The technical firm behind privacy cryptocurrency zcash (ZEC) is transitioning to a non-profit, called the Bootstrap Project, after a majority of shareholders elected to donate their holdings in the company.
“A majority of the investors and owners have informed us of their generous willingness to do this in support of our shared mission to empower everyone with economic freedom,” the Electric Coin Company (ECC) said in a blog post.
The stockholders’ donation comes as international governments have looked increasingly askance at encryption-backed technologies such as privacy coins and wallets.
The ECC will continue operating under the same business structure, with Bootstrap acting as an umbrella firm of sorts. Bootstrap will be helmed, at least initially, by the ECC’s board of directors, zcash creator and ECC CEO Zooko Wilcox said in a Friday phone interview. The Zcash network is maintained by the ECC, independent developers and the Zcash Foundation.
A date for the ECC’s donation to Bootstrap has not been specified, but is aimed for around the network’s November hardfork, Canopy. The ECC has 24 investors, including Paradigm Capital co-founder Fred Ehrsam and venture capital firm Pantera Capital.
Practically speaking, the donation will free up cash flows for the ECC, which has continued to operate in the red regardless of a 160% year-to-date increase in the price of ZEC.
Under the Zcash founders’ agreement, the ECC receives 5% of miner revenue for developing the encryption tech backing the cryptocurrency. The ECC’s portion of future mining revenues will increase to 7% under Canopy, as agreed upon in February’s Zcash Improvement Proposal (ZIP) 1014.
Yet at a higher level, the donation will allow the ECC to more fully embrace a central plank in ZIP 1014 – that of all future mining revenue furthering zcash’s potential as an asset, and not enriching founders or early investors. Those involved in the project’s 2016 launch garnered 15% of mining revenue under the old scheme.
Outside observers suggest the move may be in keeping with the progressive decentralization ethos designed to keep regulators at bay. Deal Ninja attorney Gabriel Shapiro told CoinDesk the ECC’s shift to non-profit status was “potentially preferable to the status quo muddle of having a non-U.S. ‘foundation’ and a U.S. ‘development company’ with unclear rules of engagement between them.”
Wilcox said the ECC transition to a non-profit was “in alignment” with the community’s stipulations.
Pantera Capital’s Franklin Bi told CoinDesk in a phone call that the firm opted to donate its ECC shares because it was in the best interest of the zcash community. “[It’s] less about the tax benefit, but more so about the community,” he said.
Bi further said Pantera has never sold any of its ZEC holdings.
