The Electric Coin Company that runs ZCash (ZEC) has published a transparency report highlighting key figures and expenses they incur on a monthly basis. The report, which was published on their blog on May 14, 2019, comes amid demand for more transparent disclosures from cryptocurrency firms.
Financial Status and Outflows
Assuming a $60 per coin price on ZEC, the company is adequately funded to run as per their roadmap until October 2020. As of 2019, the Electric Coin Company and its employees are direct recipients for approximately 4.2% of the total mining reward from the ZCash network.
Once again assuming a $60 ZEC price, the company estimates nearly $550,000 worth of employee compensation on a monthly basis; this amounts to about 9167 ZEC of which Zooko Wilcox, founder of ZCash, revealed he earns about 2,000 of a month (20 percent of total employee expenditure). To ensure financial sustainability of the company and its operational capability, the founder rewards will be diluted from June 2019 onward.
Operating costs in the second half of 2018 averaged close to $700,000 a month while an additional $180,000 was paid out as employee compensation – the company is currently operating at a significant deficit.
Mining rewards that the company (not employees) reeled was invested to fund engineering, R&D, global adoption efforts, audits, trademark protection, and regulatory relations. The company presently holds close to $5 million in cash and ZEC tokens.
Pricing Pressure and Criticism
When ZEC was first listed on exchanges in 2016, it traded at nearly $20,000 as the exchanges believed the scarce supply was enough to justify such a price. Within a few days it had fallen to a mere $6,000 and today it trades at $70 – a 99.7 percent decline in value.
With an inflation rate of 0.1 percent per day, ZEC does not have the deflationary investment benefit of Bitcoin and Ethereum. Over 10 percent of the 21 million maximum supply was allocated to the founder’s reward pool; this is unlike any other cryptocurrency meant for public transactions and usage. ZCash recently discovered a vulnerability that allowed counterfeiting on the ZCash network – it was promptly rectified by the development team.
The regulation around privacy-focused coins like ZCash has been the subject of public debate; some believe they are an integral part of the ecosystem while others are convinced governments won’t allow privacy coins to gain mainstream traction.
Whatever the innate features of ZCash may be, publishing a transparency report is an extremely forward-looking step; Zooko and the Electric Coin Company deserve plaudits for taking such measures to improve transparency.