ZenIP 42409: Addendum - Horizon 2.0 Tokenomics Proposal

ZenIP: 42409
Title: ZenIP 42407 Addendum: Horizon 2.0 Tokenomics Proposal
Owner: Domenico Cusumano
Discussions-To: dcusumano@horizenlabs.io
Status: Final
Type: Technical
Created: April 21st, 2025

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Introduction

The current ZEN Proof of Work and Staking tokenomics allocates 80% of the block reward to security, and 20% for protocol development. The migration to an ERC-20 token on Base and re-launch of Horizen as a L3 Appchain on Base provides an opportunity to strengthen the financial position of the Horizen DAO, and focus on growing the strength and capability of Horizen.

There are two important steps for this migration. These are being done in parallel:

1. Migration of two existing blockchains using ZEN to an ERC-20 token on Base
2. Re-launch of Horizen blockchain as an L3 Appchain on Base with ETH as gas

The migration of ZEN from ZEND and EON blockchains to an ERC-20 token can be done before and separately from the re-launch of Horizen on Base as an EVM. This makes the migration straightforward.

Providing to the Horizen DAO the approximately 5 million ZEN that is the difference between the 21 million ZEN cap and the current 16 million ZEN already distributed to holders creates a fund for infrastructure maintenance, protocol growth, application development, and user incentives.

Horizen will be able to differentiate from other EVMs by funding the development, deployment, and successful launch of privacy-focused applications on its own Appchain. Users in both the Base and Ethereum ecosystem will enjoy using the Horizen Apps with very low transaction fees.

By migrating ZEN to an ERC-20 on Base, Horizen will be one of very few OG crypto projects to become an integral part of Base DeFi. ZEN holders will have the opportunity to earn tokens by using ZEN in many DeFi applications on both Base and Horizen on Base.

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Update Tokenomics Rationale

This proposal reflects a strategic recalibration of Horizen's tokenomics designed to optimize long-term sustainability, growth, and community impact. By reallocating the security budget into high-impact categories such as the ZEN Sustainability Initiative and Incentives/Participation, Horizen is better positioned to attract developers, expand the ecosystem, and ensure token value stability. Furthermore, ZEN's utility will be integral to Horizen's capability to enable private and compliant use cases within the ecosystem.

This ZenIP outlines a proposed addendum to the previously approved Horizen 2.0 tokenomics framework. With the recent decision to migrate Horizen to operate as an L3 appchain on Base, the ecosystem no longer requires a dedicated allocation to blockforging security. This provides an opportunity to reallocate the remaining 5M unminted $ZEN in a way that strategically drives long-term growth, ecosystem adoption, and sustainability, and makes sense with being the first privacy platform of the Base ecosystem.

Note: The maximum ZEN supply will remain unchanged at 21 million tokens.

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Recommended Allocation of Unmined ZEN

Upon migration, the max supply of 21 million ZEN will be minted via the ZEN ERC-20 smart contract on Base. ZEN holders on both the PoW chain and EON will be able to claim ERC-20 ZEN at a ratio of 1:1. Unmined ZEN will be allocated to Horizen DAO & the Horizen Foundation based on the below schedule and automatically unlocked via the ZEN ERC-20 smart contract.

The table below is based on an estimated 16 million ZEN circulating at migration, resulting in 5 million unmined ZEN to be allocated based on the ‘% of Total’ column. The actual ZEN allocations will differ based on circulating ZEN supply at the time of migration.

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Unlock Schedule

At migration, 25% of the unmined token supply will be minted and deposited into the Horizen DAO and Foundation multisig wallets respectively, with the rest subject to a linear unlock period over 48 months for each entity. This structure is designed to promote prudent spending over time and to help stabilize ZEN’s value.

The locked ZEN will be held in a smart contract with unlocks deposited to the respective DAO and Foundation multisig wallets on a monthly basis.

Horizen DAO and Horizen Foundation allocations will be segregated as allocations are unlocked. All ‘Horizen DAO’ ZEN allocations will be subject to community governance.

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Category Explanations & Rationale

1. Incentives/Participation (750,000 ZEN | 15%)

• Purpose: To establish a robust incentive pool that rewards ZEN holders for utilization of strategic ZEN integrations on Base and on the Horizen appchain. Incentivized activities may include liquidity provisioning, governance, dApp onboarding etc.
• Rationale: Incentives are crucial for onboarding high-impact projects and encouraging engagement within the Horizen ecosystem.

2. Community Grants (250,000 ZEN | 5%)

• Purpose: To provide direct funding for community-driven initiatives, development projects, and other grassroots activities that support Horizen's growth.
• Rationale: Direct funding empowers community members to actively contribute to the Horizen ecosystem by supporting innovative, grassroots initiatives that align with the protocol’s core values of privacy and decentralization.

3. Growth Marketing (250,000 ZEN | 5%)

• Purpose: To increase awareness, promote Horizen adoption, and drive targeted marketing campaigns aligned with platform growth.
• Rationale: Performance-driven campaigns will focus on outcomes such as TVL growth, developer recruitment, and dApp adoption, maximizing capital efficiency.

4. ZEN Sustainability Initiative (2,000,000 ZEN | 40%)

• Purpose: To establish a long-term sustainability reserve that ensures ongoing resources for Horizen’s ecosystem well into the future.
• Rationale: Designed to support initiatives with long-term value and generate revenue/equity share opportunities, this initiative secures the protocol’s future while investing in the ecosystem.

5. Ecosystem Development (750,000 ZEN | 15%)

• Purpose: To fund technical infrastructure, tooling, and services that expand Horizen’s platform capabilities.
• Rationale: Focused investment in Horizen-specific tooling and enhancements not covered by Base infrastructure.

6. $ZEN Capital Market Liquidity (500,000 ZEN | 10%)

• Purpose: To maintain orderly & efficient ZEN markets on both centralized & decentralized trading venues.
• Rationale: Ensures order book health and supports growth of $ZEN in DeFi.

7. Infrastructure (500,000 ZEN | 10%)

• Purpose: Supports the security and maintenance of blockchain infrastructure including sequencers, RPC nodes, oracles, indexers, bridges, and other essential services.
• Rationale: Ensures long-term stability and functionality of the Horizen ecosystem.

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Conclusion

This proposal reflects a strategic recalibration of Horizen's tokenomics designed to optimize long-term sustainability, growth, and community impact. By reallocating the security budget into high-impact categories such as the ZEN Sustainability Initiative and Incentives/Participation, Horizen is better positioned to attract developers, expand the ecosystem, and ensure token value stability.