Zcash faces a widening development funding debate as its community reconsiders the network’s long-term monetary identity.
Investors, developers, and cryptographers disagree over whether protocol-funded grants strengthen or weaken the ecosystem.
The dispute also reflects growing support for treating ZEC more like a long-term store of value. Meanwhile, developers are preparing a major upgrade that could change how the network operates.
The Zcash Dev Fund receives 20% of every block reward generated by the network. The pool finances grants for teams working on ecosystem development.
Developer Maxime Desalle challenged the model in his September 9 essay, “Contra the Zcash Dev Fund.” He argued that grant funding reduces rewards available to miners securing Zcash.
Desalle also criticized the incentives created by the system. He said it can encourage dependency, bureaucracy, political selection, and competition for grant approvals.
He argued that guaranteed funding reduces pressure to seek alternative financing. Teams could focus on grant reviewers instead of building products users want.
Desalle said he canceled a Zcash Community Grants award obtained about six months earlier. He said keeping the funding no longer seemed right.
He cited Tachyon, Shielded Labs, and ZODL as projects that attracted private capital without protocol subsidies.
Paradigm co-founder Matt Huang disagreed with Desalle’s position. Huang called inflation-funded developer support an elegant mechanism for financing long-term public goods.
Economist Alex Tabarrok offered a mixed assessment. He acknowledged Desalle’s governance concerns while pointing to challenges surrounding public-goods funding.
Governance questions sharpen the Zcash Dev Fund debate
Investor Haseeb Qureshi focused on who should control the Zcash Dev Fund. He argued that allocations should not depend entirely on token voting.
Instead, Qureshi proposed a system similar to representative democracy. Tokenholders would elect delegates or council members on a regular schedule.
He said those representatives should remain accountable to holders. Qureshi also warned that lifetime appointments generally undermine effective governance.
Qureshi and Desalle agreed on concerns involving coinholder grants. Recipients receive ZEC, which can increase their influence over later funding votes.
That influence can compound when the same recipients secure repeated grants. ZIP 1016 currently places no restrictions on anyone voting their coins.
‘Encrypted Bitcoin’ identity shapes ZEC’s next phase
The Zcash Dev Fund dispute also overlaps with changing views about ZEC’s purpose. Qureshi said the community increasingly sees ZEC as “encrypted Bitcoin.”
That identity favors monetary simplicity and fewer additional protocol features. Qureshi argued that a dependable store of value may eventually need to ossify.
Starknet co-founder Eli Ben-Sasson offered another perspective on September 17. He linked ZEC’s rally partly to concerns about Bitcoin becoming too ossified.
ZEC has traded close to $1,500 following a roughly 20% Thursday increase. The rally has brought further attention to Zcash’s direction.
Meanwhile, developers are targeting November 5 for the NU7 upgrade after reaching unanimous agreement on its contents. Testnet activation is scheduled for October 6.
Developers expect a final mainnet decision on October 20. NU7 would cut target block spacing from 75 seconds to 25 seconds.
The upgrade would also introduce the Network Sustainability Mechanism while preserving Zcash’s existing halving schedule.
Community voting has already supported both proposals. Developer Sean Bowe said 98.9% backed keeping the halving schedule. Bowe also said 99.9% of the ZEC-weighted vote supported faster blocks.
