Zcash founder reward is about to be cancelled, the community is big due to funding problems

time does not wait.

Based on market capitalization, Zcash is the world's second-largest private currency with a default deadline. Currently, 20% of Zcash's block rewards (founder awards) are distributed to individuals and entities responsible for development, including the Electric Coin Company (ECC) and the Zcash Foundation. By November 2020, when the 570000 block was dug up, Zcash supply will be halved and this incentive mechanism will be cancelled.


Zcash founding team members include privacy advocate Zooko Wilcox, who wants a cryptocurrency that is as anonymous as cash. This has always been the dream of password punks, who have witnessed the rise of the commercial Internet and fear that transactions are no longer private. Unlike Bitcoin, Zcash uses zero-knowledge proof to hide user data, while bitcoin can find the user's identity through transaction information.

It stands to reason that the community needs to find a way to maintain its operations. But the strange thing is that there is no proper governance mechanism that allows members to reach consensus, so finding a way forward will be especially challenging.

The Zcash community has a sense of urgency. Beginning in January, the Zcash Community Forum moderator (which seems to be the only platform where community members can reach a consensus) posted a post about "Zcash's Future" to discuss what to do next.

“I think it’s crucial to start talking about these things as we have time to work together,” moderator Shawn wrote. He raised several questions in his post: Who manages the Zcash Github codebase? Does Zcash have enough developers to continue to maintain its code? What should I do with the Zcash trademark?

These issues were also of great concern to people attending the Zcon1 Annual Conference (Zcash Developers Conference) in Split, Croatia last weekend.

There are two options in front of Zcash. The community can decide to continue to provide some form of funding and keep the current system running; or let it “floating itself” without the core development team continuing development work.

Jack Gavigan, head of ECC product and regulatory affairs, said:

"The founder's reward is coming to an end. This is for sure. When Zcash halved for the first time, this mechanism will end."

"The question is that the Zcash community wants the company (ie ECC) to continue to develop Zcash? If they say 'no, we don't need' it doesn't matter. But the ECC will make the appropriate adjustments."

In this case, ECC – as a company that needs to make a profit – will have to adopt a new business model to maintain break-even. Gavigan said that because the company hopes that the community can continue to fund the development of the network, there is less discussion. This model may produce a company similar to Blockstream and still participate in the development of the network, but at the same time there are other profit opportunities.

The founders of the two companies (ECC and Zcash Foundation) will be cancelled in 2020, but they all have some funds, mainly Zcash. At present, after the founder's reward is cancelled, ECC can run for about two years according to its fund reserve (assuming Zcash's price remains at current level); according to Zshash Foundation executive director Josh Cincinatti, the foundation has sufficient funds to Maintain a five-year operation.

Nathan Wilcox, chief engineer of ECC, said that due to a large number of unknown factors at the time, the founder's reward period was only four years. He said that in the early stages of network development, even considering things two to four years in advance is a long time. In essence, the initial funding plan was just to get Zcash to start smoothly.

Wilcox said at a meeting on Saturday that he fully agreed to extend the time of the founder's reward or set up another form of fund to continue to maintain the network.

However, extending the founder's reward is controversial. Last year, ECC CEO Zooko Wilcox disclosed the salary of everyone in the company, including his own annual salary of $2.7 million (at current prices). But in order to avoid criticism and to guarantee the decentralization of the network, ECC cannot make decisions on behalf of the Zcash community. Instead, miners, holders, and fan groups need to unite to decide what to do next.

But unlike PoS currencies like Tezos or Cosmos, Zcash doesn't have a built-in voting mechanism, which makes the problem even more tricky. Here are some tips on how to make community-driven decisions. The community can make a normal vote, or establish a one-time voting mechanism to allow Zcash holders to participate in the voting on the Zcash blockchain, in the form of locking the cryptocurrency on the Zcash blockchain. In addition, you can create two versions of Zcash, one with the founder reward and the other with none, so that the miner chooses which one to support.

When it comes to letting the miners choose their own, one organization has already begun to take action. The non-profit Ycash Foundation is being formed to provide another Zcash chain, and the founder awards will continue until 2020. However, as the team believes that these funds are sufficient to sustain its growth, the founder rewards are reduced to 5% of the block rewards, a 75% reduction.

Ironically, Zcash's development comes from a centralized company. The fate of this cryptocurrency now depends on a decentralized community, and there is no alternative governance mechanism in this community. How to avoid a crisis? They only have 17 months left to think about countermeasures, and time is running out.