Sean Bowe, co-founder of privacy-focused cryptocurrency Zcash, has proposed a significant shift in the network’s funding structure that would end Zcash Community Grants’ (ZCG) automatic share of block rewards. On Monday, Bowe published a draft Zcash Improvement Proposal (ZIP) suggesting that ZCG’s 8% allocation from the block subsidy be redirected toward the Network Sustainability Mechanism (NSM), a protocol-level fund established under ZIP 237. This transition would take effect until the original timeline for the subsidy’s expiration. Bowe confirmed that assets currently held by ZCG would remain with the committee, allowing it to continue funding projects from existing reserves. The 12% “coinholder stream,” which is determined by community votes, would continue as before.
Debate among Zcash developers
Josh Swihart, founder of ZODL, a Zcash development group, criticized the approach on social media, arguing that only ending the ZCG fund could leave unresolved governance issues. Swihart advocated for discontinuing both the ZCG and coinholder funding streams, redirecting their allocations to the NSM until the next halving event. He stated that a partial measure would create ongoing debates. Swihart also disclosed that his organization, ZODL, recently received a retroactive coinholder grant, expressing concern that fully shutting both funds would end this source of financial support.
Josh Swihart warned that “a half measure leaves the door open to ongoing debate and politics,” adding that retiring both the ZCG and coinholder streams together would offer a cleaner resolution.
Ian Miers, a cryptographer involved with Zcash’s early development, raised questions about the final destination of the redirected funds. In a community forum post, he supported imposing caps on how much any single organization can draw from the development fund, but argued that simply rerouting the subsidy could create, in his words, “a dev-fund-in-waiting.” Miers cautioned the NSM might function as a reserve that could later be used at the discretion of a future committee or group rather than resolving underlying issues, and that the mechanism may just move funds to miners indirectly.
Mini dictionary: Network Sustainability Mechanism (NSM), a protocol-level smart contract established in Zcash Improvement Proposal 237, is designed to collect and manage funds from block subsidies for the long-term technical sustainability of the Zcash ecosystem.
Bowe responded by emphasizing that the NSM already exists as a destination for block subsidies and described it as “the location of least resistance.” He added, “the issuance has to happen anyway, so it needs to go somewhere.”
Rationale for change
Bowe stated via social media that ZCG was not intended to manage the current volume of funding. He published estimates, using ZCG’s public dashboard as a reference, which lists 91,452.98 ZEC along with approximately $8.8 million in cash holdings. After accounting for about $2.4 million in outstanding grant commitments, Bowe provided calculations for ZCG’s reserves under various ZEC price scenarios: $125.3 million if ZEC trades at $1,300, $97.8 million at a price of $1,000, and $52.1 million at $500.
| Scenario | Assumed ZEC Price | ZCG Reserves (approx.) |
|---|---|---|
| High | $1,300 | $125.3 million |
| Medium | $1,000 | $97.8 million |
| Low | $500 | $52.1 million |
Bowe noted in his post that the dashboard figures used for these calculations have not yet undergone independent verification and that updates to the worksheet are required.
Broader implications for community funding
Zcash Community Grants serves as the main body allocating funds from protocol-level block subsidies to projects supporting the Zcash ecosystem. The 8% share Bowe now seeks to end was due to be revisited based on the network’s broader governance structure. The discussion around ZCG’s future and the proposed shift to the NSM has sparked renewed debate among contributors about sustainable funding models and transparent governance for protocol development.
