2019-11-22 15:21:24 -08:00
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ZIP: 1009
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Title: Five-Entity Strategic Council
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Owner: Avichal Garg <avichalgarg@electriccapital.com>
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2020-02-27 09:54:18 -08:00
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Status: Obsolete
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2020-11-14 14:06:46 -08:00
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Category: Consensus Process
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2019-11-22 15:21:24 -08:00
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Created: 2019-08-28
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License: MIT
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Discussions-To: <https://forum.zcashcommunity.com/t/dev-fund-proposal-5-entity-strategic-council-approach/34801>
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Terminology
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===========
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*Key terms*
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Developer Fund
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20% of the mined ZEC in the four-year period from approximately October 2020
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to October 2024, during which at most 5,250,000 ZEC will be minted.
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Strategic Council
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A five-person committee that determines how to allocate the Developer Fund.
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Held accountable to the community via regular elections.
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Executor
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An individual, group, company, or other organization that receives funding
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from the Strategic Council. They are responsible for excellent execution
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and held accountable by the Strategic Council.
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Abstract
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========
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This proposal reserves 20% of newly minted coins in each block for a Developer
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Fund. A five-person Strategic Council would be elected by the community every
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two years. The Strategic Council would determine the high level strategy,
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goals, and metrics to evaluate progress for the ecosystem on a six-month
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cadence. The Strategic Council would be responsible for allocating funding to
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Executors for the subsequent six months and summarizing the performance of
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Executors in the prior six months. Executors would submit proposals to the
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Strategic Council on a six-month cadence, including project plans, funding
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plans, and how they will measure success on a scale from 1-10. At the end of
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six months, Executors will grade themselves and the Strategic Council will
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summarize what was accomplished with a target of 7/10 in every quarter on a
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roll-up basis (a simple average of all of the outstanding projects for that
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six months).
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Out of Scope for this Proposal
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==============================
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* How to do 1 person = 1 vote (and perhaps we cannot or should not do this).
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* How to structure the Strategic Council legally, i.e. should it be a Swiss
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Foundation and what sorts of legally binding responsibilities do the
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Strategic Council members have?
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Motivation and Requirements
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===========================
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This is an attempt to put on my startup CEO hat and address the strategic and
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execution challenges I believe have held back Zcash from realizing its full
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potential.
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**Principles & Observations Based on My Experiences (a.k.a. Biases?)**
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Because layer 1 protocols are network-effect driven, without a quickly growing
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network-effect in miners, developers, users, and liquidity, a layer 1 protocol
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will ultimately collapse.
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The primary driver of success in a network-effect business is how quickly you
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grow the network effects.
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To grow a network effect, you must have both the correct strategy and
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excellent execution. If your strategy is not correct, no matter how well you
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execute, you will fail. If your execution is not excellent, you will not be
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able to assess whether lack of progress is due to poor execution or poor
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strategy.
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Thus, to build the network effects Zcash needs to succeed, we must answer five
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questions:
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1. Who determines the strategy?
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2. How do they decide on the strategy?
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3. How are they held accountable to having the correct strategy?
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4. Who executes?
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5. How are Executors held accountable to excellent execution?
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*1. Who determines the strategy?*
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* Volunteer-based approaches require the ability for individuals or entities
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to accumulate significant quantities of the underlying coin. Bitcoin did
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this through obscurity and Grin is accomplishing this through extremely
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high inflation in the early years. Zcash has moved beyond this phase and
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thus I do not believe a volunteer-based approach could be effective. Thus,
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a developer fund (or similar approach) is the only realistic option for
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Zcash today.
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* Independent, high-quality governance enables better decisions and higher
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quality execution.
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* We should ideally have the recipients of the funds be different entities
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than the governance body that allocates funds to avoid conflicts.
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* Too few people in a decision-making process and people can collude. Too
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many and nothing gets done.
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* Good governance and leadership is a significant time commitment and requires
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significant support/resources.
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* There are a variety of perspectives that should be represented, including
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miners, developers, regulators, and users.
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*2. How do they decide on the strategy?*
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* Flexibility in how funds are used is important. Strategies and markets
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change over time and we should be able to evolve. Thus, we should not
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constrain how funds are used up front.
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* There should be no constraint to using all of the funds in any given time
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frame.
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* Creating and fostering decentralized ecosystem of miners and developers is
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important for the long-term health of the ecosystem.
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* A regular and predictable cadence in planning and goal setting makes it
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easy for teams to build, ship, and recharge between intense periods of
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building.
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* Transparency in the strategy, decision making of fund recipients, and how
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funds are distributed is paramount.
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*3. How are they held accountable to having the correct strategy?*
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* No organization or individual should have a permanent seat on a
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decision-making body. Regular elections enforce good behavior.
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* Third-party audits of financial behavior enforce good behavior and create
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transparency.
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* Bad actors should be able to be removed from any decision-making body for
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egregious violations of trust or misbehavior.
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*4. Who executes?*
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* Anyone should be able to participate in the execution.
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* Over time the best executors should have reputation accrue and be able to
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receive more funds.
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* There is value in having Executors distributed across geographies and
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across entities.
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* There is value in identifying Executors who have long-term commitments to
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Zcash and will be available for long-term support and maintenance of their
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work.
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*5. How are Executors held accountable to excellent execution?*
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* Excellent execution comes from having verifiable hypotheses, backed up
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with data, and clear milestones.
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* Executors need to submit concrete plans, with clear goals and metrics, and
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be judged according to both whether or not the goals were reasonable and
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whether they accomplished those goals (ideally in a measurable way using
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metrics).
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* Execution is best measured by pre-defining success and failure criteria,
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prior to having been influenced by the challenges of the task at hand.
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Specification
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=============
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*1. Who determines strategy?*
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* A five-person/entity board -- Five people is better than three to minimize
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collusion.
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* Strategic Council should get two-year term so we can pivot people in the
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middle if necessary. No permanent seats.
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* For the purposes of voting to determine seats (not having seats vote on
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issues): one of the five seats should be allocated for miners and signaled
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through nodes. One of the five should be weighted by ZEC holding so
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1 ZEC = 1 vote. Three of the five should be 1 person = 1 vote.
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* Elections should be open such that any person or entity can run for a seat.
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* The board is a paid position from Dev Fund emissions. Compensation TBD.
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*2. How do they decide?*
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* 20% of block rewards are allocated for the Developer Fund.
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* There should not be any limit up front on where money can go. Perhaps one
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year it makes sense to invest entirely in protocol and another year it
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makes sense to invest in user adoption via content marketing, SEO, SEM,
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etc.
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* Every six months, the board has a responsibility to publish an update to
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the strategy, key metrics that are being tracked, and key metrics to hit
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as goals in the next six months. This will require feedback from the
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community but ultimately the board needs to decide on and own the strategy.
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* Every six months, the board runs a process whereby anyone can submit
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proposals for how they would best accomplish these strategic objectives
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and hit those metrics and milestones.
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* No more than 33% of funds can go to one entity for development purposes.
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This enforces broad decentralization and encourages the ecosystem to
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identify new participants.
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*How are they held accountable for having the correct strategy?*
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* Elections every two years from the community.
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* All decisions and finances are audited by a third-party audit firm.
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* There is an annual meeting of all stakeholders (perhaps at Zcon?) for
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feedback, Q and A of the board, and a walk through of what has been
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accomplished in the last six months and what the proposals are for the
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next six months for feedback. The other six-month cadence meeting for
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the Strategic Council to present its plans and receive feedback can be
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virtual.
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*4. Who executes?*
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* Individuals, teams, or companies from anywhere can submit a proposal that
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aligns with the strategy (or doesn’t), a budget for what they want to do,
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and their success criteria on a scale of 1-10 (see below).
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* Executing Entities can submit plans that may take longer than 6 months
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to complete as the reality of hiring and funding employees may dictate
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longer term financing commitment. The Strategic Committee should have
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discretion to allow for these sorts of investments but should require
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intermediate milestones and grading on the 6-month time horizon as well.
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* Companies that have sustainable business models and can support or
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subsidize engineers to work on Zcash or that have adjacent businesses
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that would benefit from investment in this technology should be encouraged
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to participate, i.e. the way Square is supporting Bitcoin we should have
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companies supporting Zcash.
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* Ideally the board also encourages non-technical execution such as education,
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video series, regulatory progress, etc.
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*5. How are they held accountable to excellent execution?*
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* At the end of six months all proposals are graded 1-10. Each team would
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pre-agree to what would would result in a 0, 3, 7, 10/10 and then they
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can move it up or down a little once results are due in 6 months. If they
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pre-agreed to some definition of results that is a 3 and then tried to
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give themselves an 8, it would look fishy and could impact future funding.
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* The Strategic Council should target an average score of 7/10 for that
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six months across all Executors. If we score too high, we are not being
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ambitious enough in our goals. If we score too low, we were trying to do
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too much or had a fundamental misunderstanding of our goals.
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* Over time the Strategic Council decides who gets funds so under-performers
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will be culled. Thus Executors are held accountable by the board and the
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board is held accountable by the community.
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Issues & Further Discussion
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===========================
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*Raised objections, issues, and open questions:*
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* How might we create a process to amending this process? We may want 4/5
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of the Strategic Council to approve changes or 2/3 of ZEC holders to be
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able to amend the Strategic Council’s charter.
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* How do we recall or impeach the members of the Strategic Committee prior
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to the end of their term if necessary?
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* I’m sure there are many other points of ambiguity and improvements we
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could make. There may even be critical design flaws or failures in this
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system. Feedback is appreciated.
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References / Background
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=======================
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.. role:: editor-note
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* https://www.zfnd.org/blog/multisig-governance/
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* https://forum.zcashcommunity.com/t/placeholder-considerations-resources-governance-and-legitimacy-in-nu4/34045
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* https://electriccoin.co/blog/ecc-initial-assessment-of-community-proposals/
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* https://medium.com/@socrates1024/here-are-a-couple-of-points-on-framing-the-discussion-of-a-potential-new-dev-fund-in-zcash-c13bcbf4ed5b
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* https://www.grin-forum.org/t/solved-early-disappointments/3682
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* https://www.electriccapital.com/ (for disclosure of investments we’ve made).
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:editor-note:`these should be made into inline references.`
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Change Log
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==========
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* 2019-08-27 Initial draft - thanks to @jubos, @puntium, @zooko, @joshs, and
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Jack Gavigan for helping me more clearly articulating my ideas and helping
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get them formatted properly for a ZIP. These ideas are solely mine and were
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not influenced by any of these individuals.
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* 2019-08-28 Updated to be in ZIP format.
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* 2019-09-15 Finally turned in to a pull request on GitHub and incorporated
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feedback from @daira and @str4d.
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