Electric Coin Company June funding analysis

Today the Electric Coin Company (ECC) released its June 2020 transparency report, reviewing income, expenses and use of funds in Q4 2019. The company ran a $300,000 monthly deficit in the quarter, having received coins at an average of $410,000 a month and while having realized ~$710,000 a month in operating expenses. At the end of Q4 2019, the ECC held $3.9M in USD and ZEC, based on the December closing price of $27.23. The ECC’s holdings at the current ZEC price are ~$7.2M in USD and ZEC.

ECC transparency reports provide critical insight into the financial health of one of the most important stakeholders in the Zcash ecosystem. Using the numbers provided in the report, we’ve updated our Zcash funding model to illustrate Zcash’s post-halving financial position under the new Zcash developer’s reward agreed upon in January of this year.

Assuming the ECC’s $710,000 in operating expenses stay flat, at current prices, the ECC will run a $280,000 monthly deficit after its upcoming November halving. With its ~$7.2 million cash position, the ECC could survive 25 months, or more than two years, post-halving before it would need to look for alternative funding sources or cut costs.

However, cryptocurrency prices are anything but stable, so a bear case is prudent to consider as well. Under a bear case scenario where Zcash fell to it’s all time low of $20.40, the ECC could survive just 7 months post-halving, before it would need to look for alternative funding sources or cut costs. And this model likely overstates the runway considering part of the ECC’s cash balance is in ZEC to begin with.

Nevertheless just as there are bear cases, there are also bull cases. The ECC is about a 60% ZEC price increase away from reaching breakeven, an amount very much within the realm of possibility for cryptocurrency.

For now, it appears the ECC’s funding needs will not be an issue unless Zcash plummets substantially from current levels. Perhaps more important though is the fact that the latest developer reward proposal reduces reliance on the ECC anyways. With over 65% of the developer reward going to the ZF and third parties, the Zcash community has paved the path towards a future less dependent on any specific organization.

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