8-K: Grayscale Horizen Trust Announces Migration to Base Blockchain Amid Supply Increase and Viability Review

Grayscale Horizen Trust (ZEN) announced the migration of its underlying Horizen (ZEN) tokens to the Base blockchain, a Layer-2 scaling solution, effective July 23, 2025, following a Horizen DAO vote and leading to an increase in circulating supply and a review of the Trust's ongoing viability.

Summary

• Grayscale Horizen Trust (ZEN) announced on July 18, 2025, that all Horizen (ZEN) tokens will migrate from the main Horizen blockchain to the Base blockchain, an ERC-20 Layer-2 network built on Ethereum.
• The migration, effective July 23, 2025, follows a favorable vote by the Horizen DAO in February 2025.
• The Trust's assets will solely comprise ZEN Base Tokens after the migration, with Coinbase Custody Trust Company, LLC expected to act as custodian.
• The Horizen protocol's emissions schedule will change, increasing the circulating supply from approximately 16.0 million ZEN to a projected 17.25 million ZEN Base Tokens.
• Additionally, 0.75 million ZEN Base Tokens will be transferred to the Horizen DAO and 0.50 million to the Horizen Foundation.
• No action is required from Trust shareholders for this migration.
• Grayscale Investments Sponsors, LLC will evaluate the adoption and usage of ZEN Base Tokens and the Trust's ongoing viability, expecting a determination by December 2025, which could lead to the Trust's discontinuation.

Sentiment

Score: 4

Explanation: While the migration to a Layer-2 solution offers technical benefits like scalability and lower fees, the significant increase in circulating supply and the explicit risk of the Trust's discontinuation by December 2025 introduce considerable uncertainty and potential negative impact for investors, outweighing the immediate technical positives.

Positives

• Migration to Base blockchain aims to improve scalability and transaction throughput for Horizen, addressing limitations of the Ethereum Network.
• Layer-2 solutions like Base blockchain can significantly reduce transaction fees compared to direct Ethereum Network transactions.
• The Base blockchain leverages the security of the Ethereum Network through synchronization mechanisms.
• No action is required from shareholders for the migration to be completed.

Negatives

• The circulating supply of Horizen tokens is projected to increase from approximately 16.0 million ZEN to 17.25 million ZEN Base Tokens, which could dilute existing token value.
• The Sponsor will evaluate the ongoing viability of the Trust by December 2025, with the possibility of discontinuing its affairs, introducing significant uncertainty.

Risks

• The Sponsor will evaluate the adoption and usage of ZEN Base Tokens and the ongoing viability of the Trust, with a determination expected by December 2025, which could result in the discontinuation of the Trust.
• The success of the migration and the long-term viability of ZEN Base Tokens depend on their adoption and usage within the crypto ecosystem.
• Optimistic rollups, while efficient, rely on a dispute period where transactions are assumed valid unless challenged, introducing a different security model compared to direct validation.

Future Outlook

Grayscale Investments Sponsors, LLC intends to evaluate the adoption and usage of ZEN Base Tokens following the migration, along with other factors, including the ongoing viability of the Trust. A determination on the Trust's future is expected by December 2025, which could potentially lead to the discontinuation of the Trust's affairs.

Management Comments

• Grayscale Investments Sponsors, LLC, the sponsor of Grayscale Horizen Trust (ZEN), announced that, from and after the Migration Date, it will consider the ERC-20 ZEN tokens on the Base blockchain (the ZEN Base Tokens) to be generally accepted ZEN and, therefore, such ZEN Base Tokens should be thereafter considered ZEN for the Trust's purposes.
• The Sponsor intends to evaluate the adoption and usage of ZEN Base Tokens following the Migration, among other factors, including the ongoing viability of the Trust, and currently expects to make a determination as to the foregoing by December 2025.
• Based on such evaluation, the Sponsor may discontinue the affairs of the Trust pursuant to the terms of the Trust Agreement and as described in the reports and documents of the Trust filed with or furnished to the SEC.

Industry Context

This migration reflects a broader trend in the cryptocurrency industry towards Layer-2 scaling solutions to address the throughput and cost limitations of foundational blockchains like Ethereum. As the Ethereum Network struggles with processing approximately 12 transactions per second compared to traditional payment networks like VisaNet's 65,000+ transactions per second, Layer-2 solutions such as Base blockchain, utilizing optimistic rollups, are becoming crucial for enhancing network speeds and reducing transaction fees, thereby improving user experience and scalability for decentralized applications and digital assets.

Comparison to Industry Standards

• The Base blockchain, as a Layer-2 scaling network built on Ethereum, aligns with the industry's move towards off-chain processing to alleviate congestion and high fees on mainnets.
• Its use of optimistic rollups is a common and widely adopted Layer-2 technology, similar to those employed by other major Layer-2 solutions like Optimism and Arbitrum, which batch transactions and assume validity unless challenged.
• The stated throughput of the Ethereum Network at approximately 12 transactions per second is a well-known limitation, often contrasted with centralized payment systems like VisaNet's capacity of over 65,000 transactions per second, highlighting the scalability challenge Layer-2s aim to solve.
• The reduction in transaction fees by allocating Ethereum Network transaction fees across many Layer-2 transactions is a standard benefit of rollup technologies, making micro-transactions more feasible than directly on the Ethereum mainnet.

Stakeholder Impact

• Shareholders: No action is required from shareholders for the migration. However, the increase in circulating supply could dilute their holdings, and the potential discontinuation of the Trust by December 2025 poses a significant risk to their investment.
• Horizen DAO: Will receive 0.75 million ZEN Base Tokens, indicating increased resources or influence.
• Horizen Foundation: Will receive 0.50 million ZEN Base Tokens, indicating increased resources or support for the ecosystem.
• Coinbase Custody Trust Company, LLC: Expected to benefit from acting as custodian for the Trust's ZEN Base Tokens.

Next Steps

• On or about July 23, 2025, each ZEN token currently owned by the Trust is expected to be replaced by a ZEN Base Token.
• Coinbase Custody Trust Company, LLC is expected to act as custodian for the Trust's ZEN Base Tokens following the migration.
• The Sponsor intends to evaluate the adoption and usage of ZEN Base Tokens and the ongoing viability of the Trust.
• The Sponsor expects to make a determination regarding the Trust's future by December 2025.

Key Dates

Recommendation

Keywords

Grayscale Horizen Trust, ZEN, Base blockchain, Layer-2 scaling, Ethereum Network, ERC-20, Horizen DAO, cryptocurrency, digital assets, blockchain migration, optimistic rollups, Grayscale Investments Sponsors, Coinbase Custody