On The Brink with Castle Island - Josh Cincinnati on the challenge of blockchain governance (EP.144)

Episode Date: November 2, 2020

Josh Cincinnati, former Executive Director of the Zcash Foundation, joins the show to talk about his tenure at that organization, and lessons he's taken from the experience. In this episode:  The genesis of the Zcash Foundation Prior foundation mistakes that Josh sought to avoid The difference between governing a non-cryptocurrency FOSS project and an open source protocol with an explicit monetary element Why Josh chose to step down from the Zcash Foundation How the monetary distribution of Zcash was initially devised and how the founder's reward became a developer fund The dynamics around the trademark sharing in Zcash Trademarks as a last resort tool of power in blockchain governance How public blockchains are 'Marxist in their goals, Leninist in their implementations' How the mandate of the Zcash Foundation was broader than simply the Zcash ecosystem The current outlook for funding Zcash development The subtle change in the social contract underlying development funding Why poorly formalized social contracts risk opening up projects to capture How 'aid dependency' is relevant to blockchain governance Why blockchain insiders hide the true mechanisms of power Why coin votes might be more of the output of power rather than the input Josh's advice to a founder trying to devise funding for a novel cryptocurrency Why Rawls' Veil of Ignorance is so important in determining initial conditions for a monetary protocol What Josh is working on now The story behind PonzICO.win Why there is no good satire in the crypto industry Content mentioned in this episode: Angela Walch, Deconstructing 'Decentralization': Exploring the Core Claim of Crypto Systems James Prestwich, Zcash Dev Fund Opinions

Hello and welcome back to On the Brink with Castle Island. This is Nick Carter. Today we have one of my very favorite people in the industry on the show, Josh Cincinnati. Lots of you will know him. He's an incredibly entertaining follow on Twitter. He has a great sense of humor. And for the last couple of years, he also ran the Zcash Foundation. Now, you might know that the power at Zcash is split up into the electric coin company, and then the foundation was created subsequently in kind of an attempt to distribute control and achieve more decentralization over the governance of CCASH realistically. Josh has since left, which gives us the opportunity to reflect back on his tenure and on the history

of CCSCHAS governance, which is a very interesting and somewhat contentious topic on a prior episode with James Prest, which we talked about it. And this gives us another opportunity to candidly reflect on the history of CCSH and the potential pitfalls of having direct protocol monetization through the distribution of resources directly from issuance. Now, I had a bit of an audio snafu on this episode. I selected the wrong input for my audio, and as a result, my audio is a little bit garbled, but luckily for us, Josh's audio sounds great, and he's really the star of the show. So we're going to go right to Josh Cincinnati. This was such a great conversation, and I'm really glad that I was able to sit down with them.

Brought down by bad mortgage investments, Lehman, which has 25,000 employees, will be liquidated. The federal government loans American International Group, AIG, $85 billion. This is a different kind of market, and the Fed is asleep. The federal government is stepping it to stabilize Fannie Mae and Freddie Mac, the two mortgage giants that have been threatened by the housing crisis. The Bank of England has pumped 75 billion pounds more into Britain's ailing economy with a new round of quantitative easing. You print a couple trillion dollars, and all of a sudden people start to worry.

So out of this worry, we have something called the Bitcoin. Josh Cincinnati, you're one of my favorite people in the crypto industry. Oh, likewise, Nick. Thank you. Thank you for paying on our great show. Hopefully I can return the favor one day and come on your own podcast. One of my favorites. Yeah, absolutely.

As long as you can make the interview work within the two-minute time limit that we have on Josh. Yeah, those are some really serious constraints, but I think I'll be able to do it. Yeah. What was the catalyst for you? Because your voice sounds great. And we were talking about this before the episode. We were talking about how the phrase dulcet tones, you know, you only ever hear dulcet used in that exact context.

Yeah. And never outside of that. But your tones truly are dulcet. Oh, thank you. And, you know, partly that's because you bought some really nice audio equipment. So maybe before we start, why don't we cover that important topic? What was the catalyst for you improving your audio setup over there? Oh, well, well, actually, I think it was partially feedback like that, that my dulcet voice.

Yeah, it doesn't really work, does it? Dulsat voice just doesn't sound right. No good. No good. But in any event, there was feedback that people seem to enjoy the little twadcasts that I was putting together. And so I decided to up my game a bit and get that equipment. But actually, you know, what really got me into even doing the stupid little Twitter podcast thing was I think it was seeing you, Nick, post a Twitter voice thing and realizing that I was not one of the lucky few in that Twitter rollout. And so I as you may know all of my

All of my Twitter voice you know Josh's dumb voice podcast It's actually just like a It's an Ersatz Twitter voice it's not really Twitter voice I faked it It's homebrains. Yeah It's bootleg, exactly It's a little audio moonshine as I like it's a little audio moonshine As I like much moonshine's better than the storebots

That's right that's absolutely right But there's a 5% chance that you go blind. Oh, yeah, or deaf, I guess, listening to it in my case. But it was a lot of seeing that people were starting with that format. And I have to admit, like, I made the first few twads, as they are kind of terribly coined. I made the first few of them were to make fun of the format. And as I started doing that, I discovered that I enjoyed the medium that I was making fun of in this very meta, meta realization.

So I just kept doing them for a little while, you know. That's how they get you. It is. It snared you in. I mean, it is a fun medium because you can impress your voice upon people in your feed who are normally just consuming your content with their eyeballs. Yeah, yeah. It's like really aggressive thing. It's like, people didn't wake up this morning expecting to like hear me shouting at them from Twitter.

Yeah. They wanted to passively consume. Now it's a new domain. And now it's, and the beautiful thing is if you keep doing it eventually, almost like a Pavlovian response, you can start to get people to read your passive Twitter messages in your own voice rather than their own internal monologue. So that's really the goal. just I just want to live, I want my voice to live in everyone's, you know, in everyone's mind, rent-free. That's the goal. Because maybe people read your tweets, I don't even know what you

sound like. Yeah. So you really need to close that, that chasm. Yeah. That's right. Well, for our listeners sake, I'm glad that you have some high-quality equipment. Sounds great. Very much Dulcett. The subject of today's podcast is very serious, though. It's not comedic, although maybe it will be. I don't know. Yeah, we'll find out. We're going to talk about governance, just as a G word, really tough concept.

You know, much ink has been spilled over it. So, you know, for context, you were the executive director of the Zcash Foundation for some years, how long was your tenure over there? So I was at the Zcash Foundation for three years and an executive director for like two and a half. And you effectively, would it be appropriate to say you kind of design the structure for the foundation, or you're involved in the structuring of the foundation? Yeah, so I joined the foundation, you know, a little bit after the initial incorporation. and there are some moving parts there that were already in play.

But I would say that it is fair to say. I mean, I was the first full-time employee there. And then the first outside of the board of directors at that point. And certainly, definitely someone who had influence on the shape and direction of the broader governance discussions in the Zcashi. system. So yeah, I think I think that's fair. So it's not a secret that you've since left or stepped down from that role, which gives us a great chance to have a retrospective on the topic. So maybe we can start at the beginning. I mean, when you were thinking about setting up the foundation or getting involved, were there other foundation case studies

that you thought were, you know, ones to follow or was it all in the negative sense, like looking at the Bitcoin Foundation and just trying to avoid that. Yeah. Not to, not to, you know, can I, can I say shit on the podcast? You may. Okay, I just want to make sure. I want to calibrate for my audience here. So, but, but yeah, not to shit on the, on the Bitcoin Foundation because they were,

they were really a pioneer. But that was certainly something that I was viewing in a negative relief, you know, trying to understand like what went wrong there and to try and prevent that in the formation of the Zcash Foundation. But, but beyond that, there weren't really a lot of good, like, crypto examples. There were lots of great nonprofit, you know, open source software examples for sure. places like the, you know, the EFF and the Free Software Foundation, the way that the Rust community and the Rust development process has been built has been a great guiding presence as well. So there's, there are definitely great examples that you could draw from, but there wasn't

really at the time, I think, like, in my view anyway, like a truly, you know, stellar example of how one should set up a cryptocurrency foundation. So I did my best at kind of taking a shot at building what I thought would be, you know, the right kind of cryptocurrency nonprofit. That was not just, you know, something, you know, not just a vehicle for, as we've seen in many other foundations, like self-promotion of the people involved or, some kind of, you know, extractive body that's just designed to enrich the people that were

associated with the foundation. That wasn't the case at all at the Zcash Foundation. And I'm really, I'm actually really proud of how that, how we, you know, were kind of, in my view, anyway, among cryptocurrencies, is an exception to that pattern. Right. Yeah. And I would say the other class of foundations is also just the shell foundation where they don't have any meaningful power. They just exist to kind of warehouse maybe some treasury or some coins, you know, raised in a crowd sale or something. And the real objective is to keep a nominal difference between the, you know, the proceeds of a crowd sale and then, you know, a corporate entity that might be managing. the blockchain itself. And it's more of sort of just a regulatory play.

I think that's why we have the Crypto Valley and Zoug and so on. Yeah. But that's sort of the other class of foundation, I would say, exists. Yeah. Yeah, I would agree. And, you know, I think to the extent that, you know, the extent that we did a, you know, a good job of establishing the foundation, we had that in mind that we didn't want the Zcash foundation to merely be this kind of empty shell with no weight or power in the ecosystem.

And, you know, on the plus side, I think that we demonstrated that throughout the various Zcash debates that happened about governance that I'm sure we're going to dive into in a moment. But so we definitely, we definitely demonstrated that. But I will say it wasn't like, you know, it definitely wasn't without, without cost because certainly, at least for me personally, you know, it definitely affected my, you know, working relationship with the other primary organization that was working on Zcash, Electric Coin Company and, you know, and their leadership. And that was certainly, like, I think having that self-reflection and understanding that there were scars from us being a truly independent

foundation scars that weren't going to to heal or be ameliorated as long as I was there was a part of a catalyst for me leaving as well. So one thing I wanted to zoom in on, you mentioned inspiration from other open source modes of governance. We had a great episode with Joseph Jacks of open source capital and we talked about the difference between governing a, you know, bizarre style open source project and then commercial open source and then open source as it pertains to a monetary system, which is a very special case in my opinion. And I've always had this intuition that you can't just transpose the historical kind of functional governance processes that we've seen in significant.

successful open source to a monetary system because the stakes are so much higher and because there's sort of the direct potential for, you know, enriching the protocol insiders, so to speak. Is this kind of an intuition that you share as well? Oh, yeah, that resonates with me completely. Because I think, and this is the challenge that any, as you say, that any foundation that is focused on a protocol that aims to be money. when that foundation or really any other entity, but it could be a for-profit corporation,

it could be a collective, you know, it could be whatever really, as long as it's a center of power perceived or otherwise in that ecosystem, as long as they wield that power, they have a fair bit of authority in determining the shape direction and development of that protocol. And as a result, there is this just tremendous risk

of them basically engaging in extractive or rent-seeking behavior. And to the, you know, to the Seacash Foundation's credit, I don't, I really feel like they did a, you know, while I was there, we did a good job of pushing back against what is a very tempting, I think very tempting, especially for organizations that are, you know, by their nature as nonprofits, like typically cash-strapped, when you're literally in the business of making money, it is so hard to resist the urge to quite literally make money for yourself, you know, and to do so in a way that would, I think sidestep kind of consensus and community buy-in. And I like to think that we didn't, you know, we didn't do that at the foundation.

There was, you know, there is a portion of funds from the resulting dev fund debate that will be going to the foundation. But one of the reasons that, you know, that, again, one of the reasons that I'm, that I left the foundation was to demonstrate that like this, you know, that decision was made while I was in charge. It wasn't actually the decision that I personally wanted, but even so, it's something that happened while I was head of the foundation. And I don't think it's, if you do engineer, if those sorts of things are engineered and happen, such that an organization that you're involved with becomes a beneficiary of that activity, I think there's actually a very

strong, I think there's a moral imperative to demonstrate that you're not going to personally take advantage of it. And that was part of my decision as well. So you mentioned this renegotiation or alteration to the Dove Fund. I think many people are vaguely aware that there was some sort of reinterpretation there, but many Bitcoiners probably won't be familiar with the whole the whole kind of history there. So when you talk us through your understanding of what the initial setting was in terms of the monetary issuance, breakdown, who was entitled to what, and then what was subsequently decided through this process of negotiation much more recently. Yeah, yeah, for sure. Yeah. And I am, and obviously, like, I think the caveat that you

already suggested in the formulation of that question that it's from my perspective very strongly applies. I don't have all the information and it might even, you know, memory is a faulty thing. So I will do the best to express my view of how things shook out from my perspective. But, you know, caveat, is it, is it Lecter? No, not Lecter. I can't remember my my Latin, caveat listener, whatever the listener, listener cognate might be. But, okay, so my, so my perspective on this whole situation, one of the things that I am actually by nature a Bitcoiner, and I've been a Bitcoiner for a while, but I got excited about Zcash because I recognized that that there were two, you know, at the time when I was looking at it, like two issues with Bitcoin

that seemed a long ways off from being solved. One of them was base layer privacy, and the other was figuring out a way to ethically align incentives for early development in a way that would benefit folks early on. I think actually, to be honest, today, Bitcoin, in some respects in a very patchwork fashion, but has solved that second problem. In fact, you wrote a very good article about how it has. So I'll let listeners find that on their own. But that first problem is something that still exists and is important, I think, for Bitcoiners to recognize.

But I ended up getting interested in Zcash because it seemed like that technology was interesting. And I thought that the initial Founders reward mechanism was a, a smart way to bootstrap that early development, you know, in a way that was like ethical and aligned with the interest of the project and the ecosystem at large. So to those who don't know, the founders reward, you know, and because if you're a Bitcoiner, you know the Bitcoin supply schedule, Zcash follows the overall Bitcoin supply schedule with a few nuances on the early issuance. But effectively, you can imagine that like Bitcoin, In the first four years of Zcash's issuance, there will be 10.5 million ZAC, as it's colloquially known, minted by minors.

And the Founders Award was a method by which 20% of that Zach, as it was being mined, so not immediately, not like a pre-mine, but as it was being mined, would be granted to a number of entities I think early investors in the electric coin company, which was the primary company involved in development of Zcash. But early investors, employees, a small strategic reserve for that company. And actually, eventually the foundation itself was a beneficiary of this founder's reward, but in a sort of indirect way in that a bunch of those early employees and investors pledged their founders reward coins to the foundation to establish it as an independent second party working on Zcash.

And just to be clear, so that 20% of that initial four-year supply is 10% of the fully diluted supply. That's right. 10% of the fully diluted supply. And I, you know, I very much consider myself a bit coiner. but Zcash is not Bitcoin, and I thought it was fair to experiment with these kinds of early, you know, early development bootstrapping financial models. And I thought it, you know, it made a lot of sense at the time, and it still does, I think, to this day.

Like, I don't think I would have changed anything with how that was structured. I will say that, you know, it was my impression. and I think if you look, you'll never see this explicitly stated by the electric coin company or anyone who was originally involved in that formulation of the Founders' reward. But as a community member at that time, my impression was that that would be a temporary bootstrapping mechanism and that there would be no subsequent Founder's Reward style, you know, vested coin generation for really anyone, you know, anyone else. I simply thought like that was sort of it. And then the foundation would have migrated to a donor-based model and the

ECC would have migrated to a different business model. And that would be the end of that. But as you can tell by the tone and the direction that this answer is taking, that was not to be the case and what wound up happening is that there were rumblings of of their being a desire to extend that founder's reward but call it something else the developer fund or dev fund for short and that instead of it you know rightfully instead of it benefiting any investors it would purely go to the entities that are working on you know, working on Zcash or maybe grants for people that could work on Zcash in the future. And this, you know, I think I first like heard about it privately from from some folks like in

2019 and then I first heard about it publicly on the forms like in May 2019 on the, you know, the Zcash community forms. And, you know, for me personally, and I've said this before, but I, It put me in a kind of weird spot because I had a duty to the board of directors of the foundation, like any executive director at a nonprofit, and that they're, you know, I need to serve to the best of my ability and to the way that they want me to serve the board. But I also personally had a very strong dislike and, you know, almost like a knee-jerk revolution at the idea of, extending this, you know, extending or creating a new dev fund because to me it felt like a violation of an implicit social contract that existed in the beginning of Zcash. And, but, but, you know, ultimately, like my personal feelings were less important than my role as, as someone running a foundation trying to balance and compromise, trying to find that balance and compromise amongst

all the ecosystem participants. And so, you know, I didn't really, I didn't push back, I think, as hard as I would have if it was, if the foundation was a dictatorship of Josh, which I'm glad it wasn't for that matter. But so what was the, I mean, so there was a negotiation, there was a debate. I kept up with it a little bit. How did it shake out in the end? I mean, what became the subsequent distribution of rewards? Yeah, so the final tally after all was said and done, and it is actually quite a dramatic tale because in between that hearing about it and finally reaching a resolution and reaching consensus with the broader community,

the foundation and the electric coin company, in between all of that, there is this underwriting assumption that there would be a trademark agreement between the ECC and the Zcash Foundation that defined this governance model that we like to call two of two multisig, where both the Zcash Foundation and the ECC would have to agree on the legal definition of Zcash for purposes of protecting the mark. In the case of a fork, for instance? Yeah, exactly. In the case of a fork or a disagreement about a network upgrade, which obviously, like, that doesn't really happen. In the Bitcoin world, there's a much more like, there's one, there's no trademark because it's all prior art. And two, there's more of a grassroots consensus building that happens as you saw in, you know, the Segwick adventures of 2017 in terms of what defines Bitcoin and all of the subsequent Bitcoin forks that have utterly

failed to capture the same kind of market dominance as what the broader community thinks is Bitcoin. Well, for better or for worse, there is a Zcash trademark. And it's certainly, given that there is a trademark, there is this sense that it should be held by a single entity. And so the, given that it existed, there's this poll to figure out a way of distributing power so that it wasn't just up to one entity to legally define what Zcash is. So if there was a contentious fork, for example, that entity couldn't go to all the regulated exchanges in the U.S. and say, you can't call that Zcash, et cetera, et cetera, et cetera.

So, like, you know, it's something that was just sort of, something that needed to be decided in a way that still distributed power away from a single entity. And this, like, I actually thought that the two of two idea was a solid one, in that both the ECC and the foundation, with slightly differing incentives and perspectives, would have to agree on what constitutes Zcash. And there was this assumption and negotiation that was happening throughout most of 2019, that an agreement like that would be struck and that we would sign that.

And that was in at least the foundation's mind, not just my own, but also the, the board of the foundation, it was a, it was a like a, you know, a preamble to a successful dev fund negotiation was having that agreement in place so that the foundation could actually use its weight to, to, and use its voice to affirm what the, you know, what actually would constitute Zcash. In addition to the foundation building its own Zcash node software, so there's of a, you know, there's this balance of soft, you know, or explicit power in the legal agreement and then softer power in terms of people actually choosing to run the Foundation's Node software as well. So that's a lot of, that's a lot of background context, but ultimately one of the

other things that happened in the process of this dev fund debate is that the ECC, you know, reneged on that widely known structure. Like in the middle of this debate, they said they weren't going to, they would like to have a third party be involved without much warning. And it kind of threw everybody for a loop, myself included. And it basically led to the foundation saying, okay, well, we're not going to actually engage in any kind of, you know, measurement of community will or consider. consensus if this agreement isn't set because otherwise any, you know, any result can't actually

be enforced by us and have the importer of both organizations. And, you know, the good news is that we did reach a resolution in accordance with that initial framework. And that, in fact, the whole legal document that describes that arrangement is actually up on the foundations GitHub. So you can read through all 100 pages if you're so inclined or interested. But that was a absolutely necessary, like, preliminary requirement for us to feel like we would have any sort of legitimacy in the decision-making process rather than it just being, you know, decentralization theater. So just to maybe summarize that, you felt that as a key stakeholder in the ZECASH ecosystem that had been created subsequent to the creation of the ECC.

But a key stakeholder, part of your mandate was to counterbalance the power of the ECC. You deserved effectively equal say in the, in effectively the ontology of Zcash, the project, and being able to determine what constituted validity and which fork in the case of a fork had a true claim to the Zcash name as instrumentalized by the trademark. And so that was kind of a necessary precondition. Yeah. Yeah. That's right. And I think also from our perspective, it was a widely known process and expectation by anyone in Zcash that that, there would be the sharing of the trademark prior to this decision. And I think that, you know, that fair, you know, and maybe I'm giving the foundation too much credit here. But I think it's

fair to say that like people in the community viewed the foundation as an advocate for the community's choice over, you know, let's say arbitrary decision making by other parties in the ecosystem. And so I think people widely viewed it as an important backstop for the foundation to have that power. And that's not to say that that's the only power that matters. Right. You know, because... It's kind of a last resort almost. I mean, it's like the nuclear weapon.

Exactly. People don't know, but, I mean, it's hard power, really. You know, the Ethereum Foundation has the trademark to Ethereum, if I'm not mistaken. But they've never had to wield it, even in... the most critical situation was the creation of Ethereum Classic. They didn't have to build it. Soft power was sufficient. However, they might have to one day.

I mean, especially around a 2.0 kind of situation. Yeah, yeah, that's right. And honestly, like, I mean, it should come as no surprise that I am a bit of a radical when it comes to intellectual property rights and law. And especially for crypto projects, I definitely, think the Bitcoin path, and I suppose actually the Minero path is preferable where there's no trademark whatsoever. And there's really just this much more anarchic method of deciding what constitutes that, you know, the eventual asset is really based on what the community and market effectively

decide. And, you know, certainly dangerous for sure. someone who's starting a project to give up that control. But I think a recurring theme that I've encountered, at least in my experience in the cryptocurrency industry, for people starting new projects is everyone makes claims that they're going to give up power. And then when push comes to shove, oftentimes they hesitate because they're too worried about what will happen when they do. And it's this almost like project paternalism, I guess. guess. Yes. And it's, you know, I get where it comes from, but I think it's also like really, if you're trying to create robust intergenerational money or financial, you know,

instruments of sorts that will last generations and not just some new social networking app or something, like if you're doing that, then you need to have the will and conviction and I think the constitution to simply let you. go, you know, at a certain point. Yeah. This is where I have to interject with my favorite ever tweet, which comes courtesy of Angela Walsh, who's a bit of a bet to wow for the crypto industry sometimes. Yeah.

But I like her. And her tweet is public blockchains are Marxist and their goals and Leninist and their implementations, which strikes directly at the core of what you're saying here. you know in other words she's saying people that create public blockchains have these utopian objectives and this belief maybe even a sincere belief that they'll be able to decentralize power and effectively dissolve the state you know angles talks about the withering state they really believe that they'll be able to dissolve those administrative functions post main net launch and then when push comes to shavs they realize oh actually it'd be great to find a little bit more discretion

and a little bit more control and oh there's a lot of risk involved in giving up power and you know maybe now it looks more like a leninist you know dictatorship yeah yeah and then eventually well on its way to Stalinist and all the sudden all the Trotskyites are out right like whoops likely we haven't had any blockchain gulags yeah No, but that is a one. I also like, because I sometimes, you know, have, have, like, really good-spirited debates with Angela about, it's mostly about the liability of, like, public, of public blockchain developers. Because she has, you know, she has divergent views, I think, from, from, you know, a lot of folks in the ecosystem.

But they're worth exploring. And that I do appreciate her viewpoint a great deal and actually love seeing her tweet. especially those ones like that that are extremely insightful and pithy. And I think that that is, that does like sort of speak to the heart of it, that there is always this temptation and draw to simply exert power when you have it. And it takes a great deal, I think, of circumspection and perspicacity to say, no, I'm not going to do that. and to know that it will benefit the project, you know, in the long term, right?

But if I had to add to that, I would say it's often not even necessarily an individual's choice. It becomes a decision which no individual can make to surrender power once that they've created organizations and created new stakeholders and set things in motion. And at that point, they no longer have the ability to reduce the kind of administrative creep, you know, or like the scope creep of the organizations that, you know, help administer these blockchains. So once you've created a corporation or a foundation, you have shareholders, you have employees, they have families. Like it becomes much more difficult to wind down and say, hey, we're going to, you know, put down our sword. we're going to retire, you know, go back to the farm, basically. Yeah, it is, it is, like, extraordinarily difficult to do that.

And, I mean, even, you know, not to get too personal about it, but even me, you know, leaving the foundation, you know, I knew that it wouldn't affect the well-being of the foundation itself because, you know, the treasury is good. There's, there are great people there. But I felt, you know, there was definitely part of, part of me that felt that leaving was a bit like retiring too early and abandoning, you know, abandoning things. And it's a hard decision to make, especially when all of their, there are all those personal angles there, you know. So maybe just to refocus slightly, it might be helpful actually at this stage to explore what the mandate of the Zcash Foundation was and is, because we didn't actually cover that. And I always thought it was interesting that you guys gave grants to non-ZCash projects as well as Zcash community projects.

Yeah. So the foundation, and I apologize if I'm paraphrasing this incorrectly, but the mission of the foundation is really to, promote and protect privacy protecting financial infrastructure on the internet, primarily through Zcash, but obviously, as you said, not just through Zcash. So we have often, when I was at the foundation, we've given money to tour, to open privacy, to the Human Rights Foundation, to do a series of, of, a piece of research on privacy and cryptocurrencies today. We've given money to the Open Money Initiative.

It's not just focused on Zcash. Of course, like, you know, predominantly we were, Zcash was our primary focus, so the vast majority of our funding went into either internal development of node software and research and development that the foundation's been doing through our really like top-notch engineering team that's over there. And but or or grants to Zcash ecosystem participants that were developing,

things that we felt were necessary in order to bolster more usage of private transactions on Zcash. Because unlike some other projects, privacy is not really the, unfortunately is not really the default behavior in Zcash. You have to know what you're doing to engage in truly private transactions. But when you do, they are indeed the best privacy preserving technique for obfuscating a transaction graph that exists today. So we saw that there are lots of gaps there and try to focus grants toward filling those gaps. So like in GUI support for Z to Z transactions across Windows, Linux, and Mac, on mobile, on hardware wallets and the like. So it was a pretty like, you know, it was a broad mandate with a focus on Zcash, but it wasn't our only focus. Yeah, not to turn this interview into too much of a hagiography, but I was always very impressed by that.

Oh, thank you. I mean, I think you guys even made grants to Manero-related problems. projects at certain points as well. Yeah, I think the best example of that was this is actually more of a, like, we had an oh shit moment when we realized in 2019 that the big conference that we organize every year, ZCon, was the same weekend as the big Minero conference in the U.S. and that was totally unintentional and we were worried like, oh, is this going to fan further, you know, flames and diverge these communities even more when, frankly, like, they should actually be collaborating a lot more because we share a lot of the same goals. And luckily, we kind of viewed, turned that into an opportunity for greater collaboration and said, why don't we have a cross-conference panel to talk.

talk about privacy and regulation mainly so that we were actually having that simultaneously at both conferences and we actually helped provide in Monero, I might add. We met their funding goal on the Monero form funding system for the conference so that they could hold it. So I was pretty happy about that. That was a really great moment. So maybe to tie up the thread on the historical analysis here. What happened in that debate? Yeah. And what was kind of the final outcome there?

Yeah, sure. You asked that question 20 minutes ago, Nick, and I apologize. I know, but we've had some great dalliances. Yeah, I enjoy the dalliance. So the end result of that debate, after all of a sudden done, there

are many different proposals that were submitted, anyone could submit a proposal, and it would be evaluated, at least from the foundation's perspective. We had a long list of criteria about how we would evaluate community support for each individual proposal, including voting on the form and voting through this community advisory panel. But we made it pretty clear that, like, ultimately that would be inputs into the board's decision of what it would support. And then the ECC had their own method

that I think closely mirrored our own, but maybe had a few differences in interpreting community sentiment. But long and short of it is that the proposal that wound up that wound up capturing the most support was one that provided, I think, 35% of a continued 20%. So let's say, sorry, I should be explicit here, 20% of the next, of the next four-year period, so before the next having on Z-Cash, 20% of that

mining award, of that 20%, 35% of the 20% would go to the electric coin company, 25% would go to the Zcash Foundation, and 40% would go to the Zcash Foundation, but earmarked specifically for a new body called the major grant review committee that was to be and actually was just elected by that same community advisory panel that would basically operate completely independently of the foundation but would be under the foundation's financial umbrella just to make things easier for them. So that was the conclusion after all was said and done. And, you know, I still, in my heart of hearts, wish that there wasn't a dev fund personally. But I think that the end result was one that did have a lot of buy-in and ultimately will be productive and positive

for the Zcash ecosystem, even if it wasn't what I wanted personally. So to summarize that, so kind of to summarize to date, Zcash has had a having already, is that correct? Or are they imminently having one? I believe it's imminently having a having. So 10% of fully diluted supply was set aside for investors, ECC, like various third parties, and then some of it was eventually earmarked for development, although not all of it. Then subsequently, following this debate, 5% of fully diluted supply on top of that will be administered to these three entities, ECC Foundation Grant Review Committee. for a total effectively 15% of fully diluted supply. That is correct.

That says that's how it stands today. And in theory, four years from now, there'll be some additional negotiation, perhaps, or at the very least, the future beyond four years out is uncertain. Yes. And, and, you know, at least for my personal view, I would hope that there isn't yet another dev fund in that time. I personally think that if any, you know, if any combination of bodies, of governing bodies, whether it's like the foundation, the ECC and the new MGRC or some other ecosystem participants, you know, can negotiate another dev fund four years from now, then I just

think that the project risks basically becoming, um, becoming tied to this mechanism that will always, in my view anyway, always like at a steady state result in some kind of rent seeking or resource capture by, you know, by the institutions or people involved. I think like that's the unfortunate thing. There, you know, there are a lot of interesting, like in the winning proposal. There are a lot of. lot of interesting transparency requirements that are mandated for the ECCN Foundation. But it doesn't really say anything about, you know, how does the community react if, like, these transparency requirements aren't met or if they are met and they're met improperly.

Or, you know, you find out that like, let's say the foundation spent all of its money on a giant yacht party, right? That is something that would be super inappropriate. And would be, I think, if it was, you know, if it was just the market and you got, you know, the foundation was a for-profit entity that had a business model and it was choosing to spend its money on a yacht party because that's the best way to allocate its capital, that would be one thing. But since it's purely an almost semi-guaranteed stream of funding, you know, that's another. And so I'm concerned.

I think you can do these things for short periods of time, but I worry a lot of. about how you create a like an enduring institution that is ethical that can maintain, you know, a long-term incentive-aligned approach to, you know, making, making revenue off of the issuance of the actual protocol. I think it's possible, but it's just very, very difficult. Do you think that this, you know, because there's certainly some amount of disillusionment or disappointment with the renegotiation. I mean, at least on my part, you know, I was in a same boat as you.

I thought that the 20% or 10% of fully diluted supply, I thought that was the sum total of it as far as redirecting minor rewards or, you know, validated rewards. So I was actually pretty surprised when this happened. Do you think that partly this was due to a poor codification of the social contract? I mean, would have a formalization of that contract have sort of helped avoid this situation? Yeah, I do think so. I think there's, and I don't know that this was, you know,

by malicious intent or just a, you know, lack of specificity. But the fact that that wasn't explicitly stated and promised was, I think, a big deficiency in the early establishment of Zcash. You know, because ultimately, you know, what's interesting is like if it had been a dev fund that was, you know, 10% issuance, but over the lifetime of the protocol, for example, I think that would have been totally reasonable if that was the understood, you know, understood, I don't want to say Constitution, but, you know, the starting, if those were the starting conditions that everyone agreed to and that you were getting involved in the project with that knowledge, then that would have been completely copacetic in my view. And to be honest, like, it's one of the things that I really love about Bitcoin that to date, no other project in my mind has really come close to having a crispness of understanding in what the implicit social contract is. And just the strong response that you'll get from people when you try to modify the terms.

you just don't see that really anywhere else. And I mean, I love some of the experiments going on on Ethereum, for example. I obviously love all the work and development that's happening on Zcash. But, you know, in the Ethereum case, a great example of something that doesn't really ring true to me. Even if this might be for the best for monetary policy, you know, the constant refrain that the Ethereum monetary supply is the minimal amount to keep the network secure does not strike me as like a, you know, ironclad social contract that will resist all attempts at capture. Right.

Yeah. And I mean, and I, and I, you know. Exactly. Who sets the minimum? What defines the minimum? Is it a council that sets it? You know, is it a, what's the governing body? You know, it leads to all of these, all of these instances.

where you can create opportunities for people to grab power and oftentimes in ways that aren't transparent to anybody else. And I don't mean that to like pile on to Ethereum. I just, you know, I think it's important to contrast what is a robust implicit social contract and one that is, you know, one that is, in my view, like, has, there's a lot of risk for, even for people who have very good intentions that there's risk for capture there. So one concept that I draw on when I think about these systems would be this notion of aid dependency in international developments. Yeah.

Which you might be familiar with. I mean, basically the idea is if you kind of, if the aid issued to some, you know, economic region is at a scale that it sort of eclipses the local economic output, then the economic incentive of those individuals, you know, some repressed region, is to sort of reconfigure itself in order to acquire more aid, to sort of optimize itself for the money spigot. and, you know, then you look at bureaucracies emerging and graft and so on. And the more aid you give, the outcomes aren't necessarily better. It's just that, and this probably sounds cold-hearted of me, but I mean, it's a kind of well-established problem in development.

Giving more aid doesn't necessarily lead to better outcomes. It just leads to the creation of bureaucracies, which are optimized. for receiving aid. And it also just ultimately changes the sort of economic activities occurring in a specific country. I mean, the other analogy would be Dutch disease, which is a commodity, which starts to dominate your exports. The whole economic activity of the country becomes reconfigured, specifically tilting itself towards that industry, whether it's oil or lumber or, whatever it is, and other industries suffer. So, you know, you can probably see the analogy I'm making here.

Do you think that is a potential affliction if there is, you know, a corporate entity or another entity, which their primary business model has to do with ongoing flow from rewards from a protocol? Oh, yeah. I think without strong powers to oppose and keep. keep that accountable, you know, keep their activity accountable. And really methods for changing the flow of that issuance or having some kind of reprimand or punishment, I suppose.

Like without those controls or avenues for recompense in place, I just, I see it as an inevitability, you know. And in fact, like, you can, you can see it with lots of other, you know, large outside of the crypto, you know, crypto world, but still in the open source world, one could argue that, you know, what's happening with Mozilla today is like a great example of, of, you know, an organization that has been sort of reconfigured in that way. I don't know if this is really recent, but like they had, you know, the U.S. is suing Google, you know, for antitrust violations, I believe. Really fascinating to see how that's going to go. But like Mozilla had this real just, I would call it, this tepid initial response about how, well, it's not, you know, Google, Google's not really a monopoly.

It's all okay. It just felt really like, really like they were worried about losing their giant money spigot from Google if this legislation comes through. And I don't mean, like, I don't, you know, we don't have to get a discussion about whether Google is actually a monopoly or not. But given, like, that Mozilla wound up having this big, you know, they've fired a bunch of folks recently that were working on, like, really interesting. cutting edge web research, but meanwhile, their executives are still paid millions of dollars in this weird, you know, hybrid structure model. It just strikes me as something that is indicative of what a lot of these crypto foundations could become or have become even as a result of this sort of resource or aid, you know, aid related, you know, an analogous curse that you

describe. So I would caution everyone who's getting, who's, who's involved in foundations or, you know, part of them to really apply that lens and think about things in terms of second or third order or facts. And that more formalizing, you know, more formalization of where political power exists and how it can be, you know, pushed back is is very, very good to have. Yeah, I recommend Angela's paper on decentralization. I think it's a critical look at decentralization of major crypto projects. And I don't exactly remember what it's called, but I think she coined this notion of the veil of decentralization, which is, I like it because it reminds me of the veil of ignorance. Yeah, from Rawls.

I love it. But her concept is basically saying that lots of projects, in fact, probably most crypto projects have an incentive to promote themselves as decentralized, not just for regulatory purposes, but also in order to be more covert and subtle about where power truly lies. And in so doing to avoid scrutiny and maybe even accountability if something goes wrong. her point is that there's always power, even if it's not explicit. Even if there are explicit mechanisms which are promoted as being the mode through which power is exercised, those are often not really the true mechanisms. Yeah. Another point, which kind of makes me think of coin votes as not necessarily a genuine expression of power,

but more of a cosmetic thing. Yeah, yeah. And it's funny. I mean, I think maybe I mentioned this to you before we recorded, but it's as if people see what they believe are inputs to a political process, not realizing that they were in fact outputs and that the real inputs were some degrees removed from where they think they see power being exercised. And it's frustrating. Yeah. So the coin you're saying in a situation with coin votes, the votes themselves aren't necessarily a, you know, democratic ideal, an expression of power. But, you know, the real politics determines what topics are voted on and who is fit to propose those topics. And yeah.

Yeah. And I mean, really, it's also just the distribution of coins in the first place. how the rose allocative decisions made and so on. Yep, exactly. So on the same topic of giving advice, because I think you're exceptionally well placed to do so, for a founder of a protocol who's contemplating all of these funding mechanisms, and there's a lot.

There's a whole array, and I think Zcash was really typified a certain school of thought, especially back in when it launched, in, I guess it launched in 2016, but the sales was in 2015 or the kind of foundation of the business. Yeah, I think so. Yeah. So it typified this school of thought of here's a new, interesting way to fund open source goods. You know, you attach a token to them and it funds the cryptography, which might otherwise go unremunerated, which I think is a pretty valid point. I mean, And, you know, zero knowledge proofs, like undoubtedly the fact that Zcash exists has advanced that science.

Oh, yeah, completely agree. And now they're being used in all sorts of other places with ZK roll up. So it's pretty interesting to see the knock-on effects there. But, you know, as we've discussed, there's also downsides to that model. It's very tricky to maintain any notion of a founder's reward or ongoing development fund. to, you know, say the Ethereum community has now come to reject this idea as well. So what would you advise to someone that's thinking of creating, you know, let's say new protocol and is contemplating, you know, a construct like that? Yeah. Well, I'm actually, I'm going to call upon a reference that

you made incidentally that I think actually is pretty valid for understanding how you should develop fairer models of fundraising, which is in fact the mental exercise of Rawls's veil of ignorance. So if you do imagine yourself, let's say you're a founder of one of these new protocols, and you just want to, you know, you have an initial set of conditions that you want to create to establish a new system of governance and protocol development and, and support the protocol long term so that you know you have a degree of faith and confidence that it will continue to exist years and years decades after you have stopped working on it. I think this is obviously improperly applied compared to what Rawls was suggesting doing, but I think applying that same

mental exercise and basically putting yourself in a position where you don't know who you are in that ecosystem, you could be anybody. You might wind up being a user with no coins five years later. You might be the founder at one end. Like if you exist in that system and you don't know what your identity will be as part of that system, how would you go about designing something that is fair and just and has appropriate sort of controls to max. maximize fairness, as one might say. And I don't know what an ideal system looks like. I think part of the fun of that exercise is that nobody does,

and you have to try and do your best to, you know, establish one. But one approach, I think, as a heuristic, that's a good one, is, you know, you should work to establish a strong formal, a strong formalized norm about what to expect with the funding model from the get-go. And if there's ever any possibility that that will ever change, you have to ensure that after that change happens, you no longer stand to benefit from it in any way, shape, or form. I think that's the right way to build something that can endure in my mind.

you're actually calling upon a few of Rawls's principles there. He was a great read. I think more people could benefit for some political philosophy. I do like Rawls in the context of blockchain design because, look, these are inherently political systems that much is clear. Effectively recruiting governments and administrative bodies. Yeah. You know, there's no doubt in mind that that's what we're doing.

the stakes are extremely high if you think that these are going to have some penetration as global monetary assets of consequence, which I think we both think that. And so, you know, when you think about Rawls, he was trying to write down principles for how to design a political system from scratch, which seemed very exotic when he was doing it in the summaries, because you can't actually do that in the real world. You kind of have to work with what you have. But in our strange new frontier, you can. This is the only time I'm going to say this seriously. But with blockchain, you can.

With the abstract, brute, no article, capital B, blockchain. T.M pending. The IBM formulation of blockchain. And you're right. And Rawls is exactly the go-to. I mean, you might alternatively go to his antagonist, Nozik, and say, well, you actually want the governors to be as minimalist as possible and really have the least amount of control. And, you know, maybe even try and strip out all of that control possibility, which is sort of the Bitcoin thesis. but I think Rawls is absolutely worth contemplating,

especially the veil of ignorance thought experiment, because it becomes so difficult to disentangle yourself from these debates. Yeah. And everyone that has these debates has some privileged stance within one of these protocols. They're protocol proximate, as I like to say. So like when the Dow debate was being had, it was between people that had an interest in a resolution of the Dow situation one way or another. You know, there weren't a lot of neutral third parties there.

Yeah. The question is, can you design a system which, you know, where you, not having prior knowledge of your status within that system would find it to be pretty fair. Yeah. Yeah. Yeah, and that, you know, I think to the degree that, you know, to the degree that it's possible, the idea of the sort of Nozik, you know, Bitcoin ideal is like the preferred outcome, even if it results in slower protocol development. Because of its sort of robustness and antifragility and because you are minimizing, you know, minimizing actual political control in most in most places. But, you know, I think that that is a singular event that probably can't be really truly emulated anymore, you know, the genie's out of the bottle, and it's

impossible to do that again. So given that constraint, I think applying that lens of like how do you develop a fair system when you have no ego associated with it and no identity in the resulting system is a great framework for figuring that out. And then making, you know, really following through and saying, you know, following through when if changes occur in that system that could benefit you in some way, shape, or form, being able to see that, admit it, be transparent about it, and then, and this is me drawing upon my ancestor a bit. But, you know, having, being, being, being, being, being dictator of Rome long enough to just say, all right, let's fix this. And now, sure, I have all this power and I'm allowed to keep it, but I don't want it, you know, go back to my farm.

So I guess that answer is the last question, which is, are you really Roman in your origin? Actually, yeah, my, my dad is Italian and came to America in I think 1960. and so that name is in fact Italian in origin. So I am, you know, either directly related to the great hero of Cincinnati or what is more likely related to one of his hundreds of indentured servants, I'm sure. But it's kind of a fun, it's a fun name. It's really kind of, I feel like I don't deserve. the name. It's too cool for me. It's nominative determinism.

I don't know if what he's actually associated with. Maybe it's something terrible. Well, I think, I think like all things, he is supposedly a model of Roman virtue that people used to call it on. But I think the more that I read about it, the more I realize it was probably propaganda by people that were politically adjacent to Cincinnati and wanted to promote his image. So, oh, well. Oh, well, maybe you'll have a similar phenomenon. Yeah. You know, your sycophants will be ginning you up here.

Maybe that's my role in all of this, is to create favorable propaganda. Well, I appreciate you trying. Well, I have thoroughly enjoyed this. Yeah, me too. I have wanted to have you on for a while. I think the timing is good. you know, we could really have the frank discussion about this. I happen to think it's one of the more interesting case studies, really,

in the history of governance in this industry. Oh, yeah. It's been out in the open, too. You know, like a lot of the governance debates happen behind closed doors. But Cache has been a very, very interesting model to follow from those lines, for me at least. Yeah, and now, you know, now that I have a bit of distance from it as well, I really, I really have to applaud everyone in the Zcash ecosystem for being as open as they are

and for being willing to debate these issues with a degree of, you know, depth and integrity. That is, honestly, I think, kind of rare or happens behind closed doors in other projects. So it's a real, I mean, it felt really, really, I was a real honor to be a part of it and to be, you know, to be in the thick of it, even though it was certainly stressing me out quite a bit for a while. But I think it's providing a lot of positive guidance for people that are looking, you know, at governance in their own ecosystems and trying to figure out how to resolve potentially big conflicts, which is, what it's all about. Well, Josh, what projects can we look forward to from you now? Yeah. Well, to quote Monty Python, now for something completely different, I'm actually, I'm going

to be doing a little bit of advising other projects on, you know, on either foundation setups or governance and the like and community building and the like. But I think actually my main approach, you will be surprised to hear, is that I'm going to be working on a little bit of a satire side project. It's my kind of my little bit of a hobby horse of mine. I've written satire for quite a while, but never tried to make a go of it. And I feel like there's a real gap in our little cottage industry of, I mean, there's certainly the wonderful trollishness. that you can find at any corner of any cryptocurrency community. But I feel like there's an opportunity for a more elevated long-form satire that doesn't exist.

So I'm going to be working on something like that that will be out real soon, I hope. But yeah, something something a bit more, you know, a bit more to my crypto roots when I was, you might have remembered some of my greatest hits like Ponziaco.win. I do. I do. Was that a real?

Was that a real? Were there funds exchange to talk about that? Yeah, we can talk about it. Sure, we can talk about it. It wasn't a lot of money. But yeah, there was like 10, 10th that came my way. That's a real amount of eath, Josh.

Well, not, hopefully not to the SEC or the I IRS. So let me see. So this was a, I remember, it was a satirical ICO, explicit Ponzi, I guess. And you made a really nice white paper in latex. I don't know how to pronounce that. I think some people say Lattec,

but I also don't know how to pronounce it. See, like all the computer science people know how to say these things. That's the shibolets, see? You know, now you all know. I'm desperately ignorant about these things. and then people actually send you some meat for the terrible ICO. Yeah, they did. I mean, the real, the beauty of, so there's, like, the thing that made me super proud about that.

In addition, I mean, it was just fun to write, but it got quoted in a Matt Levine column. And he added his own spin to it, and it made me so happy. And, yeah, truthfully, like, what my goal is, is, like, I would like to produce something, maybe not quite Pons like O dot win quality, but something close to that. Something like that once a week in some other, you know, in some model or context that I'm still trying to figure out how to make economical. But yeah, I want to do something like that. I think it would be really fun and a very distinct and different pace for me after being

in the, you know, in the real boiler room of cryptocurrency governance. So it'll be fun. Well, the crypto world desperately needs. satire. Oh, yeah. The, the, the enthusiasts are too sincere and the detractors are too angry to produce a crypto hater who has any humor whatsoever. Oh, yeah.

They're all kind of just blindingly angry. And then, of course, if you're clever and active in the crypto industry, then you're just going to be, you know, fully long. these assets including from an intellectual perspective, which also leads to a humorlessness. Yeah. There's no satire. Yeah, I think that's extraordinary. That is absolutely apt analysis of why there is this blind spot.

Because, you know, people will say, obviously, that, you know, the crypto industry is filled with lots of funny people, but it seems like they, they always have an agenda that is quite heavily correlated to the weight of their bags, intellectually or otherwise. Myself and me too. Me too. But I think if I make my aim to just do that for a little while and focus on it, I can try and untether myself from said bags, at least intellectually, long enough to make a good run of it, you know?

I was thinking about this today. I think to be truly comedic, you have to be unshackled from some political objective. Yeah. And like if you look at the life cycle of Sasha Baron Cohen's comedy, he's become less and less entertaining as he's become more of a scold and more intent on achieving certain political objectives. You know, whereas far more levity and creative freedom earlier. not to, you know, segue this into an analysis of, oh, no, that's okay. I mean, if we want to do another episode on, like, absurdism as an approach to effective comedy, I'd be all all in on that. We'll have you back. We'll have you back. Nice. Excellent. But yeah, I had a lot of fun talking

about this, Nick. It's always great to have such a wonderful interlocutor to ask really pointed questions in a way that teases out answers that I don't think I would have had on my own. So I deeply appreciate it. Yeah, and I honestly do think this is an incredibly important topic. We did cover it to a certain extent with James Prestwich. I'll also link some of the things that James wrote about with Zcash. Very sharp things. Yeah, it's great.

Very sharp things. But warranted, I think having that level of introspection is incredibly valuable, especially from people with the credibility of James. And we're adding to that kind of corpus right now. So thank you again, Josh. Look forward to hear from you and seeing what you come up with next. Yeah, thanks so much, Nick.