Zcash founder Zooko Wilcox and cryptographer Sean Bowe, who heads the cryptography firm Tachyon Group, have jointly backed a new proposal to significantly reduce the Zcash Community Grants (ZCG) program’s access to block rewards. This plan follows rising debate on social media platform X and the project’s official forums about the growing size of ZCG’s holdings.
Joint Proposal to Halt ZCG Funding Stream
The draft Zcash Improvement Proposal (ZIP), developed by Bowe’s team and Zooko’s research organization Shielded Labs, seeks to end ZCG’s entitlement to 8% of future block rewards through an upgrade following Zcash network update NU7. If approved, the redirected funds would be placed into a newly created Future Dev and Legal Defense Fund, which would remain locked until a later proposal determines how it should be allocated.
Additionally, the plan requires ZCG to send 50,000 ZEC to an unspendable address—a measure that effectively removes these coins from circulation. This address supports the Network Sustainability Mechanism (NSM), a system designed to distribute ZEC reserves to miners gradually. ZCG would have 30 days from the proposal’s approval to execute this transfer.
Mini dictionary: Network Sustainability Mechanism (NSM), a Zcash protocol feature that releases reserve ZEC to miners over time to support ongoing network operations and stability.
Impact on ZCG Holdings
At a ZEC price of about $1,224 according to CoinGecko on Friday, the proposed 50,000 ZEC burn amounts to approximately $61 million. This represents a little more than half of ZCG’s holdings, which total around 91,450 ZEC, equivalent to about $112 million. The current 8% stream brings in roughly 144 ZEC daily, or nearly $176,000 in value.
| Metric | Current Value |
|---|---|
| ZCG ZEC holdings | 91,450 ZEC (~$112 million) |
| ZEC to be sent to unspendable address | 50,000 ZEC (~$61 million) |
| Daily new ZCG ZEC (8%) | 144 ZEC/day (~$176,000) |
Former rival proposals suggested gradual changes, but the new joint ZIP aims for a more immediate shift. The ZCG committee would continue issuing grants from remaining reserves, while grants distributed directly by coinholders would remain unaffected at 12% of block rewards.
Community Reactions and Ongoing Debate
Zooko described the situation as a “governance crisis” and called on supporters of competing plans to withdraw in favor of the joint proposal. He emphasized that Shielded Labs, the research organization he leads, has not received any funds from the ZCG program.
Zooko urged, “The Zcash community is going through a governance crisis,” and asked rival ZIP authors to “withdraw yours and support this one.” He further clarified, “Shielded Labs does not take any money from the Zcash Community Grants program.”
On Thursday, the ZCG committee proposed an alternative approach: phasing out its funding gradually by 3% each month until the scheduled 2032 halving and transferring about 36,200 ZEC to the NSM, while keeping 55,200 ZEC. The committee described this as an initial suggestion rather than a final plan, projecting that about 98,000 ZEC would be directed to future block rewards.
Sean Bowe had previously recommended shutting off the ZCG funding entirely and sending the full 8% block reward stream to the NSM. He withdrew his earlier proposal to support the more collaborative approach. Tyler Winklevoss, co-founder of Gemini, criticized a ZCG committee member for unfollowing another participant during the debate, calling the action “embarrassing, childlike behavior.”
Tyler Winklevoss stated that the committee member in question was “not qualified to run 110 million dollars with no accountability!”
The community remains divided on both the urgency and the methods of fund restructuring. One forum user, emersonian, argued that “there is no emergency” and advocated giving the community three months to reach a decision. Others, like Milton, voiced reluctance to pause ZCG’s stream unless the stream to coin voters is also suspended. Tom Howard, who also authored a competing ZIP, said he could support the new joint plan if ZCG agreed to withdraw its own proposal and fully back the consolidated ZIP.
