Horizen Trust's oversight moves to Base Blockchain, as announced by Grayscale.
The Grayscale Horizen Trust has announced a significant move, transitioning its underlying asset, the native ZEN token, from Horizen's Layer 1 blockchain to the Base blockchain, an Ethereum Layer 2 solution. This migration is part of Horizen 2.0's relaunch as a privacy-first appchain.
The move by Grayscale Investments Sponsors, LLC is in response to Horizen network's plan to phase out its legacy ZEN tokens. After the transition, ERC-20 ZEN tokens on the Base network will become the principal asset of the trust.
This shift towards Base blockchain signifies a broader shift towards interoperability, efficiency, and improved governance mechanisms in blockchain ecosystems. Coinbase Custody Trust Company, LLC will manage custody services for the ZEN Base Tokens post-migration.
Implications
The move decommissions Horizen’s original UTXO mainchain and EON sidechain, focusing development on the Base appchain for better scalability and DeFi integration. The transition facilitates new DeFi functionalities, such as liquidity vaults, single-sided staking, and increased liquidity options on Ethereum-compatible platforms like Uniswap.
Privacy is reinforced with default confidentiality in transactions, staking pools, and verifiable interactions without data exposure, leveraging zero-knowledge proofs for privacy preservation.
Token Supply
The maximum supply of ZEN remains capped at 21 million tokens, unchanged by the migration. Following the migration, the circulating supply increased to approximately 17.25 million tokens. A portion of the increased supply will be directed towards supporting the Horizen ecosystem. Specifically, 750,000 tokens are earmarked for the Horizen DAO and another 500,000 allocated to the Horizen Foundation for development and ecosystem support.
A DAO governance proposal (ZenIP 42405) approved the migration with near-unanimous support, including a five-year grant program managing up to 1 million ZEN for developer incentives.
Long-Term Viability
Transitioning to Base’s Ethereum L2 leverages a broader DeFi ecosystem, potentially boosting liquidity, developer engagement, and user adoption. The shift to a privacy-focused Layer 3 appchain allows Horizen to capitalize on increased regulatory compliance and market demand for confidential transactions amid tightening scrutiny of privacy coins.
Security audits by specialized firms have found no critical vulnerabilities in migration contracts, aiding user confidence. Exchanges like Coinbase and Bybit automatically converted existing ZEN tokens to the new ERC-20 format, minimizing disruption for holders and maintaining market continuity.
Post-Transition Plans
A detailed review of the ZEN Base Tokens' adoption and utility will be conducted following the transition. The Base blockchain syncs periodically with Ethereum to maintain security and decentralization. A decision regarding the long-term viability of the trust is expected by December 2025 based on the analysis of ZEN Base Tokens' performance.
If the outlook is deemed unsustainable, the sponsor may opt to wind down the trust in accordance with its SEC disclosures. The Base blockchain, now hosting the ZEN Base Tokens, is a Layer-2 network focused on increased transaction efficiency through optimistic rollups.
The new tokens comply with ERC-20 standards and are hosted on the Base blockchain, a Layer-2 solution that utilizes optimistic rollups to boost scalability while maintaining alignment with the Ethereum mainnet. The overall circulating supply of tokens is set to rise from about 16 million ZEN to 17.25 million ZEN Base Tokens.
The transition process for ZEN tokens to ZEN Base Tokens will occur automatically without the need for shareholder intervention. Each ZEN token held within the trust will be substituted with a ZEN Base Token during the migration. The transition process is expected to be finalized by July 23.
This strategic evolution towards scalability, DeFi integration, and enhanced privacy via zero-knowledge technology positions Horizen for stronger ecosystem growth and long-term viability within Ethereum’s expanding infrastructure. The transition may influence future decisions for similar blockchain investment vehicles in the digital asset space.
- The transition of the Grayscale Horizen Trust's asset to the Base blockchain, an Ethereum Layer 2 solution, will result in ERC-20 ZEN tokens becoming the principal asset of the trust, signifying a broader shift towards DeFi integration and interoperability in the industry.
- The shift towards the Base blockchain, with its focus on scalability and privacy-preserving zero-knowledge technology, could encourage similar blockchain investment vehicles in the digital asset space to adopt comparable strategies for long-term viability and growth.
