ZIP 1014: wording updates; volatility reserve is per organization.

Deletes "ZF may award grants as profit-sharing contracts".
Adds "The ECC will not be eligible for Major Grants if they have any funds available in their slice's Volatility Reserve" (which is later deleted).
Transfers responsibility for Major Grants awards from the ZF Board of Directors to a separate committee.

Originally 025dc79858

Co-Authored-By: Josh Cincinnati <acityinohio.users.noreply.github.com>
Signed-off-by: Daira Hopwood <daira@jacaranda.org>

zip-1014.rst

@@ -1,19 +1,24 @@
 ::
 
-  ZIP: 1012
+  ZIP: 1014
   Title: Dev Fund to ECC + ZF + Major Grants
-  Owner: Eran Tromer <eran@tromer.org>
+  Owner: Josh Cincinnati <josh@zfnd.org>
+  Original-Author: Eran Tromer
+  Credits: Matt Luongo
+           Josh Cincinnati
+           Howard Loo
+           @aristarchus
+           @dontbeevil
   Status: Draft
   Category: Consensus / Process
   Created: 2019-11-10
   License: MIT
   Discussions-To: <https://forum.zcashcommunity.com/t/dev-fund-proposal-dev-fund-to-ecc-zfnd-major-grants/35364>
 
-
 Abstract
 ========
 
-This proposal describes a structure for a the Zcash Development Fund, to be
+This proposal describes a structure for the Zcash Development Fund, to be
 enacted in Network Upgrade 4 and last for 4 years. This Dev Fund would consist
 of 20% of the block rewards, split into 3 slices:
 
@@ -32,7 +37,7 @@ Motivation
 
 Starting at Zcash's first halving in October 2020, by default 100% of the block
 rewards will be allocated to miners, and no further funds will be automatically
-allocated to research, development and outreach. Consequently, no substantial
+allocated to research, development, and outreach. Consequently, no substantial
 new funding may be available to existing teams dedicated to Zcash: the Electric
 Coin Company (ECC), the Zcash Foundation (ZF), and the many entities funded by
 the ZF grant program.
@@ -56,18 +61,18 @@ which has similar motivations. The major changes are as follows:
   present themselves, to mitigate unwarranted loss of existing capabilities.
 * For simplicity, the above slice is combined with the Foundation's existing
   grant system; but is accompanied by explicit requirements to achieve its
-  goals, independent advisory input, and a Restricted Funds mechanism to
+  goals, an independent body to disburse funds, and a Restricted Funds
-  enforce these requirements.
+  mechanism to enforce these requirements.
 * The "easing function" coin value cap is removed, in favor of capping each
-  slice at $700k/month funding target. Any excess is kept in a reserve, from
+  slice at $700k/month funding target. Any excess is kept in a reserve by each
-  which it can be withdrawn only to maintain the funding target in the future.
+  organization, from which it can be withdrawn only to maintain the funding
+  target in the future.
 * Strengthened the transparency and accountability requirements, and
-  harmonized them across ECC, ZF and major grantees.
+  harmonized them across ECC, ZF, and major grantees.
 * Removed ZF's supervisory role in determining the "principal developer",
   fixing it to be ECC (changing this would be sufficiently dramatic to merit a
   fork).
-* Small differences in prescribed changes to the ZF board.
+* Calls for the development of decentralized voting and governance.
-* Call for, and incentivize, development of decentralized voting and governance.
 * Clarity and brevity.
 
 .. _Decentralizing the Dev Fee: https://forum.zcashcommunity.com/t/decentralizing-the-dev-fee/35252
@@ -106,7 +111,7 @@ implement. In particular, it should not assume the creation of new mechanisms
 (e.g., election systems) or entities (for governance or development) for its
 execution; but it should strive to support and use these once they are built.
 
-Comply with legal, regulatory and taxation constraints in pertinent
+Comply with legal, regulatory, and taxation constraints in pertinent
 jurisdictions.
 
 
@@ -152,7 +157,7 @@ Zcash cryptocurrency and its community.
 In particular, ECC must commit to not distribute the Dev Fund proceeds to its
 partners ("shareholders"), other than:
 
-1. In fair-market-value compensation for specific new work.
+1. In fair-market-value compensation for specific new work. (e.g., to employees)
 2. For covering pass-through tax obligations to partners caused by ECC's receipt
    of the Dev Fund.
 
@@ -168,14 +173,10 @@ ZF-GU slice (Zcash Foundation, for general use)
 
 This slice of the Dev Fund will flow to ZF, to be used at its discretion for
 any purpose within its mandate to support Zcash and financial privacy,
-including: development, education, support community communication on-line
+including: development, education, support community communication online
 and via events, gathering community sentiment, and external awarding grants
 for all of the above.
 
-ZF may award grants as profit-sharing contracts, in which case any resulting
-profits will be added to the ZF-GU slice (to fund its ongoing operations and
-any future grants).
-
 
 ZF-MG slice (Zcash Foundation, for major grants)
 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
@@ -200,7 +201,9 @@ following additional constraints:
 
 3. Major Grants may be issued to ECC only if no other parties are available
    and capable of performing the specified work with similar effectiveness and
-   cost. (The intent is that eventually ECC will not receive Major Grants.)
+   cost. The ECC will not be eligible for Major Grants if they have any funds
+   available in their slice's Volatility Reserve. (The intent is that
+   eventually ECC will not receive Major Grants.)
 
 4. Priority will be given to Major Grants that bolster new teams with
    substantial (current or prospective) continual existence, and set them up
@@ -213,19 +216,22 @@ following additional constraints:
    ecosystem; this is more restrictive than ZF's general mission of furthering
    financial privacy.
 
-6. Major Grants awarding is subject to individual approval by ZF's Board of
+6. Major Grants awarding is subject to approval by a five-seat Major Grant
-   Directors, by a majority excluding any members with a conflict of interest.
+   Review Committee. The Major Grant Review Committee will be selected by the
+   ZF's Community Advisory Panel. The Major Grant Review Committee's funding
+   decisions will be final, requiring no approval from the ZF Board, but are
+   subject to veto if the Foundation judges them to violate the ZF's operating
+   documents or US law.
 
-7. ZF shall seek advisory input on its choice of Major Grant awards, by all
+7. Major Grant Review Committee members have a one year term and can sit
-   effective and reasonable means (e.g., on-line discussion forums, the
+   for reelection. The Major Grant Review Committee is subject to the same
-   community Advisory Board, on-chain voting by holders and miners, and
+   conflict of interest policy that governs the ZF board of directors.
-   proactive consultation with experts). The ZF Board of Directors shall
+   (i.e. they must recuse themselves when voting on proposals where they have
-   strive to follow this advisory input (within the confines of the
+   a financial interest) Additionally, no one with interest in or association
-   Foundation's charter and duties).
+   with the ECC may sit on the Major Grant Review Committee --- since the ECC
-
+   can be a beneficiary, this avoids those potential conflicts altogether.
-8. ZF shall strive to create an independent grant committee to evaluate and
+   The ZF will continue to operate the Community Advisory Panel and will work
-   publicly recommend Major Grant proposals, based on the committee's
+   toward making it more representative and independent (more on that below).
-   expertise and the above inputs.
 
 ZF shall recognize the ZF-MG slice of the Dev Fund as a Restricted Fund
 donation under the above constraints (suitably formalized), and keep separate
@@ -233,14 +239,16 @@ accounting of its balance and usage under its Transparency and Accountability
 obligations defined below.
 
 From grant proposers' side, proposals for such grants will be submitted
-through ZF usual grant process, allowing for public discussion and public
+through ZF's usual grant process, allowing for public discussion and public
 funding. It is intended that small one-time grants will be funded by drawing
 on the ZF-GU slice (where they also compete with other ZF activities), whereas
-large long-duration will be funded from the dedicated ZF-MG slice; though this
+large long-duration will be funded from the dedicated ZF-MG slice; though
-is at ZF's discretion.
+this is at ZF's discretion. (e.g. if there are no Major Grant applications the
+ZF may opt to direct the ZF-MG to smaller grants)
 
 ZF shall strive to define target metrics and key performance indicators, and
-utilize these in its funding decisions.
+hopes the Major Grant Review Committee will utilize these in its funding
+decisions.
 
 
 Direct-grant option
@@ -274,12 +282,11 @@ the Funding Target, and only to the extent needed to cover that shortfall.
 The Volatility Reserve may be kept as ZEC, or sold and held as fiat currency
 or investments (whose profits will remain in the Volatility Reserve).
 
-The Funding Target may be changed only by unanimous agreement of ZF, ECC and
+The Funding Target may be changed only by unanimous agreement of ZF, ECC, and
-the majority vote of a voting mechanism weighted by ZEC coin holding. (This is
+the majority vote of the Community Advisory Panel. (In case of excessive 
-meant to encourage the creation of such a voting mechanism. Moreover, in case
+accumulation of reserves, the community can condition an increase of the 
-of excessive accumulation of reserves, the community can condition an increase
+Funding Target on the redirection of some of the reserves to a different
-of the Funding Target on the redirection of some of the reserves to a
+entity, miners or an airdrop).
-different entity, miners or an airdrop).
 
 Dev Fund ZEC that has been received, not placed in the Volatility Reserve,
 and has not yet been used or disbursed, will be kept by the corresponding
@@ -297,7 +304,7 @@ Transparency and Accountability
 Obligations
 ~~~~~~~~~~~
 
-ECC, ZF and Major Grant recipients (during and leading to their award period)
+ECC, ZF, and Major Grant recipients (during and leading to their award period)
 shall all accept the following obligations:
 
 Ongoing public reporting requirements:
@@ -311,9 +318,9 @@ Ongoing public reporting requirements:
   information).
 
 These reports may be either organization-wide, or restricted to the income,
-expenses and work associated with the receipt of Dev Fund.
+expenses, and work associated with the receipt of Dev Fund.
 
-It is expected that ECC, ZF and Major Grant recipient will be focused
+It is expected that ECC, ZF, and Major Grant recipients will be focused
 primarily (in their attention and resources) on Zcash. Thus, they must
 promptly disclose:
 
@@ -321,7 +328,7 @@ promptly disclose:
   is not in the interest of the general Zcash ecosystem.
 * Any conflict of interest with the general success of the Zcash ecosystem.
 
-ECC, ZF and grant recipients must promptly disclose any security of privacy
+ECC, ZF, and grant recipients must promptly disclose any security or privacy
 risks that may affect users of Zcash (by responsible disclosure under
 confidence to the pertinent developers, where applicable).
 
@@ -353,39 +360,36 @@ Fund treatment).
 Future Community Governance
 ---------------------------
 
-Decentralized community governance is used in this proposal in the following
+Decentralized community governance is used in this proposal via the Community
-places:
+Advisory Panel in the following places:
 
-1. As advisory input to the `ZF-MG slice (Zcash Foundation, for major grants)`_.
+1. As input into the Major Grant Review Committee which governs
+   the `ZF-MG slice (Zcash Foundation, for major grants)`_.
 
-2. For changing the `Funding Target and Volatility Reserve`_ (which is an
+2. For changing the `Funding Target and Volatility Reserve`_.
-   incentive for ECC and ZF to *create* the voting mechanism).
-
-3. In ZF's future board composition (see below).
 
 It is highly desirable to develop robust means of decentralized community
-voting and governance, and to integrate them into all of the above processes,
+voting and governance --- either by expanding the Community Advisory Panel
-by the end of 2021. ECC and ZF should place high priority on such development
+or a successor mechanism --- and to integrate them into both of these
-and its deployment, in their activities and grant selection.
+processes, by the end of 2021. ECC and ZF should place high priority on such
+development and its deployment, in their activities and grant selection.
 
 
 ZF Board Composition
 --------------------
 
-ZF should formally integrate robust means of decentralized community voting
-into its Board of Director elections, in a way that is consistent with ZF's
-mission and values. ZF should lead the process for determining and
-implementing this, legally and technically, by the end of 2021.
-
 Members of ZF's Board of Directors must not hold equity in ECC or have current
 business or employment relationships with ECC.
 
 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,
-by 1 March 2021. (The grace period is to allow for orderly replacement, and
+by 1 November 2021. (The grace period is to allow for orderly replacement, and
 also to allow time for ECC corporate reorganization related to Dev Fund
 receipt, which may affect how disposition of equity would be executed.)
 
+The Foundation will endeavor to use the Community Advisory Panel (or successor
+mechanism) as advisory input for future board elections.
+
 
 Disclosures
 ===========