Sean Bowe's draft ZIP would redirect Zcash Community Grants' 8% of new ZEC to the Network Sustainability Mechanism, arguing its roughly $125M in reserves is enough.
Zcash co-founder Sean Bowe has proposed ending the Zcash Community Grants (ZCG) funding stream, which gets 8% of each block's new ZEC, and sending that share to the Network Sustainability Mechanism (NSM). Bowe says ZCG "has over $125M in funding, and will receive millions more before the spigot is turned off."
What's the Scoop?
What Changes: Bowe's draft ZIP stops the 8% payments to ZCG, the five-member committee selected by a community advisory panel to fund Zcash ecosystem grants, and redirects that share to the NSM through the stream's scheduled end at the third halving. Bowe says ZCG's existing treasury, roughly $125M by his estimate, is enough to keep funding grants. The separate 12% Coinholder-Controlled Fund stream is unchanged.
What's the NSM?: It's a protocol-level reserve that takes ZEC out of circulation and gradually reissues it through future block rewards, to help fund network security as scheduled issuance winds down. Once NU7 activates, 60% of each block's transaction fees will flow into it instead of to miners, and Bowe's proposal would add the redirected 8%. Reissuance is slated to start in 2031.
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What's the Coinholder-Controlled Fund?: It's the pool fed by a separate 12% slice of each block's new ZEC under ZIP 1016. ZEC holders vote on grant proposals each quarter, and three key-holder organizations (the Zcash Foundation, Electric Coin Company and Shielded Labs) hold the keys and sign off on payouts. ZCG's 8%, by contrast, is spent at its committee's discretion.
Early Pushback: The idea is already contested on the Zcash forum. Zcash Open Development Lab founder Josh Swihart says it'd be "a mistake to kill only one part of the dev fund" and wants the coinholder stream dissolved too. The forum thread also floats sweeping ZCG's remaining treasury into the NSM, which Bowe says he'd back but wants handled separately.
What's Next: It's a draft with no activation height and isn't part of NU7. NU7, expected around Nov. 5, adds the NSM and also freezes any ZEC left in Sprout, Zcash's original shielded pool, so ZCG's share would only start flowing to the NSM after a later upgrade.
David Christopher
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David is a writer/analyst at Bankless. Prior to joining Bankless, he worked for a series of early-stage crypto startups and on grants from the Ethereum, Solana, and Urbit Foundations. He graduated from Skidmore College in New York. He currently lives in the Midwest and enjoys NFTs, but no longer participates in them.