Zcash Development Fund
Zcash is a unique blockchain protocol because it is self-funded. This means that teams working on Zcash do not need to take money from outsider investors, and can remain focused on driving adoption while also staying aligned with Zcash's broader ethos and mission.
Block Rewards
In blockchains, there are something called a blocks , which are produced to record transactions that are not yet confirmed in the network. Once transactions are validated, the block is closed.
Block producers (aka miners) are tasked with validating transactions in a network and producing new blocks. When producing these blocks, block producers are rewarded with a block reward. In Zcash, roughly every 75 seconds a new block is produced, and a block reward of 3.125 ZEC comes into circulation. Block rewards in Zcash will produce new coins until Zcash reaches its 21 million max supply. After reaching max supply, block rewards will be paid for by transaction fees.
Zcash's funding mechanism (pre NU6)
In Bitcoin and other cryptocurrencies, all of the block rewards go to block producers. Zcash is unique in the fact that 20% of the block reward is transferred to the Zcash development fund . This fund funds the teams working on the Zcash protocol.
Currently, Zcash Community Grants receives 8% of block rewards, Electric Coin Co. receives 7%, and the Zcash Foundation receives 5%. This works out to 40%, 35%, and 25% of the development fund respectively.
In 2020, the Zcash community voted on the development fund and the teams supported by it. In 2024, the community will vote again to determine who gets funding from the development fund.
Zcash Hybrid Deffered Dev Fund Lockbox (NU6)
The Hybrid Deffered Dev Fund Lockbox is the funding mechanism chosen for the next generation of the Zcash development fund. This option allocates of the 20% total Zcash block rewards, 60% to the Zcash Grants Comittee and 40% to a protocol lockbox, guaranteeing that resources are available to support the Zcash ecosystem's future while continuing development and upkeep.
Decision-Making Process
The decision to implement the 20% Dev Fund Lockbox was reached through a comprehensive community-driven process. This included two rounds of Zcash Community Advisory Panel (ZCAP) polls, as well as several ecosystem-wide polls. These polls allowed a broad spectrum of stakeholders to voice their opinions and contribute to the decision-making process.
As the dev fund lockbox is deffered (meaning funds will be unlocked via network upgrade at a later date), the Zcash Community will soon decide on a distribution mechanim for funds. One proposed option being the 'Zbloc' decentralised governance mechanism.
Resources
Dev Fund Lockbox - Forum Thread
Establishing a Dev Fund for ECC, ZF, and Major Grants