The "dark power" of token governance can harm the privacy of Zcash, warns Vitalik Buterin.

Source: PortaldoBitcoin Original Title: “Dark power” of token governance may harm Zcash's privacy, says Vitalik Buterin Original Link: The debate over Zcash governance resurfaced last week after a routine vote sparked strong reactions from prominent figures in the industry.

The discussion revolves around whether the privacy-focused cryptocurrency should maintain its committee-based system or migrate to direct voting by token holders.

The co-founder of Zcash, Zooko Wilcox, started discussions asking for support from Artkor, a veteran member of the Zcash community and a current member of the Zcash Community Grants Committee (ZCG), where he seeks re-election for next year.

The off-chain governance of Zcash operates through a selected advisory panel called ZCAP, which votes on important issues and elects the committee responsible for the allocation of donations (ZCG). Wilcox describes the group as “thoughtful and independent people who disagree with each other but are committed to the same mission.”

Criticism of the current model

On Saturday, AngelList co-founder Naval Ravikant joined the discussion and questioned the model. “It's an obsolete system and should be discontinued,” Ravikant opined, adding that “trusted” third parties “are a security flaw and it doesn't matter if they are 'well-meaning and independent.'”

“All governance for decentralized protocols should be on-chain and private,” said Ravikant.

Vitalik speaks out

The co-founder of Ethereum, Vitalik Buterin, then spoke out and urged the community not to adopt a token voting model.

Buterin expressed hope that Zcash “resists the nefarious influence of token voting,” arguing that the cryptocurrency's focus on privacy could “deteriorate over time” if left to the “average voter.”

For him, “voting by tokens is bad in several ways” and “worse than the status quo of Zcash”. “Voting by coin is attractive because it seems credibly neutral: anyone can go and get some units of the governance token on an exchange platform,” Buterin wrote, adding that “in practice, however, voting by coin may seem secure today precisely because of the imperfections in its neutrality.”

Buterin argued that simple coin-weighted voting concentrates power among large holders and drives protocols towards short-term decisions, guided by price.

The price of success

The price has become a concern among the Zcash community, with Artkor noting in his reelection post that “the price context has changed significantly.”

The rise of the Zcash currency, ZEC, in the last month has “undoubtedly” created new opportunities for its community, noted Artkor.

“But at the same time, it also creates new dangerous challenges. The danger is not that we may spend more, but that we may start spending more easily. You know, it’s like a test of faith with money,” he wrote.

Supporters of the current system rely on the idea that a well-evaluated committee provides continuity and filters proposals responsibly. Critics, however, see a structure that could concentrate influence.

Risk Analysis

“Token-based voting can expose protocols to governance capture if a well-funded agent accumulates a majority stake in the tokens,” said Lucien Bourdon, security analyst. “While the likelihood of such events depends on the liquidity and distribution of the asset, the risk persists.”

Voting by tokens “often correlates influence with wealth, which is not always aligned with the long-term sustainability of the network or the values of the community,” Bourdon added.

Such factors may depend on the community, Bourdon noted. Although token voting may increase “engagement and decentralize control,” it can also pave the way “for decision-making with little information and for manipulation.”

“Well-chosen and reliable” committees can provide more consistent governance, but they risk “drifting away from the general user base,” he said, adding that “no model is perfect; the most resilient systems often combine accountability with mechanisms to prevent capture.”

At the time of publishing this text, ZEC was declining in the market after a widespread drop that caused the total market capitalization of cryptocurrencies to fall significantly.