ZenIP 42411: A Treasury Management Framework for Horizen DAO

Abstract

This proposal calls for the implementation of a treasury management framework for Horizen DAO. If passed by the community, Horizen DAO mandates the Horizen Foundation to utilize various automated, on-chain liquidity provisioning (LP) vaults to target the below asset mix for the Horizen DAO treasury in a passive and predictable manner.

Background

Horizen DAO has been allocated 3,000,000 ZEN with 750,000 ZEN (25%) unlocking at migration to Base and the remaining 2.25m ZEN unlocking linearly over 48 months.

Rationale

A sustainable treasury management framework will maximize Horizen DAO’s flexibility in funding ongoing ecosystem investments while maximizing the accrual of value to ZEN over the long-term.

With the upcoming migration, Horizen DAO has the opportunity to drive utilization of ZEN across the vibrant Base deFi ecosystem, bolstering utility for ZEN holders. The first step is to establish ZEN’s presence on leading Base DEXs. The proposed treasury management framework will provide ample liquidity to support ZEN pairings on leading DEXs and optimize yield generation for the Horizen DAO treasury.

Specification

Horizen DAO will not sell ZEN for other assets upon the passing of this proposal.

Rather, the target asset allocations for Horizen DAO treasury will be achieved in a fully-passive manner by gradually providing liquidity (LP) to ZEN pairs on leading Base DEXs.

Horizen DAO will seed single-sided ZEN deposits into vaults that automate the deployment of concentrated LPs for ZEN pairings on Base DEXs. There will be separate vaults available for automated management of ZEN liquidity against each asset held in the Horizen DAO treasury. The vaults will provide concentrated liquidity under different custom-tailored parameters depending on the inventory level of the deposit token in the vault.

ZEN from the treasury will be incrementally deposited into the single-sided vault strategies as market conditions allow.

When the market is soaking up liquidity and ZEN inventory levels are low in any vault, more ZEN can be deposited without triggering a shift in vault parameters. In this case, the diversification of Horizen DAO treasury happens more rapidly.

The vaults have additional configurable features, such as high-volatility triggers for defensive posturing. More extensive documentation of single-sided vault strategies and parameters will be made available to the community leading up to migration.

All single-sided liquidity vaults utilized by Horizen DAO will be made available to the Horizen community.

Thus ZEN holders will be able to deposit their ZEN into the same automated LP management strategies utilized by the DAO and generate yield from DEX fees.

Privacy Layer

Horizen DAO will utilize a ‘Privacy Layer’ provided by our strategic partner Singularity to obfuscate its single-sided ZEN deposits to / withdrawals from the ecosystem liquidity vaults. The Privacy Layer is the obfuscation infrastructure supporting Singularity’s various private DeFi applications to be deployed on Horizen. The on-chain obfuscation of the user’s wallet is facilitated by zero-knowledge circuits developed using Noir’s UltraPLONK.

Though private by default, by connecting to the original deposit wallet, Singularity’s compliance tool can produce a report that details all on-chain actions executed via the Privacy Layer, including the nullifier, date, amount, the action and transaction hash. This report will be released on a periodic basis to provide the community with transparency into Horizen DAO treasury movements.

Horizen DAO’s utilization of the Singularity Privacy Layer, in combination with verifiable periodic disclosure of activity, will serve as a real-life example of how private DeFi can be effectively leveraged in DAO operations. Going forward, ZEN holders will be able to utilize the same Privacy Layer to obfuscate their wallet address when executing a variety of ZEN deFi activities on Base, always with the ability to selectively-disclose positions and activity within the Privacy Layer by utilizing the compliance tool. Cost

The Horizen Foundation will engage a third-party provider to configure, deploy, and calibrate the single-sided ecosystem liquidity vaults. For their on-going monitoring, calibration, and enhancement of the Horizen liquidity vault strategies, a 10% fee will be assessed on all fees, rewards, and emissions earned by the vaults.

This performance fee aligns Horizen DAO and the third-party provider to maintain automated strategies that efficiently deploy capital to maximize fee capture in ZEN deFi, resulting in a better swap experience for ZEN holders. There is no management fee assessed on liquidity deployed via the vaults, only the performance fee on vault earnings. The third-party provider will continue to deploy additional liquidity vaults to meet the future strategic needs of Horizen DAO and its ecosystem projects.

Reporting

Treasury management data will be released each quarter detailing quarter-end positions and asset allocations, as well as yield activity such as fee revenue earned etc. This is made possible by Singularity’s compliance tool as mentioned above, producing quarter end reports down to details including all transaction hash, actions, amounts, assets and corresponding nullifiers.

Summary of Benefits

Yield on ecosystem assets - consistent yield earned from automated, on-chain liquidity provisioning **Bolstered ZEN liquidity **- automated, on-chain strategy increases ZEN TVL across Base DeFi ecosystem Funding flexibility - diversification into stable and blue chips provides flexibility in funding community initiatives and alleviates sporadic sell-pressure on ZEN Privacy layer - demonstrate selective utilization of private DeFi protocols within the Horizen ecosystem Achieve industry alignment- Increases in ETH or BTC price result in ZEN buying pressure via rebalancing Successful investments fuel ZEN - Tokens received from Horizen ecosystem investments feed into the ‘Other’ category. Thus successful investments will result in rebalancing those assets back into ZEN, blue chips, and stables in a predictable and automated manner.