Zcash began its operations in 2015 following a few rounds of private investment, and to support further developments, it chose to use a mechanism called Founders Reward (FR) which is essentially a sort of halving.
Basically, the FR subtracts 20% of the reward from each block by dividing it among Zcash’s founders, developers and investors.
Zcash uses a Proof of Work mechanism to validate blocks and currently each block has a 12.5 ZEC reward for the miner who finds the nonce. This method of financing has always provoked a lot of controversies since it is essentially a fee paid by the miners that ends up mainly in the pockets of the founders and employees of the Electric Coin Company (ECC), which created and supports the protocol, development and adoption of the privacy coin.
The Zcash Foundation (ZC), on the other hand, is a non-profit organization which focuses on financial privacy, whose mission is to create a payment and privacy infrastructure on the Internet for the public good.
Despite the controversial Founders Reward, Zooko Wilcox’s confidence in the privacy coin technology has led to a continued interest on the part of the miners, which has resulted in a steady increase in hashrate and thus network security.
Zcash, next halving will take place in October 2020
The problem is that the halving of Zcash, which will bring the block reward to 6.25 ZEC, is expected in October and with it the Founders Reward will expire. Due in part to an uncertain market in 2019, which has already led ECC to request a dilution of the FR award, Zcash’s development will soon find itself without funds to finance research in terms of engineering, regulatory commitment and adoption as it has done so far.
The Zcash Foundation and ECC are therefore committed to finding a solution to the problem, but this time avoiding making a decision as a team and involving Zcash users. Since the beginning of 2019, the Zcash Community has been actively discussing 13 separate proposals on how to proceed to support operations, marking a substantial step forward in the decentralized and self-sufficient governance of the cryptocurrency.
The different proposals agree on the continuation of the Founders Reward even after the halving, although sharing the reward in a different way.
Here is a summary of the main ZIP (Zcash Improvement Proposal):
- ZIP 1013: 10% to ECC, 10% to ZF;
- ZIP 1012: development fund to ECC + ZF + project grants;
- ZIP 1010: compromise development fund proposal with diverse funding streams.
These proposals outline a clear feeling of a more responsible and decentralized Zcash development community. On January 21st, the Zcash Protocol Hangout will take place, where the team and anyone who wants to sign up can publicly discuss proposals for maintaining the development of the protocol and the cryptocurrency ecosystem.
Zooko Wilcox has several reasons to be bullish about Zcash’s future.
Zooko Wilcox (CEO of ECC) and the team behind Zcash are very positive about Zcash’s future and, in a 2-hour ECC video, they explained why Zcash could play a very important role in medium-long term digital payments.
This especially considering the ambitious roadmap of the project which aims to become a means of payment for 1 billion people ensuring privacy, constant engineering development (which has already led to important discoveries not only for the blockchain, like Halo), legality, adoption and research on first and second level scaling.