Zcash Community Governance and Funding Model Explained
Zcash Community Governance and Funding Model: Who Gets Funded?
Zcash is a privacy coin that enables users to send its native coin, ZEC, through transparent addresses that show activity on the public ledger or through shielded addresses, which hide the sender, the receiver, and the amount using zero-knowledge proofs.
It’s a decentralized network, and so its funding has always been a collective decision, not something one company decides to pay for. The Zcash Community Governance and Funding Model is a proposal to divide a portion of each block reward into community grants and a coin holder-directed fund.
How Was Zcash Development Funded Before This Proposal?
Before the NU6 network upgrade in November 2024, 20% of every block subsidy went directly to three entities: Electric Coin Company, the Zcash Foundation, and Zcash Community Grants.
Under the new arrangement, miners keep 80% of the block reward, 8% goes to Zcash Community Grants, and 12% flows into a lockbox. A lockbox is a pool of issued coins that the protocol tracks but that cannot be withdrawn until the community agrees on a disbursement mechanism.
That setup worked as a one-year bridge. According to the draft proposal, block subsidies to both the grants stream and the lockbox would stop in November 2025 if no action was taken, which risked a funding gap for development teams. The Zcash Community Governance and Funding Model targets that gap directly.
What Is the Zcash Community Governance and Funding Model?
The community and coinholder funding proposal is published as a draft Zcash Improvement Proposal, the formal document type used to suggest changes to the protocol and its processes. It keeps the 8% and 12% split but changes who controls the larger share.
| Stream | Share of block reward | Who decides? | Stated purpose |
| Miners | 80% (remainder) | Protocol rules | Securing the network |
| Zcash Community Grants | 8% | ZCG Committee | Grants by and for the Zcash community |
| Coinholder-Controlled Fund | 12% | Coin holders by vote | Larger grants to ecosystem participants, or left at rest |
The fund is seeded with the coins already sitting in the lockbox and then topped up by the 12% stream. Both streams are proposed to run for 1,260,000 blocks, roughly three years, ending at block height 4,406,400, which the draft ties to the third Zcash halving.
How Do Coinholder Votes Work in Practice?
Under the Zcash Community Governance and Funding Model, grant applications move through a process agreed upon by the Key-Holder Organizations, the groups that jointly hold the keys to the fund. The fund sits in a multisig wallet, which needs several keys to approve a transaction, so no single party can move the money alone.
The draft sets out the voting rules in a few clear steps:
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Applications are submitted for community review 30 days before a vote.
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Coin holders vote on grant applications every three months.
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A grant needs at least 420,000 ZEC voted, which equals 2% of the total eventual supply, plus a simple majority in favor.
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Competing proposals get separate votes, and the one with the highest ZEC committed in support wins.
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The same coins may be used in more than one vote, which avoids vote-splitting.
Coin holders are not obliged to fund anything. The draft states that the money may stay at rest, and no organization or individual is barred from voting its coins.
Coin-weighted voting is simple to measure, yet it gives larger holders more influence by design. That is one reason the minimum turnout figure draws attention, and the draft itself lists whether 420,000 ZEC is the right threshold as an open question.
Can Key-Holder Organizations Block a Grant?
They can, but only in defined cases under the Zcash Community Governance and Funding Model. A grant is vetoed if any single key-holder organization says that funding it would break its legal or reporting obligations, or if two or more of them state a principled objection based on potential harm to Zcash users or a clash with community values.
The draft describes vetoes as exceptional and says they should come with a thorough rationale. Keyholder organizations cannot overturn a coin holder rejection, so the veto works as a brake and never as a way to force funding.
What Role Does Zcash Community Grants Play?
The 8% stream in the Zcash Community Governance and Funding Model continues to support the Zcash Community Grants program, which the official ecosystem page describes as funding for teams that improve Zcash and advance financial privacy. The page lists two gateways: open grants and invite-only grants.
Under the draft, this stream starts when the existing grants stream expires and follows the same rules as ZIP 1015, with a committee reviewing applications.
Why Did the Community Move Away From Direct Funding?
Community polls and discussions before NU6 produced several clear preferences. Specific organizations should not be direct recipients of development funds; direct funding creates misaligned incentives, and recipients should submit concrete proposals, compete for money, and report progress openly.
Official pages add that the trademark agreement between Electric Coin Company and the Zcash Foundation requires both to approve any upgrade that changes consensus, with clear consensus measured through community polling.
Expert Analysis: Strengths and Open Questions
On paper, the Zcash Community Governance and Funding Model offers two independent voices, one from community grants and one from coin holders, which spreads decision-making more widely than the old direct model.
The weak points are equally visible. The draft says the exact voting model will be specified in a separate ZIP that is still to be decided, and the Zcash Community Governance and Funding Model depends on a handful of organizations signing transactions after a vote passes.
Looking at how other crypto governance systems handle token voting shows why turnout rules and signer accountability matter.
Social consensus also has limits. The draft notes that nothing forces node software developers to implement a proposal.
Conclusion: What Remains Unsettled
Zcash is a privacy coin with shielded and transparent transactions, and the Zcash Community Governance and Funding Model is a proposal for paying the people who maintain it. It sends 8% of block rewards to community grants and 12% to a fund directed by coin holder votes, with a veto safeguard held by the Key-Holder Organizations.
What stands out is the shift from fixed recipients to competitive grants. What remains uncertain is the final voting design, the right turnout threshold, and whether the proposal moves beyond draft status.
Official ZIP pages and the Zcash network page are the places to track any change in the Zcash Community Governance and Funding Model.
Disclaimer
This content is for information only and is not financial, investment, or legal advice. Crypto assets are volatile and carry a high level of risk, and proposals described here may change or never activate. Research official sources independently before making any decision.
