Company: ZCSH
Filing Date: 2025-03-07
Form Type: 10-K
Source: 0000950170-25-035469
Chunk: 59

Company: Grayscale Zcash Trust (ZEC)
Filing Date: 2025-03-07
Form: 10-K
Item: Item 1
Chunk 59
---
, employees and advisers of ECC, as well as to certain investors in ECC. This allocation is called the “Founders’ Reward.” To effect this, the Zcash code provides that for the first four years of ZEC’s existence, 80% of newly created ZEC went to miners, while 20% of newly created ZEC was allocated to the Founders’ Reward. After the first four years, the Founders’ Reward would be fully paid, and 100% of newly created ZEC would go to miners. The result was that 10% of ZEC’s fully diluted supply was automatically distributed to holders who themselves were not responsible for its mining.

In June 2019, in light of the expected expiration of the Founders’ Reward in November 2020, Zooko Wilcox, founder of ECC, expressed his support for a Dev Fund (as defined below) that, like the original Founders’ Reward, would allocate ZEC from “future block rewards for core support functions such as software development, user support, business development, regulatory and government outreach, security auditing and monitoring, educational and marketing initiatives and new protocol development.” The Zcash Foundation (the “Foundation”) conducted several rounds of community polling regarding whether and how a Dev Fund should be implemented. On February 14, 2020, the Foundation announced that community consensus and agreement had been reached on a final proposal, named “ZIP 1014,” which included a 20% block reward allocation for four years, split into the following three slices (collectively, the “Dev Fund”):

•35% (7% of the total mining reward) for ECC;

•25% (5% of the total mining reward) for the Foundation;

•40% (8% of the total mining reward) for additional major grants for large-scale long-term projects to be determined by the Foundation, with additional community input and scrutiny.

On November 18, 2020, ZIP 1014 was implemented in an upgrade of the Zcash Network called Canopy.

Zcash also implemented a memory-hard proof of work algorithm, Equihash, which involves adding a memory-hard problem to be solved in valid blocks, which is intended to result in less centralized hash power.

The Zcash Network is decentralized in that it does not require governmental authorities, financial institution intermediaries or others, including ECC, to create, transmit or determine the value of ZEC. Rather, ZEC is created and allocated by the Zcash Network protocol through a “min