The managing partners of blockchain venture firm Blocktown Capital, Joseph and James Todaro, have put forward a way to extend the fuse on ZCash’s ticking time bomb.
Zcash is a privacy-focused cryptocurrency that allows users to obscure how much money they are sending on the network. A for-profit company called the Electric Coin Company (ECC), run by Zooko Wilcox, and the non-profit Zcash Foundation help to develop the coin. In return, they—and a bunch of founders—receive remuneration in the form of the Founder’s Reward.
The privacy coin currently pays out 20 percent of block rewards to the developers automatically. But that’s set to stop when the 570,000th block is mined. Then, the supply of coins will be halved and it will stop giving back to those building its technology. It’s estimated this will happen around October next year.
If the money dries up, the ECC will have to find a commercial solution to keep the development of Zcash going. This could either lead to stagnation of the network or make it too commercialized.
In anticipation, community members are debating what to do next. Some think the Founder’s Reward should be funneled to the ECC, to develop the coin and strengthen the Zcash network. Yet the Todaro brothers, also investors in Zcash, say this would decrease “decentralization, chain security, and ultimately, censorship resistance.”
They note that, while Zcash was losing money, the Zcash Foundation and ECC, hiked their expenses. Though Zcash is down 66 percent against Bitcoin since the start of the year, ECC CEO Wilcox pockets $162,000 a month in ZCash, according to a transparency report published in May.
“We are concerned that this spending behavior is reminiscent of that of state departments and governments,” writes the Todaro brothers.
Instead, they say the Founder’s Reward should continue, “albeit marked by a reduction from the current 20 percent allocation of mining rewards to a more modest 10 percent allocation.” Even with the reduction, they think there will still be sufficient income, estimated at $37 million per year.
Why the rosy outlook? “We believe that Zcash will undergo significant price appreciation over the coming five years mitigating today’s concerns regarding development funding,” they write.
The Todaro brothers think that reducing the Founder’s Reward would unite the community, and help breathe new life into a coin where “sentiment and interest in Zcash are likely near an all-time low." But will they be right?