This is the key to the team's dissolution! The 20% development bonus mechanism of Zcash (also known as the 'development fund' or 'founder's reward') is one of the most distinctive and controversial designs in the ZEC economic model. Its core logic is: **During a specific period, 20% of the block rewards mined by miners do not go to the miners, but are automatically allocated to organizations or individuals that support the development of the Zcash ecosystem**.
Based on your knowledge base information and the latest developments, I will explain in detail:
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## 🔑 1. How does the mechanism work?
### 1. Sources of funding
- Every time a new block is mined, the system generates a fixed amount of ZEC as a block reward (for example, 3.125 ZEC/block after the halving in 2024).
- Among them:
- 80% → Miners
- 20% → Development Fund Pool (Dev Fund)
> This is not “additional issuance,” but rather **a portion is pre-allocated from the rewards originally meant for miners** for ecosystem development.
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### 2. Who receives these rewards? — Evolution in phases
#### ✅ Phase One: Founder Rewards (2016–2020)
According to [Data 1][3][4]:
- In the first 4 years (approximately 210,000 blocks), 20% of the rewards were called the “Founder’s Reward.”
- Allocation objects include:
- Investors (1.65%)
- Founders, employees, advisors (5.72%)
- Electric Coin Company (ECC) Strategic Reserve (1.19%)
- Zcash Foundation (ZF, Foundation) (1.44%)
- The remainder goes to early supporters
> This money is directly deposited into a preset address without the need for an application, automatically credited.
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#### ✅ Phase Two: Community Governance Development Fund (2020–2024)
According to [Data 6] and ZIP 1014 proposal:
- Since November 2020 (NU4 upgrade), the founder rewards have ended, and a new 20% development fund mechanism has been initiated.
- The allocation ratio is adjusted to:
- ECC: 35%
- Zcash Foundation (ZF): 25%
- Independent third-party developers/community projects: 40%
> The goal is to promote decentralization and avoid ECC monopolizing development resources.
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#### ⚠️ Phase Three: After 2024 — Mechanism Paused
- According to [Data 2][8], **after November 2024 (fourth halving), the 20% development fund mechanism has officially terminated**.
- Current block rewards in 2026 are 100% owned by miners.
- This means: **ECC and ZF no longer automatically receive new ZEC income through the protocol**.
> This is also one of the important reasons leading to the collective resignation of ECC in early 2026 due to funding depletion (see your previous question).
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## 🧩 II. How do developers “get” these rewards?
### ▶ During the period of 2016–2024:
- The shares of ECC and ZF are automatically allocated to their controlled transparent addresses (t-address), as specified by the protocol hard code.
- Third-party developers must apply for funds through community proposals (such as ZIP or Grants), and after community voting or foundation review, funds are allocated.
> For example: a team wants to develop a ZEC light wallet, and can submit a Grant application to the Zcash Foundation, receiving ZEC from the “third-party 40%” pool once approved.
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### ▶ After 2024 (now):
- There are no automatic rewards anymore.
- Developers can only receive support through the following ways:
- Apply for funding from exchanges, venture capital, or DAOs
- User tips (e.g., Gitcoin)
- Self-funded (as ECC tried but failed)
> Because of this, ECC CEO Josh Swihart stated when announcing the team's dissolution in January 2026: “We cannot continue to uphold the privacy mission without income.”
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## 💡 III. The significance and controversy of this mechanism
### ✅ Positive Aspect:
- Ensured that Zcash had stable funding in the early stages to advance key technological upgrades such as zk-SNARKs, Sapling, Orchard, etc.
- Enable products like the Zashi wallet and others, greatly increasing privacy adoption (shielded pools from 4% → 30%+)
### ❌ Controversial Points:
- Criticized as a “centralized subsidy,” especially with ECC having too high a proportion in the early stages
- The community has repeatedly questioned financial transparency ([Data 7] mentioned that ECC has suffered continuous losses)
- Lack of sustainable funding models after 2024 leads to core team attrition
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## 📌 Summary: How to obtain the 20% reward?
| Time Period | Who Can Obtain | How to Obtain |
|--------|--------|--------|
| 2016–2020 | ECC, ZF, founders, investors | Automatically allocated to preset addresses |
| 2020–2024 | ECC (35%), ZF (25%), third parties (40%) | ECC/ZF automatically credited; third parties need to apply for Grant |
| From 2024 to now | No automatic acquisition | 100% rewards go to miners, developers need to seek other funding |
> Therefore, if you now want to “receive development bonuses” — **there are none at the protocol level**. But you can:
> - Participate in community Grants (if ZF still has reserves)
> - Contributing to the ZEC ecosystem to seek sponsorship from users or institutions
> - Run nodes, mine, and earn 100% of block rewards 😊