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

Governance
1

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

Status

Discussion

Author(s)

Horizen Labs / Horizen Foundation

Prepared collaboratively by members of Horizen Labs and the Horizen Foundation.

Summary

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 & Vision

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

  • It should not exist solely to manufacture rewards

  • It must be sustainable, credible, and aligned with real ecosystem growth

The primary objectives of relaunching ZEN staking are:

  1. Bootstrapping aligned participation
    Create a committed base of long-term ZEN holders aligned with Horizen’s roadmap.

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

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

  4. 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.

Lessons Learned & Guardrails

The community has seen examples across the industry where staking programs failed to create durable value—most notably programs that were 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.

The goal is for ZEN staking rewards to be increasingly funded by ecosystem-driven value flows, rather than by DAO emissions alone.

Scope of Community Authorization

What This ZenIP Asks the DAO to Approve

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

  2. Acknowledgement of a four-year indicative staking vision

  3. Agreement that each future year’s allocation requires renewed DAO approval

  4. 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

Ecosystem Budget Source

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 (Non-Technical)

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 Project Participation
    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. ZEN staking is intended to serve as the primary alignment rail for the most committed community members and long-term ZEN holders, giving ecosystem projects a direct path to engage, reward, and grow alongside the core of the Horizen community.

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

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.

Conclusion

This ZenIP proposes a measured, alignment-first relaunch of ZEN staking, grounded in sustainability, ecosystem growth, and long-term value creation.

By authorizing only the first year of funding and requiring annual renewal, the DAO retains full control while giving the ecosystem a credible foundation to build upon.

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.

1 Like
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It makes sense to focus on alignment and not just create rewards for the sake of it. Starting small and keeping it simple in Phase 1 feels the right move, instead of adding liquid staking and all that complexity too early. I also like that it needs DAO renewal every year, so we’re not locking ourselves into something if it doesn’t work. Overall it feels balanced and realistic

1 Like
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I posted this in Discord and our Horizen TG group. It’s a quick summary of where we’ve come over the last year and why I think a new $ZEN staking program is exactly what we need right now:

  1. Our first big step was migrating all the legacy L1 + EON sidechain value into Base, via the big ZEN ERC-20 launch last summer. This was a massive project and, frankly, the most elegant transition from an old 2016 vintage architecture to Ethereum that I’ve seen.

  2. This enabled us to launch ZEN DeFi with Aerodrome and have had pretty awesome success creating healthy decentralized rails with a lot of opportunity for the community to participate. We haven’t yet hit our goal of getting a big borrow-lend platform, like Morpho, to include ZEN as collateral, but we’re persistent…

  3. Then we launched the L3, bare bones but into production. This opened the door for Thrive Grant funded projects to start deploying. Slowly at first, but now things are getting ready to roll.

  4. But now it’s time to bring significant liquidity onto the L3, so we can activate our core community with all of the projects getting ready to launch. Private DeFi absolutely requires liquidity on or L3.

So here we are. We’re proposing this important, but humble, next step with simplicity and real values top of mind. We’ve seen way too many dumb staking models out there that emphasize short term profits for early movers, but all you get are mercenaries who could care less about your project. They drain the funding and move on. I could care less about that for Horizen.

This proposal is all about values alignment for our long term hodlers who actually care about the project and what we’re trying to build for the world. It starts simple, no over-financialization out of the gate. We can worry about complexity and capital efficiencies later after we’ve been something meaningful around real community.

4

Sounds great and well thought out!

5

I am in favor of this proposal but I would suggest taking it a step further, because staking sounds good, but what does it do? If the tokens just get locked and does nothing what’s the point? Can we put this value to work some how because if I can earn more in a liquidity pool its kind of stupid to stake it. Could the staked ZEN be put into a liquidity pool to create even more value? It could look something like, DAO reward/VFY rewards/liquidity rewards, that way we capture maximum value from the ZEN token. Just an idea, like I said I’m in favor of the proposal.