Crypto Non-Profits Are Flawed – Zcash Thinks It Can Change That

On the eve of the Zcash Foundation’s first major gathering, cryptocurrency aficionados worldwide are watching to see if the year-old non-profit can rehabilitate a long-maligned model of governance.

Funded, yet independent

The Zcash Foundation is hoping to avoid the pitfalls of its predecessors, in part because it has an unusual setup.

For example, instead of a token sale, its main source of funding is a fixed share – 1.44 percent – of all the zcash that is mined. This comes out of the 10 percent “founders reward,” collected from all zcash miners, that goes to the creators of zcash, several of whom work at Zerocoin Electronic Coin Company (ZEC), the startup that still indirectly profits from and promotes the currency.

ZEC’s CEO, Zooko Wilcox, joined half a dozen other zcash founders in signing contracts compelling them to donate the 1.44 percent directly to the foundation. This structure imposes more discipline on the foundation than a token sale in a white-hot market would have, according to Cincinnati.

“Since the founders’ reward is structured like a four-year vest, the foundation’s access to capital is much more restricted compared to other crypto foundations, which encourages a longer-term view and more measured spending,” Cincinnati said.

Beyond the financial arrangement, though, Wilcox isn’t directly involved with the foundation or the community election. This, too, is unusual: Buterin, who has a roughly analogous figurehead role in the ethereum community, was still the president of the Ethereum Foundation board as of last year, Swiss records show.

Explaining his preference not to join the Zcash Foundation, Wilcox told CoinDesk:

“Zcash users need an independent organization that can serve as a check-and-balance on the actions of the Zcash Company that I lead.”

That said, Wilcox has openly challenged the foundation to establish its own trademarks, hire staff software experts, and find sources of independent funding.

And when it comes to the controversial debates about whether and how to combat the centralizing effects of specialized mining chips, the foundation already takes an independent approach.

Rather than wait for Wilcox, who is not prioritizing software updates to help zcash resist mining consolidation, Cincinnati is hiring a developer to build tools for reducing corporate influence on the network.

This mining issue is also an issue in the election. In addition to choosing new board members, the digital ballots due Monday also include a question asking if the foundation should prioritize so-called ASIC resistance. “It’s going to be a good moment for the foundation to figure out what the community will is for where we go forward,” said Cincinnati.

Privacy above profit

Another way the Zcash Foundation stands out is by eagerly courting contributors from other crypto communities. The nonprofit says its ultimate goal is to promote privacy tech as a human right, regardless of whether the ultimate solution benefits Wilcox’s startup.

One such effort is allowing a community panel, separate from the foundation board, to approve funding for research grants. Despite the well-publicized rivalry between zcash and monero, that review committee includes Brandon Goodell from the Monero Research Lab.

“It’s a weird hybrid between having a group of insiders decide everything, which is the way that most organizations are run, and entirely crowdsourcing our decisions,” said Sonya Mann, the Zcash Foundation’s communications manager, acknowledging that the model is an experiment.

“At this point, it’s an open question whether our approach will be effective or whether it will be a good way to direct our efforts going forward,” she said.

One more departure from the norm: The Zcash Foundation is registered not in Switzerland, but Delaware. This helps with transparency, because as a U.S. nonprofit, it must share financial documents such as employee salaries and some tax forms.

“It’s all public information, as it should be,” Cincinnati said.

Being located in the same country as Colorado-based ZEC may produce a further benefit: it could simplify the legal process in the event any zcash founders attempt to renege on their funding obligations to the foundation, reducing risks of a Tezos-style fiasco.

It remains to be seen if Cincinnati’s unorthodox methods will give his foundation a unique role in the broader ecosystem, beyond its namesake cryptocurrency.

But William Mougayar, the founder of Token Summit, said so far the Zcash Foundation appears to have one of the most mature foundation models in the industry.

All of the cryptocurrencies that sprouted up in the wake of ether need “a neutral party that will look after the community before anyone else,” Mougayar said.

“Eventually there should be a separation” between such stewards and the issuers or creators of the coin, he said. “I think Zcash is working on it.”

Crypto Non-Profits Are Flawed – Zcash Thinks It Can Change That
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