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ZEC · 18w

"Resources, Governance, and Legitimacy in NU4 General" from Chris Burniske of Placeholder

In October 2020 the Zcash network will undergo its first halving, slicing the annual rate of ZEC inflation in half. Halvings are important moments in any cryptomoney’s maturation as they double the marginal cost of producing each incremental unit (at constant hash rate), moving the asset further along the scarcity curve. Concurrent with this halving, Zcash will undergo its fourth network upgrade (NU4), in which key decisions (especially re: the Founders Reward) need to be made that will shape the next four years of Zcash’s life.

For those new to Zcash (not many noobs on the forum, but just in case!), the Founders Reward refers to the 20% of newly minted ZEC supply that goes towards Zcash founders and software development, with the other 80% going to miners who maintain the network’s hardware and ensure its security. This bifurcation differs from Bitcoin’s choice to allocate 100% of newly minted BTC to hardware security. The term Founders Reward is not entirely representative of how the 20% ZEC is used, as witnessed in the breakdown of Zcash’s monetary policy below:

Right now, the default plan for NU4 is to discontinue any allocation for software development and revert to Bitcoin’s design of 100% newly issued ZEC to miners. If, however, the community decides it would prefer to continue allocating 20% of the block reward to software development during the 2nd coinbase reward epoch (totalling 5% of fully-diluted ZEC supply), then a number of decisions need to be made about the allocation and governance of those funds [1].

As ZEC coin holders, Placeholder recognizes that NU4 will be a critical upgrade for the Zcash network, and therefore have chosen to submit our thoughts about its contents. Since it’s our first “formal” participation in the Zcash community, some explanation could be helpful:

While members of the Zcash and Placeholder teams have known each other for years, only in 1H 2019 did Placeholder build a position in ZEC. T...

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