diff --git a/draft-nuttycom-funding-allocation.html b/draft-nuttycom-funding-allocation.html index 45cd9c88..251e140e 100644 --- a/draft-nuttycom-funding-allocation.html +++ b/draft-nuttycom-funding-allocation.html @@ -23,8 +23,8 @@ Pull-Request: <https://githu

The key words "MUST", "REQUIRED", "MUST NOT", "SHOULD", and "MAY" in this document are to be interpreted as described in BCP 14 1 when, and only when, they appear in all capitals.

Abstract

-

This ZIP proposes several options for the allocation of a percentage of the Zcash block subsidy, post-November 2024 halving, to an in-protocol "lockbox." The "lockbox" will be a separate pool of issued funds tracked by the protocol, as described in ZIP <TBD>: Lockbox Funding Streams 3. No disbursement mechanism is currently defined for this "lockbox"; the Zcash community will need to decide upon and specify a suitable decentralized mechanism for permitting withdrawals from this lockbox in a future ZIP in order to make these funds available for funding grants to ecosystem participants.

-

The proposed lockbox addresses significant issues observed with ZIP 1014 2, such as regulatory risks, inefficiencies in funding organizations instead of projects, and centralization. While the exact disbursement mechanism for the lockbox funds is yet to be determined and will be addressed in a future ZIP, the goal is to employ a decentralized mechanism that ensures community involvement and efficient, project-specific funding. This approach is intended to potentially improve regulatory compliance, reduce inefficiencies, and enhance the decentralization of Zcash's funding structure.

+

This ZIP proposes several options for the allocation of a percentage of the Zcash block subsidy, post-November 2024 halving, to an in-protocol "lockbox." The "lockbox" will be a separate pool of issued funds tracked by the protocol, as described in ZIP <TBD>: Lockbox Funding Streams 4. No disbursement mechanism is currently defined for this "lockbox"; the Zcash community will need to decide upon and specify a suitable decentralized mechanism for permitting withdrawals from this lockbox in a future ZIP in order to make these funds available for funding grants to ecosystem participants.

+

The proposed lockbox addresses significant issues observed with ZIP 1014 3, such as regulatory risks, inefficiencies due to funding of organizations instead of projects, and centralization. While the exact disbursement mechanism for the lockbox funds is yet to be determined and will be addressed in a future ZIP, the goal is to employ a decentralized mechanism that ensures community involvement and efficient, project-specific funding. This approach is intended to potentially improve regulatory compliance, reduce inefficiencies, and enhance the decentralization of Zcash's funding structure.

Motivation

Starting at Zcash's second halving in November 2024, by default 100% of the block subsidies will be allocated to miners, and no further funds will be automatically allocated to any other entities. Consequently, unless the community takes action to approve new block-reward based funding, existing teams dedicated to development or outreach or furthering charitable, educational, or scientific purposes will likely need to seek other sources of funding; failure to obtain such funding would likely impair their ability to continue serving the Zcash ecosystem. Setting aside a portion of the block subsidy to fund development will help ensure that both existing teams and new contributors can obtain funding in the future.

@@ -33,7 +33,7 @@ Pull-Request: <https://githu
  1. Regulatory Risks: The current model involves direct funding of US-based organizations, which can potentially attract regulatory scrutiny from entities such as the SEC, posing legal risks to the Zcash ecosystem.
  2. Funding Inefficiencies: The current model directly funds organizations rather than specific projects, leading to a potential mismatch between those organizations' development priorities and the priorities of the community. Furthermore, if organizations are guaranteed funds regardless of performance, there is little incentive to achieve key performance indicators (KPIs) or align with community sentiment. A future system that allocates resources directly to projects rather than organizations may help reduce inefficiencies and better align development efforts with community priorities.
    3. -
  3. Centralization Concerns: The current model centralizes decision-making power within a few organizations, contradicting the decentralized ethos of blockchain technology. Traditional organizational structures with boards and executives introduce a single point of failure and limit community involvement in funding decisions.
    4. +
  4. Centralization Concerns: The current model centralizes decision-making power within a few organizations, contradicting the decentralized ethos of blockchain technology. Traditional organizational structures with boards and executives introduce single points of failure and limit community involvement in funding decisions.
  5. Community Involvement: The current system provides minimal formal input from the community regarding what projects should be funded, leading to a misalignment between funded projects and community priorities.
  6. Moving Towards a Non-Direct Funding Model: There is strong community support for a non-direct Dev Fund funding model. Allocating funds to a Deferred Dev Fund Lockbox incentivizes the development of a decentralized mechanism for the disbursement of the locked funds.
@@ -41,12 +41,12 @@ Pull-Request: <https://githu

Requirements

    -
  1. In-Protocol Lockbox: The alternatives presented in this ZIP depend upon the Lockbox Funding Streams proposal 3.
    2. -
  2. Regulatory Considerations: The allocation of funds should minimize regulatory risks by avoiding direct funding of specific organizations. The design should ensure compliance with applicable laws and regulations to support the long-term sustainability of the funding model.
    3. +
  3. In-Protocol Lockbox: The alternatives presented in this ZIP depend upon the Lockbox Funding Streams proposal 4.
    4. +
  4. Regulatory Considerations: The allocation of funds should minimize regulatory risks by avoiding direct funding of specific organizations. The design should enable and encourage compliance with applicable laws and regulations to support the long-term sustainability of the funding model.

Non-requirements

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The following consideratiosn are explicitly deferred to future ZIPs and are not covered by this proposal:

+

The following considerations are explicitly deferred to future ZIPs and are not covered by this proposal:

  1. Disbursement Mechanism: The exact method for disbursing the accumulated funds from the lockbox is not defined in this ZIP. The design, implementation, and governance of the disbursement mechanism will be addressed in a future ZIP. This includes specifics on how funds will be allocated, the voting or decision-making process, and the structure of the decentralized mechanism (such as a DAO).
  2. Regulatory Compliance Details: The proposal outlines the potential to reduce regulatory risks by avoiding direct funding of US-based organizations, but it does not detail specific regulatory compliance strategies. Future ZIPs will need to address how the disbursement mechanism complies with applicable laws and regulations.
    3. @@ -54,8 +54,8 @@ Pull-Request: <https://githu

Specification

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The following alternatives all depend upon the Lockbox Funding Streams proposal 3 for storage of funds into a deferred value pool.

-

Some of the alternatives described below do not specify a termination height for the funding streams they propose. In these cases, the termination height is set to u32::MAX_VALUE. A future network upgrade is required in order for these streams to be terminated.

+

The following alternatives all depend upon the Lockbox Funding Streams proposal 4 for storage of funds into a deferred value pool.

+

Some of the alternatives described below do not specify a termination height for the funding streams they propose. In these cases, the termination height is set to u32::MAX_VALUE. A future network upgrade that alters the maximum possible block height MUST also alter these termination heights.

Alternatives

Alternative 1: Lockbox For Decentralized Grants Allocation (perpetual 50% option)

@@ -64,11 +64,26 @@ Pull-Request: <https://githu
  • 50% of the block subsidy is to be distributed to the lockbox.

    • As of block height 2726400, and continuing until modified by a future ZIP, the complete set of funding streams will be:

    - 
    ================= =========== ============= ============== ============
-      Stream       Numerator   Denominator   Start height   End height
-================= =========== ============= ============== ============
-``FS_DEFERRED``       50           100          2726400      u32::MAX
-================= =========== ============= ============== ============
    + + + + + + + + + + + + + + + + + + + +
    StreamNumeratorDenominatorStart heightEnd height
    FS_DEFERRED501002726400u32::MAX

    Motivations for Alternative 1

    This alternative proposes allocating a significantly larger portion of the block subsidy to development funding than is currently allocated, aiming to establish a long-term source of funding for protocol improvements. The disbursement of these funds will be governed by a mechanism to be determined by the community in the future, ensuring that the funds are released under agreed-upon constraints to maintain availability for years to come.

    The proposed lockbox funding model for Zcash's post-NU6 halving period allocates 50% of the block reward to a deferred reserve, or "lockbox," designated for future decentralized grants funding. This approach is designed to address several critical motivations:

    @@ -120,12 +135,33 @@ Pull-Request: <https://githu
  • 8% of the block subsidy is to be distributed to the Financial Privacy Foundation (FPF), for the express use of the Zcash Community Grants Committee (ZCG) to fund independent teams in the Zcash ecosystem.

    • As of block height 2726400, and continuing for one year, the complete set of funding streams will be:

    - 
    ================= =========== ============= ============== ============
-      Stream       Numerator   Denominator   Start height   End height
-================= =========== ============= ============== ============
-``FS_DEFERRED``       12           100          2726400      3146400
-``FS_FPF_ZCG``         8           100          2726400      3146400
-================= =========== ============= ============== ============
    + + + + + + + + + + + + + + + + + + + + + + + + + + +
    StreamNumeratorDenominatorStart heightEnd height
    FS_DEFERRED1210027264003146400
    FS_FPF_ZCG810027264003146400

    Motivations for Alternative 2

    As of block height 2726400, and continuing for two years, the complete set of funding streams will be:

    - 
    ================= =========== ============= ============== ============
-      Stream       Numerator   Denominator   Start height   End height
-================= =========== ============= ============== ============
-``FS_DEFERRED``       20           100          2726400      3566400
-================= =========== ============= ============== ============
    + + + + + + + + + + + + + + + + + + + +
    StreamNumeratorDenominatorStart heightEnd height
    FS_DEFERRED2010027264003566400

    Motivations for Alternative 3

    This alternative is presented as the simplest allocation of block rewards to a lockbox for future disbursement that is consistent with results of community polling.

    @@ -156,15 +207,39 @@ Pull-Request: <https://githu
  • 8% of the block subsidy is to be distributed to the Financial Privacy Foundation (FPF), for the express use of the Zcash Community Grants Committee (ZCG) to fund independent teams in the Zcash ecosystem.

    • As of block height 2726400, and continuing for four years, the complete set of funding streams will be:

    - 
    ================= =========== ============= ============== ============
-      Stream       Numerator   Denominator   Start height   End height
-================= =========== ============= ============== ============
-``FS_DEFERRED``       17           100          2726400      4406400
-``FS_FPF_ZCG``         8           100          2726400      4406400
-================= =========== ============= ============== ============
    + + + + + + + + + + + + + + + + + + + + + + + + + + +
    StreamNumeratorDenominatorStart heightEnd height
    FS_DEFERRED1710027264004406400
    FS_FPF_ZCG810027264004406400

    Motivations for Alternative 4

    This alternative proposes a slightly larger slice of the block subsidy than is currently allocated for development funding, in order to better provide for the needs of the Zcash community.

    +

    Revisitation Requirement for Alternative 4

    +

    The terms for this Alternative should be revisited by the Zcash ecosystem upon creation/ activation of a "non-direct funding model" (NDFM). At that completion of an NDFM which accessess the lockbox funds, this ZIP should be reconsidered (potentially terminated) by the Zcash ecosystem, to determine if its ongoing direct block subsidies are preferred for continuation. Discussions / solications / sentiment gathering from the Zcash ecosystem should be initiated ~6 months in advance of the presumed activation of a "non-direct funding model", such that the Zcash ecosystem preference can be expediently realized.

    +