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Zcash Foundation and Electric Coin Company showing signs of schism

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Ironically enough, the road to true decentralisation may be best navigated by a dictator.

Zcash has a novel governance and funding mechanism.

Dividends for its early investors and founders are hard-coded into Zcash as part of its block rewards through the so-called "founders reward", while governance and development is handled by a combination of the non-profit Zcash Foundation and the for-profit Electric Coin Company, both of which are funded through their own portions of the founders reward.

This arrangement was intended to bring the best of both worlds, with a non-profit spreading the word and building a decentralised community, and the Electric Coin Company creating viable commercial products based on the technology underpinning the Zcash cryptocurrency. The idea was that neither organisation would have unilateral power, ensuring a healthy level of decentralisation without sacrificing the direction that discrete organisational structures bring.

But it's also caused some problems that are largely oriented around the challenges of trying to fund these sometimes-overlapping organisations with voluntary allotments of the founders reward.

And now its governance may be tearing at the seams, with the Electric Coin Company (ECC) functionally seizing control of the Zcash trademark. That is to say, it's retaining its legal sole ownership of the trademark rather than sharing it with the Zcash Foundation as previously agreed.

Negotiations between the ECC and Zcash Foundation are ongoing, and Zcash's ongoing adventures in decentralised governance are well worth watching as an example of the benefits and pitfalls awaiting decentralisation enthusiasts.

Underlying issues

The Zcash trademark was meant to be protected with a so-called "double veto" arrangement where either the ECC or the Foundation could veto any usage of the trademark that they did not approve of. Unfortunately, this could result in a deadlock, Zcash founder Zooko Wilcox noted.

"The inherent problem with double-veto is that it is prone to inaction or deadlock. Our earlier intention had been that 2-of-2 would be a stepping stone to 2-of-3, or even further decentralisation. But, if we were to lock the trademark into a 2-of-2 double veto, and then there wasn’t subsequent agreement on how to further decentralise it, then it would be in a dead end. There would be no way to move on to 2-of-3 or another more decentralised governance structure."

So in the absence of amicable agreement, ECC is retaining control of the trademark.

The ECC will not do anything with the trademark that goes against the broader will of the Zcash community, Wilcox says.

"We've publicly committed (both me personally, and ECC as a corporation) that as long as we’re the sole steward of the trademark, we'll use it to honor the community’s decision in the current governance process.

"So we believe that we should wait for the governance process to work itself out and we advocate for further decentralisation of control over the trademark. As long as we remain the sole stewards of the trademark, we will use it to protect the community's decision in this governance process."


It's ironic that unilaterally retaining control of the trademark, potentially against the will of the Zcash community, can be regarded as the best way of serving the community's interests.

But despite how it all sounds, depending on how the ECC handles its power, it's not necessarily going to be a bad decision or against the often-complicated principles of decentralisation. The community is not always right, not every blockchain really needs pure 100% decentralisation and the majority of users' immediate interests will not always be served by true decentralisation.

Zcash's current struggles echo the debate in Ethereum following the Parity wallet bug, where some users advocate intervention from lead developers and others oppose it.

Ironically, the tough slog to workable decentralisation is sometimes best navigated with the help of a dictatorial authority.

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Disclosure: The author holds BNB and BTC at the time of writing.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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