Zcash Miners: Stop Paying 20% “Genius Tax”

Zcash miners are currently paying 20% of all new coins to the founders. In this article, I explain how they can stop.

A Little Background

People familiar with Bitcoin know that the Bitcoin blockchain is a public ledger of every transaction that ever happened. In 2013, years after Bitcoin was created, a new development in cryptography was made, known as ZK-SNARKs (Succinct Non-interactive ARgument of Knowledge).

Only a small number of cryptographers in the world are familiar with this new technology, and Zcash is one of the first major cryptocurrencies to take advantage of it. ZK-SNARKs mean that actual transactions are not stored in plaintext on a blockchain. Rather, a cryptographic proof is recorded that only guarantees transactions made were valid and sound. Transaction amounts and transaction addresses are not recorded on the blockchain.

Founders and Organization

From the homepage of the Zerocash Electric Coin Company LLC, you can see the many investors, advisors, and developers who contributed to the creation of Zcash.

20% “Genius Tax”

As a reward for a job well done, the Zerocash team has decided to pay themselves a reward of 20% of all Zcash mined in the next 4 years.

Removing the 20% Founders Rewards

Looking at the code, removing the 20% founders reward was shockingly simple:

I decided that the best way to start having a discussion about this was to make the patch and submit it as a pull request:

which was quickly rejected with “wontfix”.

However, one thing I found interesting is that a Zcash developer immediately started offering help and suggestions for how to improve my fork. As if there needed to be any more proof that developers would work on a project without founders rewards.

Miners Control The Network

I’d like to point out that now would be a great time for Zcash mining pools to switch to software that keeps all their rewards. It will only get harder.

Miners will get 25% more rewards. Right now, miners get 80% of block rewards. If they received the additional 20%, they would earn 20/80 = 25% more rewards for mining.

How to Get Started

You can start by running the Zcash miner fork minus founder rewards at https://github.com/heyrhett/zcash-minus-founders-reward. This compiles just like the stardard Zcash miner, and runs on the Zcash main network. I welcome any pull requests.