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Zcash developers propose ending ZCG funding, moving 50,000 ZEC
Zcash founder Zooko Wilcox and cryptographer Sean Bowe back a plan to halt block reward funding for the grants program and donate half its treasury.
Key takeaways
- Funding stream halted. ZCG's ongoing 8% allocation of block rewards would be redirected to a Future Dev and Legal Defense Fund Lockbox, accumulating without a spending mechanism until the community decides otherwise.
- Treasury reduction required. The committee must send 50,000 ZEC to the Network Sustainability Mechanism within 30 days of proposal acceptance, reducing its treasury from approximately 91,450 ZEC to about 41,450 ZEC.
- Grants work continues. ZCG would retain the ability to fund community projects using its remaining assets, preserving the program's grantmaking function despite the funding reduction.
What happened
Zcash founder Zooko Wilcox and cryptographer Sean Bowe, who leads Tachyon Group, have jointly proposed a plan to fundamentally restructure the Zcash Community Grants program's funding model. The draft Zcash Improvement Proposal, announced on October 30, calls for ending ZCG's 8% allocation of block rewards in a future network upgrade following NU7. Rather than distributing those rewards to the grants committee, the funds would accumulate in a new Future Dev and Legal Defense Fund Lockbox, remaining locked until a subsequent community decision determines how to deploy them.
The proposal also mandates that ZCG donate 50,000 ZEC to an unspendable address feeding into the Network Sustainability Mechanism, a reserve that releases cryptocurrency to miners over time. According to Crypto.news, the committee must complete this transfer within 30 days of the proposal's acceptance. Unlike the funding stream change, which requires a network upgrade, the treasury donation does not depend on protocol modifications and could proceed immediately upon community approval.
The joint proposal emerged from escalating tension within Zcash governance over the grants program's growing treasury. Earlier in the week, ZCG presented its own plan to gradually reduce its funding by approximately 3% monthly through the 2032 halving, with a smaller 36,200 ZEC donation to the Network Sustainability Mechanism. Bowe had previously advocated for a more aggressive approach, proposing to redirect the entire 8% funding stream to the reserve. The compromise between Tachyon Group and Shielded Labs seeks to unify the community behind a single proposal by preserving ZCG's ability to continue awarding grants while addressing concerns about its accumulating resources.
First $1.4KLatest $1.2K-14.9% over the period
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Why it matters
The dispute reflects fundamental questions about how Zcash should allocate its newly created cryptocurrency and who should control significant financial resources. Unchained reported that Wilcox characterized the ongoing debate as a governance crisis, indicating that the community views the outcome as consequential for the project's direction. The size of the assets at stake underscores the importance: at assumed valuations cited in the proposals, the 50,000 ZEC donation alone represents tens of millions of dollars, and the remaining treasury after the donation would retain sufficient capital to fund operations for years. How the Zcash community resolves this disagreement may influence confidence in the project's governance processes and development funding model going forward.
What the data shows
The proposal cites specific treasury figures from ZCG's dashboard accessed on October 26, showing approximately 91,452.98 ZEC alongside approximately $8.8 million in dollar holdings and roughly $2.4 million in outstanding grant liabilities. Using an assumed ZEC price of $1,300 per coin, the authors estimate the total treasury value at $125.3 million before the donation. The 50,000 ZEC contribution would reduce holdings to approximately 41,452.98 ZEC, leaving an estimated value of $60.3 million according to the proposal's calculations. At the assumed price, the donation itself would be valued at $65 million. The current 8% block subsidy allocation generates approximately 144 ZEC daily, equivalent to roughly $176,000 at the referenced price. Based on annualized spending estimates of approximately $9.4 million, the remaining treasury would theoretically cover around 6.4 years of operations at current spending levels and prices.
Background
The Zcash Community Grants program was established to fund development and community initiatives supporting the privacy-focused cryptocurrency. ZCG receives an 8% allocation of the block subsidy, the newly created ZEC awarded with each block added to the blockchain. Over time, this steady inflow of cryptocurrency has allowed the committee to accumulate a substantial treasury. Unchained noted that the program's dashboard indicated approximately 91,450 ZEC in holdings, representing the largest pool of centralized resources within the Zcash ecosystem. By contrast, a separate Coinholder-Controlled Fund receives 12% of block rewards and operates under different governance rules, remaining unchanged in the current proposal.
The tension over ZCG funding gained prominence in June when Wilcox posted on the Zcash forum questioning whether rising ZEC prices justified maintaining the current funding structure. At the time, he supported preserving some form of development fund, suggesting he viewed the existing arrangement as potentially excessive given market conditions. The October proposal builds on that earlier questioning, incorporating input from Bowe and other stakeholders while attempting to balance the desire to reduce ZCG's unilateral control over resources with the practical need to fund ongoing work.
What is still unclear
The proposal does not specify a timeline for the network upgrade that would implement the funding stream change, and no reference implementation has been prepared. The Future Dev and Legal Defense Fund Lockbox would accumulate indefinitely until the community passes a separate proposal establishing spending rules. Additionally, the mechanism for determining how funds in the lockbox would ultimately be deployed remains undefined, leaving open questions about the governance process for future fund allocation decisions.
What to watch
The proposal's path to acceptance requires community consensus, and dissent has already surfaced. According to Unchained, some community members have questioned the urgency of the changes, while others have raised concerns about whether ZCG should reduce its funding if equivalent reductions do not apply to the Coinholder-Controlled Fund. Helius CEO Mert Mumtaz argued that ZCG's alternative plan was insufficient, while Gemini co-founder Tyler Winklevoss publicly criticized a committee member's conduct on social media. These dynamics suggest the final form of any proposal may differ from the current draft as the community negotiates its preferences.
Questions readers ask
Would the grants program continue operating after this proposal?
Yes. ZCG would retain its remaining treasury of approximately 41,452 ZEC after the 50,000 ZEC donation and could continue awarding grants from those assets. The proposal ends the automatic funding stream but preserves the committee's grantmaking function.
When would the 50,000 ZEC donation need to happen?
The committee would have 30 days after community acceptance of the proposal to transfer the funds. This obligation does not require a network upgrade and could proceed independently of the funding stream changes.
What happens to the 8% funding stream after it stops going to ZCG?
The funds would accumulate in a Future Dev and Legal Defense Fund Lockbox at the protocol level, frozen until a future proposal established spending rules. This requires a network upgrade after NU7.
