Zcash Community Faces Governance Crossroads: $125 Million Treasury's Fate Sparks Multi-Party Debate

Author: Oluwapelumi Adejumo

Compiled by: Saoirse, Foresight News

As investor interest rises and the treasury of this privacy-focused public chain continues to expand, the Zcash community is facing a choice: eliminate the developer subsidy or extend this funding mechanism.

The debate escalated quickly after Zcash co-founder Sean Bowe proposed halting automatic allocations to the Zcash Community Grants (ZCG) program. He argued that the grant program's existing reserves are already substantial enough to support years of development work without additional funding.

His proposal gave rise to more radical demands, with ZODL founder Josh Swihart, Gemini co-founder Tyler Winklevoss, and other ecosystem participants weighing in. At the same time, an alternative proposal emerged to extend developer funding support through 2036 at a reduced grant level.

The split erupted just as Zcash is set to mark its tenth anniversary on October 28 (today). With institutional capital re-entering the project and privacy transaction activity climbing, the market has begun to scrutinize how this public chain should allocate newly minted ZEC tokens.

Zcash's $125 Million Treasury Fuels Calls to Dissolve the Grants Program

In a draft proposal dated October 26, Bowe recommended redirecting the 8% block reward share originally allocated to ZCG to the Network Sustainability Mechanism (NSM). The NSM is a protocol reserve pool designed to safeguard long-term block reward supply. Bowe posted on X:

"It's time to cut off ZCG's funding."

He added that ZCG's existing funds already exceed $125 million and will continue to receive millions in allocations even before the deadline set in the proposal—yet the grant mechanism was not originally designed to manage funds of this magnitude.

The valuation is based on approximately 91,453 ZEC and $8.8 million in fiat assets, net of $2.4 million in pending obligations, calculated at a ZEC price of $1,300. At that price, ZCG would receive roughly $68.3 million in annual allocations, compared to its quarterly spending—an annualized expenditure of just $6.12 million.

Bowe's proposal would preserve all existing assets under ZCG's name while leaving untouched the separate 12% funding stream controlled by token holders.

But Maxime Desalle proposed going further: dissolving ZCG entirely, halting approvals of new grant applications, and transferring remaining treasury funds to the NSM after honoring all committed grants. Desalle argued that ZCG's governance mechanism is flawed—a small community advisory panel can steer where funds go, while all ZEC holders bear the corresponding economic cost. He also disclosed that he works at Cypherpunk, a leading Zcash mining company, but emphasized that the proposal is independent of his role and involves no conflict of interest.

Bowe later said he would personally be open to transferring ZCG's existing treasury funds but prefers to vote on that decision separately from the proposal to "halt future allocations."

Winklevoss and Swihart Push for Deep Cuts as Alternative Proposal Emerges

The controversy has long transcended the question of whether ZCG itself should survive. Tyler Winklevoss publicly backed eliminating the entire grant mechanism, remarking: "It's time to end Zcash's USAID-style grant model."

Swihart, meanwhile, argued that cutting only ZCG's allocations treats the symptom rather than the root cause. He said:

"Cutting only part of the development fund is the wrong approach. If you're going to dissolve it, don't stop halfway—ZCG and the token holder funding stream should both be eliminated."

Swihart noted that the token-holder-controlled pool receives roughly 216 ZEC per day, and as the token price rises, the same problem of continuous fund accumulation will emerge. He proposed shutting down both funding streams and redirecting everything to the NSM—first honoring all approved grants, then transferring the remaining compliant funds. Swihart also floated a companion idea: a one-time special fund approved by token holder vote to cover developers' legal defense expenses. He said:

"Compromise solutions only prolong the controversy and factional maneuvering. The market needs certainty."

Notably, Swihart acknowledged that his company ZODL recently received a token holder grant for core protocol development; if the grant program is retained, they would still have opportunities to apply for further funding. His proposal would directly eliminate this funding channel.

However, calls for completely scrapping developer subsidies have met with a counter-proposal. In a draft dated October 27, community contributor Dismad proposed a gradual reduction plan: cutting the total developer allocation share from the current 20% to 10% around the 2028 halving cycle, to 5% in 2032, and eliminating it entirely by 2036.

This plan preserves the existing governance framework, giving developers a buffer period of up to ten years with grant amounts declining year by year.

The proposals would produce vastly different outcomes: Bowe's plan halts new allocations to ZCG; Desalle's plan dissolves ZCG as an institution outright; Swihart's plan eliminates all developer funds; and Dismad's plan extends funding with annual reductions, breaking past the original 2028 expiration.

Zcash Momentum Keeps Building, Making Developer Funding Decisions Critical

The widespread calls to eliminate developer subsidies stand in sharp contrast to Grayscale's assessment. Grayscale believes that over the past decade, R&D funded through protocol grants has been key to Zcash maintaining its technical competitiveness.

The asset manager cited a series of upgrades—Sapling, Orchard, and the recently launched Ironwood privacy pool—that all depended on dedicated development funding. Grayscale argued that improving transaction throughput, defending against quantum computing attacks, and addressing emerging cybersecurity risks will all require continued R&D investment. Grayscale stated that sustained innovation will "likely require continued funding from multiple sources to support developers in the future, while optimizing the efficiency of fund allocation."

Grayscale's assessment comes as Zcash's market cap and on-chain activity have surged in tandem. ZecStats data shows ZEC has gained roughly 260% over the past year, holding above $1,200 with a total market cap exceeding $20 billion—nearly a 20x increase from around $60 in early 2025.

Alongside the price rally, user demand for privacy features is also rising. ZecStats reports that in late October, Zcash averaged about 11,300 daily transactions, up 70% year-over-year; shielded transactions accounted for 62% of all transactions, compared to just 24% a year earlier. Currently, approximately 4.96 million ZEC are held in shielded pools, representing 29% of circulating supply, allowing users to conceal transaction information through this feature.

The momentum has also carried over to traditional investment channels. Grayscale's Zcash product ZCSH had net assets of approximately $708 million as of October 26, reflecting the scale of institutional allocation to the token.