Horizon Trust Transfers Management to Core Blockchain Run by Grayscale
Grayscale Horizen Trust, a leading digital asset investment vehicle, is moving its holdings from the original Horizen blockchain to the Base blockchain, a Layer-2 solution that focuses on increased transaction efficiency through optimistic rollups. This transition has several significant implications and benefits.
Integration into Base's Ecosystem and Ethereum DeFi
By converting Horizen's native token (ZEN) into an ERC-20 token on Base, Horizen taps into Base’s ecosystem with over 1 million daily users and gains direct interoperability with Ethereum's extensive decentralized finance (DeFi) platforms such as Aerodrome and Uniswap. This opens up liquidity pools for ZEN/WETH, ZEN/cbBTC, and ZEN/USDC trading pairs, enhancing liquidity and trading options for investors and developers.
Shutting Down Legacy Chains for Streamlined Operations
The migration involves shutting down Horizen’s original UTXO chain and its EON sidechain, consolidating efforts into a more scalable and developer-friendly environment on Base. This move is expected to promote development efficiency and ecosystem growth.
Governance and Funding for Development
Post-migration, DAO-led governance manages a 5-year grant program with 1 million ZEN tokens (roughly $5 million) dedicated to fostering private DeFi and AI app development on Base. This strategic funding aims to catalyse innovation in privacy-preserving applications, enhancing the utility of the token and platform.
Privacy Layer via Layer 3 Appchain
Despite moving onto an open Ethereum-compatible blockchain, Horizen intends to maintain privacy features through a Layer 3 appchain on Base, preserving its core value proposition in privacy-preserving infrastructure within a competitive ecosystem.
Regulatory Clarity Boost
The SEC’s dismissal of its case against Horizen Labs significantly reduces regulatory uncertainty, making the project more attractive for institutional investors and supporting adoption efforts.
Short-term Volatility but Long-term Growth Potential
The migration induced short-term price volatility (a ~13% drop on migration day), likely due to technical transition and token swaps. However, improved interoperability and exposure to Base’s user base could provide growing demand for privacy tools in DeFi, positioning Horizen favorably if developer traction and adoption materialize.
Competitive Positioning
Horizen’s move places it in direct competition with other privacy coins like Zcash and Monero but with an added advantage of blockchain interoperability and regulatory compliance tools, potentially increasing its market share in privacy-focused DeFi applications on Base.
The Broader Shift towards Interoperability
The move to the Base blockchain is a part of a broader shift in blockchain ecosystems towards interoperability, efficiency, and improved governance mechanisms. After the transition, ERC-20 ZEN tokens on the Base network will be the principal asset of the trust. The transition process is expected to be finalized by July 23, 2023.
Automatic Migration Process for Shareholders
The transition process for ZEN tokens to ZEN Base Tokens will occur automatically, requiring no action from shareholders. Grayscale Horizen Trust (OTC: HZEN) is transitioning its holdings from the original Horizen blockchain to the Base blockchain. A decision regarding the long-term viability of the trust is expected by December 2025 based on this analysis.
Increased Supply and Earmarked Tokens
The overall circulating supply of ZEN is set to rise to approximately 17.25 million ZEN Base Tokens as a result of the transition. A portion of the increased supply will be directed towards supporting the ecosystem, with 750,000 tokens earmarked for the Horizen DAO and another 500,000 allocated to the Horizen Foundation.
[1] Grayscale Investments. (2023). Grayscale Horizen Trust Announces Migration to Base Blockchain. [Press Release]
[2] Horizen. (2023). Horizen Announces Migration to Base Blockchain. [Press Release]
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