A Zcash co-founder suggests stopping funding because recipients are left with a surplus
Sean Bowe has published a draft proposal, circulating as draft-bowe-end-zcg-stream.md, to end the automatic allocation of 8% of newly issued ZEC to the Endowment Fund.
10/27/20264 min read
The calculation behind the statement
The 8% allocation pays approximately 144 ZEC per day regardless of how much the committee already holds, and at the network's target rate, this translates to nearly $68 million per year. The committee's dashboard shows approximately 91,453 ZEC and $8.8 million in cash, with $2.4 million already committed to units receiving funding. Bowe values the remaining balance at approximately $125.3 million based on a ZEC price of $1,300.
Let's compare that figure to expenses. The committee's administrator reported approximately $1.5 million in expenses in the first quarter, equivalent to nearly $6 million per year. At that rate, the current balance is sufficient to fund about two decades of operation at current prices, and even Bowe's more conservative calculation, assuming ZEC at $500, still provides for about five years of operation. Meanwhile, revenue from the fund would add an additional $68 million per year.
This is what makes this proposal unusual. Debates about treasuries in cryptocurrency governance almost always revolve around the issue of scarcity, with one program arguing that they need more and holders arguing that they already have enough. In this case, the recipient's funding mechanism has exceeded reasonable implementation capacity, primarily due to the significant price increase of ZEC while the allocation ratio remains fixed relative to the total issuance. A funding model based on a percentage of the issuance, valued at a tenfold increase in asset value, would produce precisely that result, and this is a design flaw, not due to any wrongdoing.
Where will the money be diverted?
The 8% that is diverted will flow into the Network Sustainability Mechanism (NSM), a reserve fund that accumulates for future mining rewards. This is particularly important for Zcash because the chain is facing the long-term security budgeting issue that all proof-of-work systems encounter when subsidies decrease, and the NSM is Zcash's attempt to address this issue structurally rather than hoping that mining fees will naturally appear.
That being said, this proposal shifts value from a non-spending committee to a reserve fund with a defined future purpose. Bowe also made it clear that he wanted to retain the separate 12% allocation, which is subject to quarterly voter approval. He wasn't against funding the ecosystem. He was opposing a specific financial stream whose scale had exceeded its original purpose, while preserving another financial stream with continued accountability from the holders.
The argument about risk is the stronger argument.
Beyond the mathematical figures, Bowe makes an argument about retention and governance that deserves more attention than the headline numbers. A grant committee holding $125 million is a significantly different entity than one holding $10 million. It demands retention at the organizational level; it becomes the target, and its governance decisions carry consequences that the original structure was not designed to bear. The program, as he argues, was never designed for such a large level of funding.
That's the argument from the 2022 collapses rephrased in the context of the Treasury. The concentration of assets in an entity where controls are built for a smaller balance is a form of failure regardless of anyone's intentions, and the correct response is to stop adding, not to build a mechanism to manage a balance that no one planned for.
Assessment and Conclusion
This is a draft without ZIP codes and no activation levels. It would require network rule changes, meaning consensus between node implementations and validators, and until it takes effect, 8% continues to flow. The opposition recorded so far relates to a separate funding decision, not this proposal, so the debate hasn't really begun yet.
It comes alongside all the other developments in Zcash this year, with Ironwood being activated, NU7 going live on the test network in early October with ZIP 218 and 25-second blocks, and Sprout's decommissioning date still undetermined. Adding a development fund restructuring to that list is a big ambition. The core question the community now has to answer is whether a funding mechanism that generates unspent surpluses should be fixed at its source, which is what Bowe proposed, or whether the committee should be expected to develop based on that money. The first answer is the more cautious one, and that's not how debates about development funds usually go.
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Compiled and analyzed by HCCVenture
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