Zcash Co-Founders Split Over $125 Million Grants Fund as Miners Stand to Gain
Key Takeaways
- •Sean Bowe published a draft Zcash Improvement Proposal on October 26 to end the 8% block reward stream that funds ZCG and route those funds to the Network Sustainability Mechanism.
- •Bowe contends ZCG's reserves of roughly $125.3 million, including 91,452.98 ZEC and about $8.8 million in dollar-denominated assets, can cover grants for more than ten years at $10 million in annual commitments.
- •Josh Swihart opposes ending only the ZCG stream and has drafted a competing proposal to dissolve the entire development fund, including the 12% Coinholder-Controlled Fund allocation.
- •Developer Daira-Emma Hopwood noted the NSM will not begin payouts until February 2031, so ending ZCG in the interim would effectively direct funds to miners instead of development.
- •The current dev fund arrangement expires in 2028, and outside voices such as Dragonfly's Haseeb Qureshi have urged winding it down over concerns it could become politicized as it nears $100 million.
Zcash co-founders Josh Swihart and Sean Bowe are locked in a public dispute over a Bowe-fronted proposal to shut off and reroute the 8% block reward pipeline that funds the Zcash Community Grants (ZCG) program. Bowe wants the reward slice to feed a network reserve instead, while Swihart argues that any change should sweep in the entire development fund.
The disagreement, playing out across GitHub, X, and the Zcash community forum, concerns how the privacy-focused project's development funding is carved up: 8% of every block reward currently goes to ZCG, and a further 12% goes to the Coinholder-Controlled Fund. Block-reward dev funds are a common funding model across crypto, but Zcash's streams are time-limited — the current arrangement is set to expire in 2028, making the dispute effectively a fight over what, if anything, fills the gap before any replacement kicks in.
Why Bowe wants to “turn off” the ZCG stream
In a draft Zcash Improvement Proposal shared on GitHub on October 26, Bowe argued that ZCG already holds reserves deep enough to keep operating without its customary 8% cut of every block reward.
“It’s time to turn off the ZCG funding stream,” Bowe wrote on X as he announced the proposal. He continued: “ZCG has over $125M in funding, and will receive millions more before the spigot is turned off. The program was never designed to handle this amount of funding.”
Bowe proposes redirecting the 8% allocation to the Network Sustainability Mechanism (NSM), a protocol reserve that removes ZEC tokens from circulation and later reissues them as block rewards.
Per the ZCG’s public dashboard, cited in Bowe’s draft, the reserve holds 91,452.98 ZEC and about $8.8 million in dollar-denominated assets, alongside roughly $2.4 million in outstanding grant commitments. The $125.3 million estimate—based on a $1,300 per ZEC price and therefore moving with the market—means the committee has enough funds to cover grants for more than ten years, assuming $10 million in annual commitments.
Bowe’s plan leaves the Grants Committee reserves untouched, as well as the separate 12% allocation to the Coinholder-Controlled Fund. If approved, the proposal—unrelated to the pending NU7 upgrade—would still require a network upgrade to take effect, meaning nothing changes until the draft clears the project's community-driven ZIP and upgrade process.
Why Swihart disagrees
Swihart publicly objected on X, writing that it would “be a mistake to kill only one part of the dev fund.” Swihart, who also founded Zcash Open Development Lab (ZODL), added: “If dissolved, then no half measures, dissolve it all, both the ZCG and coinholder streams. The coinholder stream accrues ~216 ZEC a day until the halving. Same problem.”
Rather than risk division and market uncertainty by targeting ZCG alone, Swihart argues that both funding streams should flow to the NSM, at least until the next halving, with already approved grants honored in the meantime. He has also floated a one-time, coinholder-voted legal defense fund for Zcash developers.
In a full shutdown scenario, ZODL would lose the funding source of a retroactive coinholder grant it recently landed for protocol work—a conflict Swihart acknowledged. In the Zcash community forum, he said he had drafted his own ZIP to end the entire development fund.
Why miners come out ahead in the meantime
The NSM does not begin paying out until February 2031, and the current funding streams expire before then. Developer Daira-Emma Hopwood, posting as str4d on the community forum, spelled out the consequence: ending ZCG without a replacement development stream “is a decision to explicitly give more money to miners by decreasing the funding available for development and maintenance of the chain.” Directing the share to the NSM, she noted, still “amounts to (for now) directing funds to miners and away from development.”
Whichever side prevails, the outcome will determine how Zcash pays for development through that interim — via grants, a long-horizon reserve, or miner revenue — until the NSM starts paying out in 2031.
The push is not happening in a vacuum. A separate forum proposal to end ZCG and send its funds to the NSM came from Maxime Desalle, who disclosed he is “actively involved with Cypherpunk, the world’s largest Zcash miner.”
The debate has also drawn in outside voices: In September, Dragonfly managing partner Haseeb Qureshi called for winding down the dev fund after it expires in 2028, warning it risks being “politicized” as it nears $100 million.
