Haseeb Qureshi, managing partner at Dragonfly, a global crypto venture capital firm, has urged Zcash to dissolve its development fund when the current arrangement concludes in 2028. Qureshi published his position on X, stating that the fund should support outstanding protocol upgrades before Zcash transitions to a model similar to Bitcoin, where ongoing development is sustained by voluntary contributions rather than a centralized funding stream.
Development fund nears $100 million
According to Qureshi, Zcash’s development fund now holds roughly $95 million, equivalent to about 63,962 ZEC, following a recent rally in Zcash’s token price. He warned that if the fund surpasses the $100 million mark, political pressures and governance disputes around grant allocation could intensify.
He recommended that Zcash maintain the fund for another one to two years to enable the completion of major technical milestones such as Tachyon, quantum resistance, and formal verification, before systematically winding down the fund and shifting to a more decentralized funding model.
Mini dictionary: Tachyon, Zcash’s planned upgrade aimed at enhancing transaction speed and scalability.
Zcash’s development fund reached $95 million after recent gains in token value. If the fund exceeds $100 million, it could amplify governance challenges due to increased political interests in the distribution of grants.
Diverging views on the future of Zcash funding
Matt Huang, co-founder of Paradigm, disagreed with Qureshi’s view and argued that continuous funding remains critical due to evolving threats from AI and quantum computing. He emphasized the need for ongoing resources to protect the protocol against future security risks.
Maxime Desalle, an analyst at Winklevoss Capital, went further, advocating for the fund’s complete elimination. Desalle claimed that institutionalized funding may entrench bureaucracy and lead to extended disputes over leadership and distribution mechanisms.
The debate expanded to the governance procedures of the Zcash Community Grants (ZCG) committee. Tom Howard raised concerns about conflicts of interest, noting that grant recipients could directly influence the election of the committee that allocates funding.
Austin Federa supported updating Zcash’s governance structure but warned against token-weighted voting, suggesting instead a representative model with periodic elections, similar to the structure of the US government. This approach, Federa suggested, might better balance tokenholder influence with protocol security and decision-making consistency.
Zcash stakeholders offered diverging solutions. Some supported the continued existence of the development fund to bolster security and technical updates, while others cautioned that excessive funding could produce lasting inefficiencies and political complications.
Lessons from other crypto governance systems
The current Zcash debate reflects broader concerns across the crypto industry around governance structures, community participation, and treasury management. Significant projects such as Ethereum, Polkadot, and Uniswap have each adopted distinct strategies to balance technical leadership with community control.
Ethereum manages upgrades through Ethereum Improvement Proposals (EIPs), resulting in an informal and discussion-based process where direct tokenholder voting is absent. Decisions rely on consensus among developers and ecosystem stakeholders rather than coinholder referenda.
On the other hand, Polkadot utilizes its OpenGov system, which lets DOT holders both propose and vote on referenda, distributing decision authority but raising concerns about the concentration of power among large holders.
Mini dictionary: OpenGov, Polkadot’s decentralized governance system enabling on-chain proposals and voting for DOT tokenholders.
| Project | Governance Model | Tokenholder Voting | Treasury Management |
|---|---|---|---|
| Zcash | Committee-elected grants | Limited, indirect | Central development fund |
| Ethereum | Informal consensus | No direct voting | Distributed, community grants |
| Polkadot | OpenGov referenda | Yes, direct | On-chain voter control |
| Uniswap | DAO proposals | Yes, direct | DAO treasury |
Events from other crypto organizations highlight potential pitfalls of token-based voting. In 2022, Build Finance DAO suffered a hostile takeover when a single participant acquired enough votes to influence the project’s treasury. Similarly, in July, BonkDAO lost about $21.2 million worth of BONK tokens after a trader exploited the governance process to transfer treasury assets to their own wallet.
