#Terminology

The key words "MUST", "MUST NOT", "SHOULD", and "MAY" in this document are to be interpreted as described in BCP 14 ¹ when, and only when, they appear in all capitals.

"Zcash Community Grants" ("ZCG"), "ZCG Committee", and "Financial Privacy Foundation" ("FPF") have the meanings given in ZIP 1015. ²

"Coinholder-Controlled Fund" ("CCF") has the meaning given in ZIP 1016. ³

"Network Sustainability Mechanism" ("NSM") and "NSM Value Balance" refer to the mechanism and balance specified in ZIP 237. ⁴ A contribution to the NSM removes ZEC from circulation for subsequent reissuance under the protocol; it is not a payment to an organization or a treasury address.

"Wind-down Date" means the UTC calendar day of Mainnet activation of the network upgrade that deploys this ZIP.

"ZCG funds" means assets held or administered by FPF for the ZCG program, including its grant and Discretionary Budget balances, assets subsequently received for that program, grant refunds, and proceeds attributable to those assets. This includes any remaining assets transferred from ZCG's previous administrator. It excludes the CCF and assets administered by FPF for other programs.

"Existing commitments" means grants approved by the ZCG Committee before activation of the designated upgrade on the Wind-down Date, including their approved but unpaid milestones, and legally binding ZCG administrative obligations entered into before that activation. An application, request for proposals, or expression of intent that has not resulted in an approved grant or binding obligation is not a commitment.

"Residual funds" means ZCG funds remaining after provision for existing commitments and the wind-down expenses permitted by this ZIP.

#Abstract

This ZIP proposes an orderly wind-down of Zcash Community Grants. At activation of the designated Mainnet network upgrade, ZCG would stop making new grants and begin winding down its operations. Existing commitments would be completed under their existing terms. FPF would retain sufficient assets to meet those commitments and reasonable wind-down expenses, then contribute all residual funds to the Network Sustainability Mechanism.

ZIPs 1015 and 1016 currently restrict the purposes for which FPF may use ZCG funds. This ZIP specifies amendments that expressly authorize completing existing commitments, paying limited closure costs, and contributing the remainder to the NSM. It also calls for corresponding legal instruments and approvals so that the change can be executed consistently with FPF's legal obligations, rather than assuming a ZIP alone changes existing agreements.

This proposal complements the separate proposal to end ZCG's future funding stream. That proposal changes future block subsidy allocations; this proposal addresses the existing treasury, commitments, and program governance. It does not itself change consensus rules or the CCF.

The wind-down can begin before a voluntary NSM contribution mechanism is deployed. Until such a mechanism is available, FPF would safeguard the residual funds solely for that purpose. Public reporting would establish the disposition of the treasury while protecting confidential grantee and financial information.

#Motivation

ZCG has carried the torch through the evolution of Zcash's development reward program. From the Major Grants structure established by ZIP 1014 to the community grants program administered by FPF under ZIP 1015, it has provided continuity for independent teams and a way to direct protocol-funded resources toward work that benefits the Zcash ecosystem. ^{5 2} That contribution provides the foundation for the next stage of the funding model.

Coinholder-directed funding has been part of that model since ZIP 1016, "Community and Coinholder Funding Model", was created on 2025-02-19. ³ The voting technology developed to support it has since matured into an operational system. The Coinholder-Directed Retroactive Grants Program (CDRGP) completed its latest round on September 29, 2026, with approximately 2.18 million ZEC of voting power participating on individual proposals. ^{6 7} The separate NU7 scope vote closed on September 14, 2026, with approximately 2.40 million ZEC participating on its issuance-schedule question. ⁸ Circulating supply was approximately 16.96 million ZEC on September 29 and 16.93 million ZEC on September 14. Both processes therefore exceeded two million ZEC of participation, or over 12% of the circulating supply in each case. ⁹

The CDRGP has demonstrated that coinholder-directed grants are operational. Its latest results approve funding for core protocol work by ZODL and Valar Group, Zec.rocks wallet infrastructure, Ironwood external audits and formal verification, and critical vulnerability bounties for Orchard and Zebra. ⁶ Earlier rounds have also progressed from approval to completed disbursements, including payments for Unstoppable Wallet, BitcoinVN, and ZcashCommunity website hosting. ¹⁰ These are concrete examples of a functioning funding channel for core development, infrastructure, and security.

ZIP 1016 provides for open proposal submission and permissionless participation by eligible coinholders in grant approval, rather than requiring an award from the ZCG Committee. ³ The program retains published eligibility conditions, legal vetoes, and administration and disbursement by FPF and the Key-Holder Organizations. Its operation demonstrates that a separate ZCG grant-selection committee is no longer needed to provide that funding channel.

This proposal therefore treats ZCG's off-chain committee and legal arrangements as a transitional bridge that has served its purpose. The development-funding system now has an operational coinholder-directed approval process, supported by on-chain voting infrastructure. ¹¹ Continuing a parallel ZCG grant-making body is no longer necessary in the proposed model. Winding it down recognizes its contribution and completes that transition, while preserving the legal administration still needed to execute grants.

Ending ZCG's automatic funding stream and winding down its grant-making program are distinct decisions. The proposal "Ending the ZCG Funding Stream in Favor of the NSM" leaves ZCG's existing assets and the rules governing them unchanged, including its authority to make further grants. ¹² An additional decision is therefore needed to close the program and determine the disposition of its remaining treasury.

This ZIP builds on Maxime Desalle's forum proposal, "End ZCG and send its funds to the NSM". ¹³

The policy proposed here is to honor work already approved, stop creating new commitments, and direct the unused balance toward the long-term sustainability of the Zcash network. Completing existing commitments gives grantees a defined transition and avoids treating program closure as a reason to abandon approved work. Returning the remainder through the NSM avoids creating another discretionary grant-making body to receive it.

The present fund restrictions need explicit attention. ZIP 1015 requires FPF to use the ZCG allocation exclusively for grants and related administration, and to recognize it contractually as a Restricted Fund donation. ZIP 1016 carries those obligations forward. ^{14 15} An NSM contribution is neither a grant to an external party nor ordinary grant administration. Express amendments are needed to authorize it within the ZIP framework.

FPF is an independent Cayman Islands foundation company. ¹⁶ Its actual authority also depends on applicable law, its constitutional documents, and the agreements governing the assets. Foundation companies have their own memorandum and articles of association. ¹⁷ This proposal provides a community mandate and a process for putting the necessary legal authority in place; it does not assume those documents have already been reviewed or amended.

#Privacy Implications

This proposal introduces no changes to transaction privacy or wallet behavior. Publishing the wind-down accounts and NSM contribution evidence may associate transactions with FPF or the ZCG treasury. Reports can establish amounts and completion without publishing grantees' private identities, payment addresses, KYC records, or privileged legal advice. A future voluntary NSM contribution mechanism may have additional privacy implications, as discussed in ZIP 233. ¹⁸

#Requirements

• Stop new ZCG grant-making at a clearly defined cutoff.
• Complete existing commitments under their approved terms, including normal milestone verification and remedies for non-performance.
• Provide FPF with an explicit mandate, within the ZIP framework and the applicable legal instruments, to close ZCG and contribute residual funds to the NSM.
• Limit and disclose the costs of administering the wind-down.
• Account for the full ZCG treasury, including later receipts and recoveries, without diverting funds belonging to other programs.
• Safeguard commitments and residual funds until their disposition is complete.
• End the committee's operational role when its remaining duties are complete, while preserving necessary accounting, custody, and reporting.
• Keep the decision about existing assets separate from changes to future subsidy allocations and CCF governance.

#Specification

#Activation

The wind-down and the amendments to ZIPs 1015 and 1016 MUST take effect at the designated Mainnet network upgrade activation, regardless of NSM contribution mechanism availability or ZCG funding-stream status. This ZIP MUST already be Active under ZIP 0. ¹⁹

The deployment ZIP MUST identify this ZIP and specify the upgrade's Mainnet activation height under ZIP 200. ²⁰ Existing rules governing ZCG funds continue to apply until that activation.

At activation, ZCG MUST stop accepting applications and approving new grants. Pending applications that were not approved before activation MUST be closed without an award.

#Administration during the wind-down

From activation, FPF and the ZCG Committee MUST administer ZCG funds solely to complete existing commitments, meet the permitted wind-down expenses, and contribute residual funds to the NSM as specified below.

FPF MUST notify affected applicants and existing grantees of the wind-down and publish the designated upgrade, its Mainnet activation height, the Wind-down Date when known, and a contact for outstanding commitments.

This ZIP does not alter block validity, funding-stream amounts or end heights, or ownership of funds already paid to grantees. Any ZCG funding-stream receipts that continue under the consensus rules MUST be included in the wind-down accounts and disposed of under this ZIP. Ending those receipts requires a separate consensus change, such as the complementary proposal. ¹²

The process MAY be rehearsed on Testnet using test funds. Testnet activation or rehearsal MUST NOT trigger the Mainnet wind-down or authorize disposal of Mainnet ZCG funds. Dates and reporting deadlines in this ZIP MUST be interpreted using UTC.

#Inventory, reserves, and wind-down plan

Within 30 days after the Wind-down Date, FPF, with the ZCG Committee, MUST publish an initial wind-down plan containing:

• ZCG balances by asset and currency, reconciled to the accounting records;
• each existing commitment, its remaining amount and currency, outstanding conditions, and expected completion or lawful termination date;
• a reserve sufficient to meet those commitments, including a documented allowance for contingent liabilities and currency risk;
• an itemized wind-down budget, with a spending cap, responsible parties, and an expected timetable for completing the administrative work; and
• the legal and technical prerequisites for the NSM contribution, identifying which have been satisfied and which remain outstanding.

The plan MUST distinguish an approved grant from an unconditional payment liability. Its reserve MUST provide for unpaid approved milestones without waiving their conditions. FPF MUST NOT contribute assets needed to satisfy creditors, existing commitments, or other legal obligations to the NSM. If assets are insufficient to meet these obligations, FPF MUST report the shortfall and address it under the applicable agreements and law before determining that any residual funds are available.

FPF MUST keep ZCG funds separately accounted for and MUST NOT use them for the CCF, other FPF programs, or general FPF operations unrelated to the wind-down.

#Completion of existing commitments

FPF and the ZCG Committee MUST continue to administer existing commitments under their approved terms, including milestone review, reporting, and any applicable suspension, termination, or refund provisions. This ZIP does not make conditional milestones payable in advance or excuse non-performance.

An existing commitment MAY be amended to enable completion or lawful closure, but an amendment MUST NOT increase its approved funding amount or add a new project or new scope of work. Any change requiring a grantee's consent MUST obtain that consent. An unexercised option for additional funding or a discretionary renewal MUST NOT be exercised.

For an indefinite or automatically renewing commitment, FPF MUST use the earliest lawful non-renewal or termination opportunity consistent with its existing obligations. The plan MUST identify the resulting final service and payment dates. Disputed or contingent liabilities MUST remain reserved until resolved or lawfully discharged.

Amounts released by completion, cancellation, refunds, or a reduction in a required reserve MUST become residual funds; they MUST NOT be reassigned to new grants.

#Wind-down expenses and committee closure

ZCG funds MAY cover reasonable, documented expenses necessary to complete the wind-down, including grant administration, legal and accounting work, asset conversion, custody, transaction fees, final reporting, and required record retention. FPF MUST limit charges to work attributable to ZCG's wind-down and MUST NOT charge unrelated programs' costs to ZCG.

The ZCG Committee MUST approve the initial wind-down budget and any increase in its spending cap, subject to FPF's existing legal veto. Existing conflict of interest and compensation rules MUST continue to apply. Committee and FPF compensation MUST reflect the reduced duties and actual work required.

Until its remaining decisions are complete, the committee MUST retain the membership and decision-making arrangements required by ZIP 1015. A vacancy or expiring term MUST be addressed under the existing selection process if needed to perform those duties. The wind-down does not authorize FPF to take over discretionary grant decisions.

Once existing commitments have been completed or lawfully discharged and the committee has approved the final administrative budget, the committee MUST conclude its operational role. No further ZCG elections are required after that point. FPF MUST retain responsibility for any remaining custody, NSM contributions, reporting, and legal record retention. An expense above the final approved cap MUST NOT be paid from ZCG funds without further community authorization under an amendment to this ZIP.

#Legal authority and implementation

Before making an NSM contribution, FPF MUST obtain advice from qualified Cayman Islands counsel concerning its authority to execute this wind-down, including the restricted-fund terms, its constitutional documents, existing contracts, and any required consents or approvals.

FPF MUST arrange for the commitments required by ZIPs 1015 and 1016 to be amended, in suitable legal language, to authorize the uses specified here. It MUST obtain any additional consent, corporate approval, or court order that is necessary before taking an action that requires it. A ZIP amendment MUST NOT be treated as automatically amending an agreement, extinguishing a third party's rights, or overriding applicable law.

FPF MUST publish confirmation of the authority and approvals on which it relies, without disclosing privileged advice or confidential information. If a required authorization cannot be obtained, FPF MUST report the obstacle, safeguard the affected funds, and seek a further community decision. Such an obstacle MUST NOT authorize new grants or an alternative recipient.

#Contribution of residual funds to the NSM

Subject to the reserve and legal requirements above, FPF MUST contribute all residual funds to the NSM. Residual assets held in currencies or assets other than ZEC MUST be converted to ZEC on commercially reasonable terms, with conversion costs included in the approved budget and disclosed in the accounts.

The contribution MUST use a deployed consensus mechanism that removes the contributed ZEC from circulation and credits the corresponding amount to the NSM Value Balance under ZIP 237. ⁴ That mechanism MUST be active on Mainnet when the contribution is made; publication of a ZIP, implementation in software, or activation on Testnet alone is insufficient.

ZIP 237 defines the NSM balance and reissuance rules, but does not by itself provide a transaction mechanism for contributing existing treasury ZEC. ZIP 233 proposes such a voluntary mechanism, but is not deployed by NU7 as specified in ZIP 259. ^{18 21} A different deployed Mainnet mechanism meeting the contribution requirements above MAY be used. This ZIP neither deploys ZIP 233 nor supplies a new consensus mechanism.

If a suitable mechanism is not yet available, FPF MUST hold the residual funds in segregated custody solely for a future NSM contribution and report their balance and custody costs quarterly. FPF MUST NOT represent a payment to an unspendable address, an excessive transaction fee, or a transfer to another organization as fulfilling this obligation.

FPF MUST publish a contribution schedule in the wind-down plan and update it as reserves are released. Each residual amount MUST be contributed within 90 days after all three conditions are satisfied for that amount: it is available without impairing the required reserves, the necessary legal authority has been obtained, and the technical mechanism is deployed. FPF MAY combine amounts within that period to reduce transaction costs, provided the full remaining balance is accounted for and ultimately contributed.

For each contribution, FPF MUST publish its amount, transaction identifier, confirmation block, and evidence that the amount was credited under the deployed NSM mechanism. It MUST verify confirmation on the canonical chain before recording the contribution as complete. The same rules apply to later receipts and recoveries, including funding-stream payments received after the initial treasury has been contributed.

#Transparency and final accounting

The existing transparency, security, and responsible disclosure obligations in ZIPs 1015 and 1016 MUST continue during the wind-down. Reports MUST protect confidential grantee information, private payment details, and key material; redactions MUST NOT prevent reconciliation of the aggregate financial amounts.

FPF MUST publish quarterly progress reports reconciling opening balances, receipts, commitment payments, expenses, conversion proceeds, NSM contributions, reserves, and closing balances. Any missed timetable or change in reserve or budget MUST be explained.

After existing commitments and wind-down expenses have been settled and all residual funds then held have been contributed, FPF MUST publish a final reconciliation and closure report. It MUST identify the custodian and retention arrangements for legally required records and provide a contact for later receipts, recoveries, or claims. Public reports and grant records SHOULD remain available as a historical archive. Any later receipt or recovery, including funding-stream receipts, MUST be accounted for and contributed under this ZIP after provision for lawful related expenses. Custody and quarterly reporting obligations MUST continue for any such funds pending contribution.

#Changes to ZIP 1015

In the Specification, under "Zcash Community Grants (ZCG)", insert a new subsection "Wind-down of Zcash Community Grants" immediately before "Furthering Decentralization", with the following text:

At Mainnet activation on the Wind-down Date defined in the ZIP "Winding Down Zcash Community Grants", FPF and the ZCG Committee MUST begin winding down the ZCG program in accordance with that ZIP. For this limited purpose, its provisions take precedence over conflicting provisions of this ZIP, including the exclusive grant-use restriction, committee and election requirements, Discretionary Budget provisions, and obligations to explore an independent ZCG entity.

The permitted purposes of the ZCG Restricted Fund donation expressly include completing existing commitments, paying the reasonable and limited wind-down expenses authorized by that ZIP, and contributing all residual funds to the NSM. FPF MUST arrange the corresponding amendments to the restricted-fund agreements and obtain the legal authority required by that ZIP before executing an action that requires it. These purposes do not authorize new grants, unrelated FPF expenditure, or diversion to another fund.

An NSM contribution mandated by that ZIP is an authorized disposition of the Restricted Fund, rather than a grant requiring a new grant award. Compliance with that ZIP does not constitute a breach for the purposes of Enforcement. Security, separate accounting, and transparency obligations continue until their completion under that ZIP, with required record retention continuing thereafter.

Add a reference to this ZIP in that subsection and in the References section, using its assigned identifier when available. The existing funding-stream tables and historical allocations are unchanged by this amendment.

#Changes to ZIP 1016

In "Zcash Community Grants", append to the first paragraph:

At Mainnet activation on the Wind-down Date defined in the ZIP "Winding Down Zcash Community Grants", the administration and disposition of ZCG funds are governed by that ZIP, including its amendments to ZIP 1015. This applies to both accumulated funds and any subsequent receipts for ZCG.

In "Administrative obligations and constraints", append to the first paragraph:

These provisions are subject to the ZCG wind-down amendments specified in the ZIP "Winding Down Zcash Community Grants". FPF MUST arrange the corresponding amendments to its contractual commitments governing ZCG funds.

After the third paragraph of that section, insert:

The ZCG wind-down amendments to ZIP 1015 and the ZIP "Winding Down Zcash Community Grants" apply only to ZCG funds. They are not incorporated into the requirements governing the Coinholder-Controlled Fund or its Key-Holder Organizations. For that Fund, the otherwise applicable ZIP 1015 obligations continue without those amendments. Neither FPF nor the ZCG Committee is authorized by the wind-down to dispose of Coinholder-Controlled Fund assets.

Add references to this ZIP at those insertions and in the References section, using its assigned identifier when available. If the complementary funding-stream proposal is also adopted, its changes to the duration and destination of future allocations apply independently of these amendments.

#Rationale

#Completing approved work

Paying the entire treasury into the NSM immediately would leave approved work and potential liabilities unfunded. Keeping a documented reserve permits existing projects to finish while preserving their milestone conditions. Closing applications and discretionary renewals provides a definite end to grant-making. Contractual termination provisions address ongoing arrangements without assuming that all grants end on the same date.

#Choosing the NSM for the remainder

The proposal directs the remainder toward protocol-defined network sustainability. Transferring it to another discretionary organization or creating a replacement grants committee would preserve the allocation role that this proposal seeks to close. The NSM's subsequent reissuance remains governed by its own consensus specification.

#Expressly amending the fund restrictions

Relying on an interpretation that an NSM contribution is an ordinary ZCG grant would leave FPF's mandate unclear. Express permission in both ZIPs, together with corresponding legal instruments, addresses the restricted-fund purpose and the incorporation of ZIP 1015's rules by ZIP 1016. The CCF exception avoids accidentally authorizing its wind-down through that incorporation.

#Coordinating the wind-down with a network upgrade

Mainnet activation provides a shared cutoff for ending new grant-making and, if the complementary proposal is adopted for the same upgrade, ending future funding-stream receipts. The proposals remain separate decisions about future allocations and existing assets. This ZIP uses the upgrade's activation as its process trigger without introducing its own block-validation changes.

If a voluntary NSM contribution mechanism is not available when the wind-down begins, safe custody bridges the interval until it is deployed. Custody may continue after the committee concludes its operational role. It introduces continuing costs and dependence on a future deployment, which the community should weigh when considering this ZIP.

#Community consideration

This is an initial proposal for discussion; it does not claim community consensus. Review should consider the effect on teams that depend on future ZCG grants, the availability of other funding channels, the proposed cutoff, and the costs and risks of retaining funds pending an NSM contribution.

#Deployment

This ZIP is not included in NU7 as currently specified by ZIP 259. ²¹ The target upgrade and its Mainnet activation height are unassigned. A deployment ZIP will specify them under ZIP 200. ²⁰

#Reference implementation

None yet.

#Open issues

• Obtain FPF's legal review of the restricted-fund arrangements, constitutional documents, and required consents; identify any assets with additional restrictions that prevent the proposed disposition.
• Designate the target network upgrade and its Mainnet activation height in the deployment ZIP.
• Confirm the 30-day initial reporting period and the 90-day contribution period after legal and technical readiness.
• Reconcile the outstanding grant and administrative commitments with FPF and agree the wind-down budget and reserve methodology before implementation.
• Identify the network upgrade and operational tooling for voluntary NSM contributions. Decide whether to retain the proposed custody arrangement if deployment is substantially delayed.
• Obtain independent review of the treasury custody, contribution verification, and privacy arrangements before this ZIP becomes Released under ZIP 0.
• Record community feedback and any substantiated objections before seeking advancement beyond Draft.

#References