Zcash Grants Fund - ZCG & Zechub (Main)

zip-zcash-grants-fund.rst

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+::
+
+  ZIP: 
+  Title: Zcash Grants Fund - ZCG
+  Owners: Matthew Green (@gguy)
+  Original-Authors: Matthew Green (@gguy)
+  Status: Draft
+  Category: Consensus Process
+  Created: 2024-03-04
+  License: MIT
+  Discussions-To: ...
+  Pull-Request: ...
+
+
+Terminology
+===========
+
+The key words "MUST", "MUST NOT", "SHALL", "SHALL NOT", "SHOULD", and "MAY"
+in this document are to be interpreted as described in BCP 14 [#BCP14]_ when,
+and only when, they appear in all capitals.
+
+The term "network upgrade" in this document is to be interpreted as
+described in ZIP 200 [#zip-0200]_ and the Zcash Trademark Donation and License
+Agreement ([#trademark]_ or successor agreement).
+
+The terms "block subsidy" and "halving" in this document are to be interpreted
+as described in sections 3.10 and 7.8 of the Zcash Protocol Specification.
+[#protocol]_
+
+"Electric Coin Company", also called "ECC", refers to the Zerocoin Electric
+Coin Company, LLC.
+
+"Bootstrap Project", also called "BP", refers to the 501(c)(3) nonprofit
+corporation of that name.
+
+"Zcash Foundation", also called "ZF", refers to the 501(c)(3) nonprofit
+corporation of that name.
+
+"Financial Privacy Foundation", also called "FPF", refers to the independent
+Cayman Islands-Incorporated non-profit organization of that name.
+
+"Section 501(c)(3)" refers to that section of the U.S. Internal Revenue
+Code (Title 26 of the U.S. Code). [#section501c3]_
+
+"Community Advisory Panel" refers to the panel of community members assembled
+by the Zcash Foundation and described at [#zf-community]_.
+
+The terms "Testnet" and "Mainnet" are to be interpreted as described in
+section 3.12 of the Zcash Protocol Specification [#protocol-networks]_.
+
+
+Abstract
+========
+
+This proposal describes a structure for the Zcash Grants Fund, to be
+enacted in Network Upgrade 6 and lasting for 2 years. This Grants Fund would consist
+of 20% of the block subsidies soley allocated to "Zcash Community Grants" for funding
+grants that support projects and initiatives aligned with Zcash's mission (denoted ZCG).
+
+Governance and accountability are based on existing entities and legal mechanisms,
+and increasingly decentralized governance is encouraged.
+
+Motivation
+==========
+
+Starting at Zcash's second halving in November 2024, the development fund will end, directing 100% of the block
+subsidies to miners, resulting in no automatic funding for other entities. This change risks depriving
+existing and new teams of essential funding. Establishing ongoing funding through grants ensures that
+resources can continue to be allocated to initiatives deemed important by the community.
+
+There is a critical need to balance incentivizing the security of the
+consensus protocol (i.e., mining) with supporting charitable, educational, and
+scientific endeavors, such as research, development, outreach, and future
+funding needs of the network.
+
+Additionally, there is a need to sustain the ongoing work of current teams
+dedicated to Zcash while promoting decentralization and the growth of
+independent development teams.
+
+For these reasons, the Zcash Community proposes transitioning the Zcash
+Development Fund to a Zcash Grants Fund. This fund will allocate a portion of
+the block subsidies, which would otherwise go to miners, as grants and bounties to support
+charitable, educational, and scientific activities within the meaning of
+Section 501(c)(3). This approach will ensure continuous funding through a
+structured grant application process, fostering the ongoing development and
+decentralization of the Zcash ecosystem.
+
+Requirements
+============
+
+The Grants Fund should encourage decentralization of the work and funding, by
+supporting new teams dedicated to Zcash. The Grants Fund should maintain the
+existing teams and capabilities in the Zcash ecosystem, unless and until
+concrete opportunities arise to create even greater value for the Zcash ecosystem.
+
+Grant funding decisions should be based, to the extent feasible, on inputs from
+domain experts and pertinent stakeholders.
+
+The Grants Fund mechanism should not modify the monetary emission curve (and in
+particular, should not irrevocably burn coins).
+
+In case the value of ZEC jumps, the Grant Fund recipients should not wastefully
+use excessive amounts of funds. Conversely, given market volatility and eventual
+halvings, it is desirable to create rainy-day reserves.
+
+The Grants Fund mechanism should not reduce users' financial privacy or security.
+In particular, it should not cause them to expose their coin holdings, nor
+cause them to maintain access to secret keys for much longer than they would
+otherwise. (This rules out some forms of voting, and of disbursing coins to
+past/future miners.)
+
+The new Grants Fund system should be simple to understand and realistic to
+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
+jurisdictions.
+
+
+Non-requirements
+================
+
+General on-chain governance is outside the scope of this proposal.
+
+Rigorous voting mechanisms (whether coin-weighted, holding-time-weighted or
+one-person-one-vote) are outside the scope of this proposal, though there is
+prescribed room for integrating them once available.
+
+
+Specification
+=============
+
+Consensus changes implied by this specification are applicable to the
+Zcash Mainnet. Similar (but not necessarily identical) consensus changes
+SHOULD be applied to the Zcash Testnet for testing purposes.
+
+
+Dev Fund allocation
+-------------------
+
+Starting at the second Zcash halving in 2024, for 2 years,
+20% of the block subsidy of each block SHALL be allocated to a "Grants Fund" that
+will be 100% allocated to "Zcash Community Grants" for funding grants that support projects
+and initiatives aligned with Zcash's mission.
+
+The fund flow will be implemented
+at the consensus-rule layer, by sending the corresponding ZEC to the designated
+address(es) for each block. This Dev Fund will end 2 years after the second halving (unless
+extended/modified by a future ZIP).
+
+Zcash Community Grants (ZCG)
+~~~~~~~~~~~~~~~~~~~~~~~~~~~~
+
+The Zcash Grants Fund is intended to fund independent teams entering the
+Zcash ecosystem, to perform major ongoing development (or other work) that
+benefits the public good within the Zcash ecosystem, to the extent that such
+teams are available and effective. The Zcash Community Grants (ZCG) Committee is
+given the discretion to allocate funds to a diverse range of projects that
+advance the usability, security, privacy, and adoption of Zcash, including
+community programs, dedicated resources, and other projects of varying sizes.
+
+The funds SHALL be received and administered by FPF. FPF MUST disburse them for
+grants and expenses reasonably related to the administration of grants, but subject to the following additional constraints:
+
+1. These funds MUST primarily be used to issue grants to external parties
+   that are independent of FPF. They can also be used to fund other initiatives such
+   as community support personnel and public goods projects that benefit Zcash, and
+   to pay for expenses reasonably related to the administration of Zcash Community
+   Grants. They MUST NOT be used by FPF for its internal operations and direct
+   expenses not related to administration of Zcash Community Grants.
+
+2. Zcash Community Grants SHOULD support well-specified work proposed by the grantee,
+   at reasonable market-rate costs. They can be of any duration or ongoing
+   without a duration limit. Grants of indefinite duration SHOULD have
+   semiannual review points for continuation of funding.
+
+3. Priority SHOULD be given to grants that bolster teams with
+   substantial (current or prospective) continual existence, and set them up
+   for long-term success, subject to the usual grant award considerations
+   (impact, ability, risks, team, cost-effectiveness, etc.). Priority SHOULD be
+   given to grants that support ecosystem growth, for example through
+   mentorship, coaching, technical resources, creating entrepreneurial
+   opportunities, etc. If one proposal substantially duplicates another's
+   plans, priority SHOULD be given to the originator of the plans.
+
+4. Grants SHOULD be restricted to furthering the Zcash cryptocurrency and
+   its ecosystem (which is more specific than furthering financial privacy in
+   general) as permitted under Section 501(c)(3).
+
+5. Grant awards are subject to approval by a five-seat Zcash Community
+   Grants Committee. The Zcash Community Grants Committee SHALL be selected by the
+   ZF's Community Advisory Panel or successor process. Elections SHALL be staggered to
+   ensure continuity within the Committee.
+
+6. The Zcash Community Grants Committee's funding decisions will be final, requiring
+   no further approval, but are subject to veto if FPF
+   judges them to violate laws or if FPF reporting requirements and other
+   (current or future) obligations.
+
+7. Zcash Community Grants Committee members SHALL have a one-year term and MAY sit
+   for reelection. The Zcash Community Grants Committee is subject to the same
+   conflict of interest policy that governs the ZF Board of Directors (i.e. they
+   MUST recuse themselves when voting on proposals where they have a financial
+   interest). At most one person with association with the BP/ECC, and at most
+   one person with association with the ZF, are allowed to sit on the Major
+   Grant Review Committee. "Association" here means: having a financial
+   interest, full-time employment, being an officer, being a director, or having
+   an immediate family relationship with any of the above. The ZF SHALL continue
+   to operate the Community Advisory Panel and SHOULD work toward making it more
+   representative and independent (more on that below).
+
+   Zcash Community Grants Committee members are expected to work approximately 35
+   hours per month and will be compensated accordingly from the Zcash Community Grants Committee
+   budget. The total compensation for the committee is paid from the Zcash Community Grants Committee budget. 
+   This works out to be a total of 175hours of compensation per month which is roughly the equivalent of a 
+   signle full time position.
+
+8. A portion of the funds shall be allocated to a
+   Discretionary Budget, which may be disbursed for expenses reasonably related
+   to the administration of Zcash Community Grants. The amount of funds allocated to the
+   Discretionary Budget SHALL be decided by the ZF's Community Advisory Panel or
+   successor process. Any disbursement of funds from the Discretionary Budget
+   MUST be approved by the Zcash Community Grants Committee. Expenses related to the
+   administration of Zcash Community Grants include, without limitation the following:
+
+   * Paying third party vendors for services related to domain name registration, or
+     the design, website hosting and administration of websites for the Zcash Community Grants
+     Committee.
+   * Paying independent consultants to develop requests for proposals that align
+     with the Zcash Community Grants program.
+   * Paying independent consultants for expert review of grant applications.
+   * Paying for sales and marketing services to promote the Zcash Community Grants
+     program.
+   * Paying third party consultants to undertake activities that support the
+     purpose of the Zcash Community Grants program. 
+   * Reimbursement to members of the Zcash Community Grants Committee for reasonable
+     travel expenses, including transportation, hotel and meals allowance.
+
+9. A portion of the Discretionary Budget MAY be allocated to provide reasonable
+   compensation to members of the ZCG Committee. Committee member compensation
+   SHALL be limited to the hours needed to successfully perform their positions
+   and MUST align with the scope and responsibilities of their roles. The
+   allocation and distribution of compensation to committee members SHALL be
+   administered by FPF. The compensation rate and hours for committee members SHALL be determined by
+   the ZF’s Community Advisory Panel or successor process.
+
+FPF SHALL recognize the ZCG allocation of the Grants Fund as a Restricted Fund
+donation under the above constraints (suitably formalized), and keep separate
+accounting of its balance and usage under its `Transparency and Accountability`_
+obligations defined below.
+
+
+Transparency and Accountability
+-------------------------------
+
+Obligations
+~~~~~~~~~~~
+
+ZCG (during and leading to their award
+period) SHALL all accept the obligations in this section.
+
+Ongoing public reporting requirements:
+
+* Quarterly reports, detailing future plans, execution on previous plans, and
+  finances (balances, and spending broken down by major categories).
+* Monthly developer calls, or a brief report, on recent and forthcoming tasks.
+  (Developer calls may be shared.)
+* Annual detailed review of the organization performance and future plans.
+* Annual financial report (IRS Form 990, or substantially similar information).
+
+These reports may be either organization-wide, or restricted to the income,
+expenses, and work associated with the receipt of Zcash Grants Fund.
+
+It is expected that Zcash Community Grants recipients will be focused
+primarily (in their attention and resources) on Zcash. Thus, they MUST
+promptly disclose:
+
+* Any major activity they perform (even if not supported by the Grants Fund) that
+  is not in the interest of the general Zcash ecosystem.
+* Any conflict of interest with the general success of the Zcash ecosystem.
+
+Zcash Community Grants 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).
+
+All substantial software whose development was funded by the Dev Fund SHOULD
+be released under an Open Source license (as defined by the Open Source
+Initiative [#osd]_), preferably the MIT license.
+
+
+Enforcement
+~~~~~~~~~~~
+
+For Zcash Community Grants recipients, these conditions SHOULD be included in their contract
+with FPF, such that substantial violation, not promptly remedied, will cause
+forfeiture of their grant funds and their return to FPF.
+
+FPF MUST contractually commit to each other to fulfill these
+conditions, and the prescribed use of funds, such that substantial violation,
+not promptly remedied, will permit the other parties to issue a modified version
+of Zcash node software that removes the violating party's Grants Fund, and
+use the Zcash trademark for this modified version. The funds will be
+unallocated until ZF’s Community Advisory Panel or successor process is able to decide on a new allocation.
+
+
+Acknowledgements
+================
+
+This proposal is a modification of Zooko Wilcox and Andrew Miller's ZIP 1014
+[#zip-1012]_ with feedback from the community.
+
+The authors are grateful to all of the above for their excellent ideas and
+any insightful discussions.
+
+.. _Zcash Community Forum: https://forum.zcashcommunity.com/
+
+
+References
+==========
+
+.. [#RFC2119] `RFC 2119: Key words for use in RFCs to Indicate Requirement Levels <https://www.rfc-editor.org/rfc/rfc2119.html>`_
+.. [#protocol] `Zcash Protocol Specification, Version 2021.2.16 or later <protocol/protocol.pdf>`_
+.. [#protocol-networks] `Zcash Protocol Specification, Version 2021.2.16. Section 3.12: Mainnet and Testnet <protocol/protocol.pdf#networks>`_
+.. [#trademark] `Zcash Trademark Donation and License Agreement <https://electriccoin.co/wp-content/uploads/2019/11/Final-Consolidated-Version-ECC-Zcash-Trademark-Transfer-Documents-1.pdf>`_
+.. [#osd] `The Open Source Definition <https://opensource.org/osd>`_
+.. [#zip-0200] `ZIP 200: Network Upgrade Mechanism <zip-0200.rst>`_
+.. [#zip-1014] `ZIP 1014: Establishing a Dev Fund for ECC, ZF, and Major Grants <zip-1014.rst>`_
+.. [#zf-community] `ZF Community Advisory Panel <https://www.zfnd.org/governance/community-advisory-panel/>`_
+.. [#section501c3] `U.S. Code, Title 26, Section 501(c)(3) <https://www.law.cornell.edu/uscode/text/26/501>`_