ZenIP 42408: Authorization of $ZEN Allocation for a Phased, Alignment-First ZEN Staking Program

Abstract

This ZenIP proposes authorizing a limited, time-bounded allocation of $ZEN from the DAO ecosystem budget to fund a phased relaunch of ZEN staking, beginning with a conservative Phase 1 focused on long-term alignment and ecosystem bootstrapping.

The proposal seeks explicit community authorization for the first year of staking incentives, alongside a high-level four-year vision, with each subsequent year subject to renewed DAO approval.

This ZenIP does not propose specific implementation details or vendor contracts. Those will be handled separately under approved vendor requirements.

Motivation

Horizen is now operating in a new context: as a Layer 3 on Base, with the ambition of becoming the leading privacy execution layer within the Base ecosystem, and a home for applications that require privacy, compliance-aware design, and sustainable onchain economics.

In this context, staking serves a different role than in many Layer 1 networks. It is not required for validator security, should not exist solely to manufacture rewards, and must be sustainable, credible, and aligned with real ecosystem growth.

The primary objectives of relaunching ZEN staking are:

• Bootstrapping aligned participation: Create a committed base of long-term ZEN holders aligned with Horizen's roadmap.

• Supporting the Horizen L3 ecosystem: Provide a foundation for liquidity, distribution, and incentives that benefit projects launching on Horizen.

• Establishing an alignment layer for future governance: Create the conditions for credible governance participation without prematurely introducing complex mechanics.

• Leveraging existing and emerging ecosystem value flows: Supplement DAO-funded incentives with sustainable economics generated by the ecosystem itself. The goal is to replace the DAO-funded incentives with sustainable ecosystem-generated rewards as quickly as possible.

Specification

Scope of Community Authorization

What This ZenIP Asks the DAO to Approve:

• Authorization of a Year-1 $ZEN allocation for staking incentives

• Acknowledgement of a four-year indicative staking vision

• Agreement that each future year's allocation requires renewed DAO approval

• Confirmation that staking incentives are funded from the DAO ecosystem budget

What This ZenIP Does Not Ask the DAO to Approve:

• Specific vendors or contracts

• Liquid staking tokens

• Governance mechanics

• Cross-chain staking assets

Proposed $ZEN Allocation

Staking incentives would be funded from the DAO ecosystem incentives allocation defined under Horizen 2.0 tokenomics.

Year-1 Authorization (Requested):

• 50,000 ZEN

• Time-bounded to 12 months

• Distributed according to the approved staking framework

  Year	Indicative Allocation (ZEN)	Notes
  Year 1	50,000	Conservative launch
  Year 2	~65,000	Subject to DAO renewal
  Year 3	~55,000	Subject to DAO renewal
  Year 4	~45,000	Subject to DAO renewal
  Total	~215,000	~29% of ecosystem pool

High-Level Staking Framework

Phase 1 staking is designed around the following principles:

• Direct ZEN staking on Horizen L3

• Optional duration-weighted rewards

• Modest base ZEN rewards

• Additive ecosystem reward streams where available

• No liquid staking token in Phase 1

Implementation details will be handled through vendor requirements and do not require DAO approval at this stage.

Leveraging Ecosystem Value Flows

In addition to the initial $ZEN allocation authorized by the DAO, the staking program is designed to incorporate sustainable, recurring rewards from across the Horizen ecosystem, reducing reliance on fixed emissions over time.
Concrete commitments include:

• DAO Liquidity Provisioning Activities: The DAO intends to allocate up to 50% of net earnings generated from DAO-managed liquidity provisioning activities to the ZEN staking program, subject to ongoing review and the DAO's long-term financial health.

• zkVerify Validator Rewards: The Horizen Foundation commits to routing 50% of $VFY earned from its zkVerify validator operations into the ZEN staking program as an additive reward stream.

These contributions are discretionary, subject to operational and regulatory considerations, and may be modified or discontinued as circumstances require.

Ecosystem projects building on Horizen are encouraged to contribute to this program by sharing a portion of their protocol economics or token distributions with ZEN stakers.

Phased Approach

Phase 1 — Alignment Foundation

• Direct ZEN staking

• Duration-based reward weighting

• Ecosystem reward streams

• Focus on participation, retention, and simplicity

Phase 2 — Governance Exploration (Future)

• Potential linkage between staking and DAO participation

• Identity or reputation considerations

• Separate community proposals required

Phase 3 — Capital Efficiency (Future)

• Optional exploration of liquid staking or composability

• Only if justified by ecosystem maturity

• Requires separate ZenIPs

Rationale

The community has seen examples across the industry where staking programs failed to create durable value — most notably programs perceived as token giveaways with no productive linkage, leading to sell pressure and erosion of trust.

This proposal incorporates explicit guardrails informed by those lessons:

• Modest, capped emissions: Staking incentives are intentionally limited and time-bounded.

• Annual DAO renewal: Each year of funding must be explicitly reauthorized by the DAO based on observed outcomes.

• Clear separation between alignment and capital efficiency: Phase 1 prioritizes long-term commitment over liquidity optimization.

• Avoidance of premature complexity: Features such as liquid staking, restaking, or cross-chain composability are deliberately deferred for future community decision.

• Progressive introduction of sustainable economics: While the program is initially bootstrapped with DAO-allocated $ZEN, it is explicitly designed to layer in value from ecosystem projects and community financing activities over time.

Success Criteria

The DAO should evaluate the program based on:

• Percentage of circulating ZEN staked

• Distribution across duration-based tiers

• Stake retention over time

• Participation by ecosystem projects

• Sustainability of reward funding sources

Failure to meet objectives should result in non-renewal or redesign.

Security and Privacy Considerations

This ZenIP does not introduce new security or privacy surfaces. Implementation details, including vendor selection and technical architecture, will be addressed in subsequent proposals. All staking mechanics will be subject to standard security review prior to deployment.

Disclaimer

This proposal reflects current intent and is subject to technical, operational, and regulatory considerations. Nothing in this proposal should be interpreted as a guarantee of returns or future incentives.

Voting

For: Support the authorization of a Year-1 $ZEN allocation of 50,000 ZEN for a phased, alignment-first ZEN staking program as outlined in this proposal.
Against: Do not support the authorization of this $ZEN allocation for a ZEN staking program.