01-07 03:04:07 -08:00
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|
be released under an Open Source license (as defined by the Open Source
|
2020-01-07 08:05:19 -08:00
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|
Initiative [#osd]_), preferably the MIT license.
|
2020-01-07 03:04:07 -08:00
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Enforcement
|
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|
~~~~~~~~~~~
|
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|
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|
For grant recipients, these conditions SHOULD be included in their contract
|
2020-01-07 03:04:07 -08:00
|
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|
with ZF, such that substantial violation, not promptly remedied, will cause
|
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|
|
forfeiture of their grant funds and their return to ZF.
|
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|
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|
ECC and ZF MUST contractually commit to each other to fulfill these
|
2020-01-07 03:04:07 -08:00
|
|
|
conditions, and the prescribed use of funds, such that substantial violation,
|
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|
|
not promptly remedied, will permit the other party to issue a modified version
|
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|
|
of Zcash node software that removes the violating party's Dev Fund slice, and
|
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|
|
use the Zcash trademark for this modified version. The slice's funds will be
|
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|
|
reassigned to ZF-MG (whose integrity is legally protected by the Restricted
|
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|
|
Fund treatment).
|
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|
Future Community Governance
|
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|
|
---------------------------
|
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|
|
2020-01-07 03:26:28 -08:00
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|
|
Decentralized community governance is used in this proposal via the Community
|
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|
|
|
Panel in the following places:
|
2020-01-07 03:04:07 -08:00
|
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|
2020-01-07 03:26:28 -08:00
|
|
|
1. As input into the Major Grant Review Committee which governs
|
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|
|
the `ZF-MG slice (Zcash Foundation, for major grants)`_.
|
2020-01-07 03:04:07 -08:00
|
|
|
|
2020-01-11 16:23:28 -08:00
|
|
|
2. For changing the `Monthly Funding Cap and Volatility Reserve`_.
|
2020-01-07 03:04:07 -08:00
|
|
|
|
|
|
|
It is highly desirable to develop robust means of decentralized community
|
2020-01-07 03:45:07 -08:00
|
|
|
voting and governance --- either by expanding the Community Panel
|
2020-01-07 03:26:28 -08:00
|
|
|
or a successor mechanism --- and to integrate them into both of these
|
2020-01-07 08:03:56 -08:00
|
|
|
processes, by the end of 2021. ECC and ZF SHOULD place high priority on such
|
2020-01-07 03:26:28 -08:00
|
|
|
development and its deployment, in their activities and grant selection.
|
2020-01-07 03:04:07 -08:00
|
|
|
|
|
|
|
|
|
|
|
ZF Board Composition
|
|
|
|
--------------------
|
|
|
|
|
2020-01-07 08:03:56 -08:00
|
|
|
Members of ZF's Board of Directors MUST NOT hold equity in ECC or have current
|
|
|
|
business or employment relationships with ECC, except as provided for by the
|
|
|
|
grace period described below.
|
2020-01-07 03:04:07 -08:00
|
|
|
|
|
|
|
Grace period: members of the board who hold ECC equity (but do not have other
|
|
|
|
current relationships to ECC) may dispose of their equity, or quit the Board,
|
2020-01-07 03:26:28 -08:00
|
|
|
by 1 November 2021. (The grace period is to allow for orderly replacement, and
|
2020-01-07 03:04:07 -08:00
|
|
|
also to allow time for ECC corporate reorganization related to Dev Fund
|
|
|
|
receipt, which may affect how disposition of equity would be executed.)
|
|
|
|
|
2020-01-07 08:03:56 -08:00
|
|
|
The Foundation SHOULD endeavor to use the Community Panel (or successor
|
2020-01-07 03:26:28 -08:00
|
|
|
mechanism) as advisory input for future board elections.
|
|
|
|
|
2020-01-07 03:04:07 -08:00
|
|
|
|
|
|
|
Acknowledgements
|
|
|
|
================
|
|
|
|
|
2020-01-07 10:13:03 -08:00
|
|
|
This proposal is a limited modification of Eran Tromer's ZIP 1012 [#zip-1012]_
|
|
|
|
by the Zcash Foundation, based on feedback from the Foundation's board and
|
|
|
|
the community.
|
|
|
|
|
|
|
|
Eran's proposal is most closely based on the Matt Luongo 'Decentralize the
|
|
|
|
Dev Fee' proposal (ZIP 1011) [#zip-1011]_. Relative to ZIP 1011 there are
|
|
|
|
substantial changes and mixing in of elements from *@aristarchus*'s
|
|
|
|
'20% Split Evenly Between the ECC and the Zcash Foundation' (ZIP 1003)
|
|
|
|
[#zip-1003]_, Josh Cincinnati's 'Compromise Dev Fund Proposal With Diverse
|
|
|
|
Funding Streams' (ZIP 1010) [#zip-1010]_, and extensive discussions in the
|
|
|
|
`Zcash Community Forum`_.
|
|
|
|
|
|
|
|
The authors are grateful to all of the above for their excellent ideas and
|
|
|
|
any insightful discussions, and to Howard Loo and forum users *@aristarchus*
|
|
|
|
and *@dontbeevil* for valuable initial comments on ZIP 1012.
|
|
|
|
|
2020-01-07 03:04:07 -08:00
|
|
|
.. _Zcash Community Forum: https://forum.zcashcommunity.com/
|
2020-01-07 08:03:56 -08:00
|
|
|
|
|
|
|
|
|
|
|
References
|
|
|
|
==========
|
|
|
|
|
|
|
|
.. [#RFC2119] `Key words for use in RFCs to Indicate Requirement Levels <https://tools.ietf.org/html/rfc2119>`_
|
2020-01-07 08:05:19 -08:00
|
|
|
.. [#osd] `The Open Source Definition <https://opensource.org/osd>`_
|
2020-01-07 10:13:03 -08:00
|
|
|
.. [#zip-1003] `20% Split Evenly Between the ECC and the Zcash Foundation, and a Voting System Mandate <zip-1003.rst>`_
|
|
|
|
.. [#zip-1010] `Compromise Dev Fund Proposal With Diverse Funding Streams <zip-1010.rst>`_
|
|
|
|
.. [#zip-1011] `Decentralize the Dev Fee <zip-1011.rst>`_
|
|
|
|
.. [#zip-1012] `Dev Fund to ECC + ZF + Major Grants <zip-1012.rst>`_
|