Horizen as a “home for ZK” and an enduring utility for $ZEN
Horizen as a “home for ZK” and an enduring utility for $ZEN
Horizen should return to its roots as a “home for ZK”.
I want to propose a new take on an old vision for Horizen, one based on many years devoted to the industry of my dreams and to the Horizen community, where I have learned so much.
Horizen was launched in 2017 as one of the first ZK projects in crypto, adding a different spin to being a privacy coin by integrating master nodes and some new ideas on governance. The vision was for Horizen (ZenCash at the time) to be a hub for privacy-oriented projects. The community had all kinds of ideas we were hoping to see develop, like decentralized VPNs, CDNs, messaging protocols, privacy-preserving DAOs, etc.
It was fun to dream big and think about how technology could bring about that cypherpunk vision that rallied the early Bitcoin community, including myself. The Horizen ecosystem could add our little part to the bigger movement of Web3.
The flagship coin of Horizen, $ZEN, ceased operating as a privacy coin earlier this year. Further, the entire Web3 stack has upgraded in a really great way over the years since Horizen launched. The early ideas of a dVPN, dCDN, messaging protocol, etc. are more viable now than ever since the industry has (E)VMs, ready frameworks, and much more efficient ZK tech. We also have much more mature concepts around tokenomics and how to make projects successful by integrating and collaborating with the rest of the industry instead of building in a silo.
So what now? Can $ZEN compete as a general cryptocurrency, should Horizen continue trying to compete with Zendoo in the interoperability market? Should $ZEN be repurposed towards some other function, like being the token of the proof verification layer envisioned in “New Horizen”? I don’t think so, and that’s not a bad thing. There’s a better way.
The good news is that Horizen was right that ZK would become a big part of Web3, and the ecosystem is perfectly positioned to make Horizen a key “home for ZK” in many ways. “New Horizen” as a super efficient proof verification layer is both a natural evolution from Zendoo and the perfect foundation onto which EON can move to become that hub for ZK projects that was always envisioned. Finally, what could be a better incentive token than one of the most “OG” ZK coins in the world: $ZEN?
With a little bit of rearrangement and some imagination, Horizen gets back to its roots and quickly emerges as one of the most important ZK ecosystems.
Tokenomics Basics
A truism for any Web3 project to be successful is that tokenomics must match product function. $ZEN adopted bitcoin’s tokenomics because it wanted to compete as a privacy coin. Ethereum chose different tokenomics than bitcoin, and even those have evolved, because it chose a different purpose and function — being a smart contracting platform.
The general rule is that tokens should be allocated to incentivize behaviors needed for the success of an ecosystem. In bitcoin, the behavior that matters the most is funding security via PoW mining. For DeFi protocols, it’s incentivizing liquidity. $ZEN’s tokenomics were established to fund security via PoW mining, a treasury for community-driven discretionary incentives, and a node system to provide a lot of replicated versions of the blockchain.
“New Horizen” is an awesome idea, and it’s getting a lot of early validation — everything from people who want to invest in it, to those who want to use it. The market wants a ZK proof verification chain and it’s going to be delivered quickly, but it is not happening in a vacuum and there are other projects launching to solve the same market problem.
In a competitive environment with others offering proof verification, Horizen can’t compete against new projects with a token whose distribution was determined in 2017 to work as a privacy coin and two-thirds of it are already mined. Imagine launching a project and saying you only have one-third of the token supply available for relevant incentives and security. If Horizen were the only project in the world, it could potentially work. But it’s not.
The Big Debate
A recent post on the Horizen DAO Discourse kicked off super valuable discussion, but also caused concern among some in the community because it suggested studying whether the tokenomics of $ZEN should change to match the new purpose of “New Horizen.” The idea of changing the supply, emission schedule, or allocations of $ZEN shocked some and just “did not compute” for others. Tokenomics is supposed to be immutable, that’s the point.
Further, the implication was loud and clear: $ZEN won’t work for “New Horizen.” This alarmed some and infuriated others as they jumped to conclusions: “We’ve been working on $ZEN for 7 years now, how could it be abandoned just as we are about to deliver something everyone is extremely excited about?”
Unfortunately for everyone, many jumped to crazy conclusions too quickly. We can both accept the reality that $ZEN’s 2017 tokenomics are not what’s needed for a new modular blockchain to be successful; and we can also keep it at the heart of our ecosystem in a way that retains and grows value over time. Further, I believe that the total ecosystem value for Horizen can massively scale by rearranging things in a way that makes sense.
A Proposed Path Forward
$ZEN is one of the last fair launch coins of its generation with any kind of relevancy, and Horizen should keep it. However, the community should consider rearranging the ecosystem so $ZEN is placed where it matters most — in driving TVL and incentives for ZK projects on EON — and Horizen can be expanded further with a super competitive proof verification layer at the foundation of what can be a broader “home for ZK.”
It’s worth describing what I mean by a “home for ZK.” It starts with our proof verification layer, which means integrating all the important ZK proof verifiers into the consensus of the base chain. This means that “New Horizen” will naturally be the most efficient settlement layer for ZK.
Then EON is optimized, focusing development on smart contract precompiles, core functionality, and tools for ZK applications and rollups. $ZEN migrating to its new home on EON as a token frees up a large portion of the remaining one-third of yet-to-be-issued supply to incentivize ZK projects to make Horizen their home. A new token for the proof verification layer would do the same with incentives to attract ZK projects to verify with “New Horizen.”
Finally, the proof verification layer opens new rollup type possibilities that aren’t possible with the constraints of Ethereum or bitcoin as they exist today. Offloading proof verification to a dedicated layer enables the creation of new L2 designs and there is a significant opportunity in bringing these to market first.
After reviewing all of the community’s input and participating in a recent AMA, here is what I believe would be the best path forward:
- Migrate EON from “Old Horizen” to “New Horizen”, which means it’d be a state-of-the-art and performant EVM connected to the Proof Verification Substrate layer.
- Retire $ZEN on “Old Horizen” and port it over to its new life as a token on the new version of EON. This immediately brings hundreds of millions of dollars of value to EON, which makes it one of the most relevant EVMs in the market. This liquidity is like an adrenaline shot for EON. Being a token on EON drops the marginal cost of maintaining $ZEN to about zero, and frees up a ton of resources for ecosystem building.
- $ZEN continues to be the gas of EON and the governance token of what can become a much bigger treasury devoted to ZK applications because 60% of its supply isn’t needed to pay for security.
- The “Old Horizen” chain is deprecated when it’s safe to do so, from both a technology and exchange support perspective. This would allow us to get rid of a lot of technical debt, and leapfrogging to a much more competitive, maintainable and modern stack.
- A new token is adopted for the proof verification layer and I feel that the community should only support and adopt a new token plan that provides $ZEN holders with a significant allocation for their actions in supporting the ecosystem.
“New Horizen” visual as a “home for ZK”. $ZEN migrates from the “Old mainchain” to EON 2.0.
I’ll repeat what I think is cool about this. $ZEN keeps its cultural heritage of a fixed 21 million supply and its fair launch (no pre-mine or ICO). There was talk about diluting the $ZEN supply to make it work as the proof verification token, but this doesn’t have to be done. The more I think about it, the more I love $ZEN’s “OG” status as one of the first ZK coins that was fairly launched and kept bitcoin’s tokenomics.
The Horizen community can decide to do whatever it wants with the remaining one-third of $ZEN yet-to-be-emitted, but my preference would be to dedicate it to incentives for ZK ecosystem building. I want us to return to our ZK roots, just in a way that’s not going to get $ZEN delisted from every exchange.
Conclusion
We’re onto something big with the ZK proof verification layer, but I strongly believe it needs a new token to successfully compete. This layer and token should be part of the Horizen umbrella and $ZEN should remain at the heart of our ecosystem; it shouldn’t be forced into a function for which it would fail.
This vision brings us back to where Horizen started, but the community has an opportunity to take what has been learned over all these years, upgrade to the latest tech, and build a “home for ZK” on top of a modular blockchain layer that’s relevant across Web3, from Ethereum to bitcoin.
Repositioning $ZEN as a token on EON immediately drives hundreds of millions of dollars of value onto the ecosystem’s core EVM, unlocks tremendous value for ZK projects by converting security budget into incentives, and drives the marginal cost of maintaining $ZEN towards zero. It also gives $ZEN indefinite life, a renewed purpose (especially if it is focused as a ZK incentive token), and holders, as active supporters of the ecosystem, could benefit massively from a new proof verification token and any other future tokens potentially existing within the Horizen umbrella.
Sometimes it just takes looking at things in a different way to unlock a whole lot of potential. I’m excited to see the ZenIPs that the community brings forward to get us there
