ZenIP 42407 Proposal Published – ZEN Tokenomics for Horizen 2.0

The ZenIP 42407 proposal has been published on the Horizen DAO Discourse. The ZenIP 42407 proposal is a comprehensive plan for future ZEN tokenomics as Horizen transitions from a Proof-of-Work (PoW) system to a more efficient Proof-of-Stake (PoS) model and an ecosystem optimized for ZK.

This shift is part of Horizen’s larger goal to enhance its ecosystem for decentralized applications, particularly those utilizing zero-knowledge (ZK) technology. The proposed tokenomics changes address the distribution of remaining ZEN tokens, vesting schedules, and rewards systems to ensure sustainable growth, network security, and incentivization for ecosystem participants.

Key Highlights of ZenIP 42407

• ZEN Allocations:

The ZenIP 42407 proposes to make notable changes to the allocation of block rewards:

• • Horizen Foundation: The Foundation’s share of block rewards is proposed to increase from 20% to 32.5%. This increase will support long-term initiatives such as ecosystem development, market stability, and infrastructure growth. The additional resources aim to strengthen the Horizen Foundation’s role in driving development across the ecosystem​.
  • DAO Treasury: The DAO Treasury is set to receive 27.5% of the total emissions. This allocation includes specific tracks like the ZEN Sustainability Initiative (17.5%), grants (5%), and growth/marketing efforts (5%) to ensure the ecosystem’s continued expansion.
  • Collator Rewards: The remaining 40% of the emissions is proposed to be used to fund the security budget, which is essential for compensating Collators and their Delegators under the new Proof-of-Stake model​

• Emission Schedule & Vesting:
  A gradual vesting schedule is proposed for the remaining $ZEN tokens. Only 25% will be released at the time of migration to Horizen 2.0, with the remaining 75% vesting monthly over 48 months. This schedule helps maintain the sustainability of the network’s resources over time.

• New Way to Earn Staking Rewards :
  Collators (validators) and Delegators will receive rewards through a smoothly declining emissions schedule, which preserves the max supply of 21 million $ZEN. This change is designed to create predictability and long-term participation incentives for network stakeholders​

• Elimination of the Halving Schedule:
  The traditional block reward halving schedule will be replaced with a gradual emissions reduction, smoothing out the supply decreases and reducing market volatility. This adjustment is expected to mitigate speculative behavior while promoting healthier long-term participation.

Why Propose These Changes?

The motivation behind ZenIP 42407 is rooted in Horizen’s evolving vision.

As the platform shifts from being a privacy-focused cryptocurrency and a traditional UTXO blockchain to a robust ecosystem for decentralized apps, its tokenomics needs to reflect this new focus. By incentivizing participants through staking and ensuring a stable financial foundation for community and infrastructure growth, these changes aim to support Horizen’s leadership in the competitive ZK application space.

Impact on the Horizen Ecosystem?

If passed, ZenIP 42407 will:

• Network Security

Collators will take over from PoW miners, securing the Horizen 2.0 network and receiving a significant portion of $ZEN rewards.

• Attract More Developers

By allocating more funds toward ecosystem development, the proposal aims to attract top-tier projects to build within Horizen’s ecosystem, ensuring a sustainable pipeline of innovative applications.

• Increased Funding for Ecosystem Growth

More $ZEN will be allocated to the Horizen Foundation and DAO Treasury, ensuring we have resources to fund development, developer initiatives, and marketing efforts.

• Reduce Market Speculation

A gradual emissions decline mitigates the market disruptions typically associated with halving events​.

• Strengthen Governance

The inclusion of a DAO-managed treasury will empower the community to drive initiatives aligned with Horizen’s mission, enhancing decentralized governance.

Next Steps

ZenIP 42407 is currently open for administrative review and community feedback. After the administrative review is completed by the Special Council of the Horizen DAO, the proposal will proceed to a community vote.

This is a critical opportunity for the community to weigh in on the future of Horizen’s tokenomics, and members are encouraged to participate in discussions and review the full proposal​.

FAQ

1. What is the max supply of $ZEN tokens proposed?
The total supply of $ZEN is capped at 21 million tokens, which will remain unchanged despite the proposed adjustments​.

2. How will this proposal impact staking rewards? 
Staking rewards for Collators and Delegators will be distributed through a gradually declining emissions schedule, ensuring predictable and stable rewards over time​. 

3. Why replace the halving schedule?
The proposal replaces halving with a smoother emissions reduction to avoid market volatility and speculative behavior triggered by abrupt changes in rewards​.

4. How can the community participate in the decision-making process?
Community members can participate by reviewing the proposal, joining discussions, and voting during the DAO community voting process​.