Grayscale praises Zcash's automatic funding as foundation proposes a reduction

Grayscale Investments, the leading asset manager specializing in cryptocurrencies, praised Zcash's (ZEC) automatic funding model on the occasion of the protocol's tenth anniversary, as the Zcash Foundation considers reducing its budget. This position, taken on October 27, 2026, comes amid tensions over subsidy mechanisms, which are crucial for innovation and security in privacy-focused blockchains. Context Zcash, launched in 2016, distinguishes itself with its privacy protocol based on zero-knowledge proofs (zk-SNARKs), enabling anonymous transactions. Its automatic funding model, unique in the ecosystem, allocates a portion of newly issued ZEC to developers and miners, without relying on external fundraising. Grayscale, which manages over $30 billion in crypto assets (2026 figures), has regularly highlighted this mechanism as a competitive advantage for Zcash, particularly against competitors such as Monero (XMR) or Dash (DASH). The Zcash Foundation, the non-profit organization overseeing the protocol's development, has however proposed a reduction in this subsidy, without specifying the extent. This announcement comes as the privacy cryptocurrency market experiences a resurgence of interest, driven by regulations such as the European MiCA regulation, which now frames digital assets while preserving niches for anonymous protocols. According to CryptoScore Pro data as of October 27, 2026, ZEC shows a market capitalization of $22.01 billion, ranking it 11th globally, with a daily trading volume of $771.91 million. The Facts Grayscale's statements, relayed by CriptoNoticias on October 27, 2026, describe Zcash's automatic funding as an "innovation engine" and "sustainable support," although it did not provide numerical data on its yield or economic impact. Here are the confirmed key elements: The Zcash Foundation proposes a reduction in the current subsidy rate, but neither the percentage nor the precise timeline has been disclosed. The final decision is expected before the end of the fourth quarter of 2026. The funding model, in place since 2016, redistributes a portion of the newly issued ZEC (approximately 20% of block rewards, according to initial parameters) to developers and miners via a mechanism integrated into the protocol. No details on the exact distribution of funds or their recent use are available in the sources. According to CryptoScore Pro, ZEC records one of the highest transaction rates among the top ten cryptocurrencies by market capitalization (10th position on CoinGecko), with 48,213 pending transactions in the mempool and average fees of 1.07 sat/vB, indicating sustained but moderately congested network activity. The total value locked (TVL) of Zcash stands at 3.15 million dollars (CryptoScore Pro data as of October 27, 2026), a modest figure compared to other protocols, reflecting its positioning focused on transactions rather than decentralized finance (DeFi). No recent tier-1 audit is mentioned in the CriptoNoticias article, although the protocol's security relies on previous audits conducted by the foundation. Market data shows contrasting recent performance: ZEC increased by 6.01% over 24 hours and 3.30% over seven days, compared to a decrease of 2.74% for Bitcoin (BTC) and 4.16% for Ethereum (ETH) over the same weekly period. The Crypto Fear & Greed Index, measuring investor sentiment, stands at 48/100 (neutral) as of October 27, 2026. Understanding Key Concepts Automatic Funding (or "Founders’ Reward") Automatic funding is a mechanism integrated into certain blockchain protocols, such as Zcash, which allocates a portion of the newly issued units (here, ZEC) to key actors: developers, miners, or foundations. Unlike traditional fundraising (ICOs, venture capital), this system is transparent and decentralized, as it is written into the protocol's code. For example, during the creation of Zcash in 2016, 20% of block rewards were automatically directed toward a development fund, without human intervention. This model aims to ensure the project's sustainability without depending on donations or external sponsors. Total Value Locked (TVL) TVL (Total Value Locked) measures the sum of assets deposited in decentralized finance (DeFi) protocols, such as loans, exchanges, or liquidity pools. For Zcash, a TVL of 3.15 million dollars (as of October 27, 2026) indicates limited adoption of its DeFi applications, unlike Ethereum, whose TVL often exceeds 50 billion dollars. This figure instead reflects the primary use of ZEC: confidential transactions, where value is not "locked" but exchanged. Mempool and Transaction Fees The mempool (network memory) is a queue where transactions awaiting validation by miners are stored. A crowded mempool, such as that of Zcash with 48,213 pending transactions, can lead to delays or an increase in fees. These fees, expressed in sat/vB (satoshis per virtual byte), reward miners for their work. At 1.07 sat/vB, ZEC fees remain moderate, but prolonged congestion could encourage users to pay more to accelerate their transactions, as observed on Bitcoin during activity peaks. Zero-Knowledge Proofs (zk-SNARKs) zk-SNARKs (Zero-Knowledge Succinct Non-Interactive Arguments of Knowledge) are a cryptographic technology allowing the validity of a transaction to be proven without revealing its details (amount, sender, recipient). Zcash uses this process to guarantee the confidentiality of exchanges, while maintaining verifiability by the network. For example, a user can prove they possess sufficient funds for a transaction without disclosing their balance, a feature absent from public blockchains like Bitcoin or Ethereum. Analysis: what is at stake Zcash's (ZEC) automatic funding model illustrates an economic mechanism rare in the crypto ecosystem: a pre-established allocation of new tokens to developers and miners, funded by transaction fees. According to Grayscale, this system acts as an "innovation engine," aligning the incentives of key players with the…