The formation of The Horizen Foundation, a Cayman Islands foundation company (the "The Horizen Foundation "), marked the beginning of the process for launching the Horizen DAO (the “DAO”). As detailed in the Constitution of the Horizen DAO (the "Constitution"), The Horizen Foundation exists as a steward of the Horizen community as the legal entity through which the Horizen DAO can govern and make decisions for the ecosystem. The formation of The Horizen Foundation was undertaken in accordance with ZenIP 42203, in which the community directed the DAO and foundation to be established.
This Transparency Report (this "Report") details the steps taken in advance of creating and configuring the Horizen DAO to comply with relevant legal registration and operational requirements. It is important for the community to understand what those steps were and the costs that were associated with undertaking them. This report identifies the activities taken by The Horizen Foundation on behalf of Horizen DAO in pursuit of the ZenIP 42203 directive.
Members of the Horizen community can implement changes of both a technical and non-technical nature through the governance process outlined below and described in further detail in the Constitution. By way of the governance structure that has been created in pursuit of ZenIP 42203, and which is noted in this Transparency Report, the community is empowered to interact with and modify it via governance proposals.
Under Cayman Islands law, The Horizen Foundation must have at least one director and one supervisor at all times. All directors have a fiduciary duty to The Horizen Foundation and are responsible for its management and operations, including entering into contracts and agreements on behalf of The Horizen Foundation.
At formation, The Horizen Foundation incorporated with one professional director provided by a Cayman Islands governance and corporate services firm, Leeward, which serves as supervisor.
Per the Constitution and accompanying governance documentation, members of the Horizen DAO have the ability to remove directors and supervisors via the ZenIP process (provided that The Horizen Foundation may not, at any time, be left without a director or a supervisor).
Initial Set-up and Operating Costs
The Horizen Foundation incurred initial expenses for preparing, investigating and establishing the Horizen DAO and its decentralized system of governance (the “Pre-Launch Costs”). This undertaking involved meticulous deliberation from independent advisors, legal structuring, and technical proficiency to create a system designed to be secure, mitigate known risks, and provide a technically robust operational framework. The goal was to empower the DAO to govern itself on a dependable platform and to facilitate the secure transition of the Horizen mainchain and Horizen EON networks from the Zen Blockchain Foundation to the Horizen DAO considering both technical and legal considerations. As of the date of this Report, the aggregate Pre-Launch Costs incurred by The Horizen Foundation are as follows:*
|Local Counsel (Cayman Islands)
|Regulatory and Corporate Counsel
|DAO Administrator, Secretary, Supervisor, Registered Office
|Director Expenses + Filing Fees
|Development and Management Support Services
*costs subject to change based on invoices not yet received as of the launch date.
At the DAO’s launch, the responsibility for governing the Horizen and EON networks was formally transferred to the DAO. In support of the DAO, The Horizen Foundation has undertaken the financial responsibilities associated with day-to-day operations, blockchain functionality, infrastructure maintenance, service agreements, and ongoing enhancements for the Horizen and EON ecosystems. Furthermore, the Horizen community's portion of the block subsidy (i.e., 20% of the total block subsidy), previously directed to a multisig wallet maintained on behalf of the Zen Blockchain Foundation (the “ZBF Block Subsidy Wallet”) and then directed to the ZBF Treasury wallet (the “ZBF Treasury”), is now directed to a multisig wallet maintained on behalf of the Horizen DAO and The Horizen Foundation (the “Horizen DAO Block Subsidy Wallet”) which will then be directed to the Horizen DAO Treasury wallet (the “Horizen DAO Treasury Wallet”). Each of the signers is subject to the terms of a legally enforceable Multi-Signature Participation Agreement with The Horizen Foundation.
To sustain the vital work of The Horizen Foundation, support the continued operation of core infrastructure and advancement of the Horizen and EON networks and provide for the DAO’s general operating costs, it is imperative to ensure sufficient funding for the Horizen DAO using the DAO’s portion of its block subsidy.
A list of estimated annual DAO operational costs incurred by The Horizen Foundation is set out below:
|DAO Personnel & Consultants
|Mainchain Development Services
|$1,730,000 USD Avg.
(historical range: $1,200,000 - $2,280,000)
|$400,000 USD Avg.
(historical range: $40,000 - $860,000)
|Ecosystem Services Support with community management, project management, ecosystem adoption, and grant program implementation
|$151,472 USD Avg.
(historical range: $2,400 - $258,750)
|Professional Fees (legal & tax)
|DAO Secretary & Registered Office Fees
|Special Council Consideration
|DAO Administrator Fees
To that end, the Horizen DAO’s portion of the block subsidy shall be allocated as follows:
25% to be retained in the Horizen DAO treasury for use by the community in accordance with the ZenIP and EONIP proposal processes.
75% to be allocated to an administrative budget for The Horizen Foundation to satisfy the DAO’s operational costs.
The Zen Blockchain Foundation ("ZBF") has longstanding relationships with service providers who were engaged at the direction of the community. The services performed by these providers were, and remain, necessary for the continued operation of the Horizen blockchain and broader ecosystem. The Horizen Foundation recognizes that Horizen would not be here today without the services and expertise from those providers, and also recognizes the need to expeditiously repay the costs that were incurred in creating and configuring the Horizen DAO. With that critical objective in mind, until such time that the outstanding Pre-Launch Costs are satisfied in full, 95% of the DAO’s portion of the block subsidy shall be allocated to the administrative budget to fund operational costs that are essential for the continued functioning of Horizen (including administration, engineering and infrastructure as well as The Horizen Foundation operational costs), and will expeditiously repay the outstanding debts that were incurred at the direction of ZBF. To the extent there are insufficient funds in any payment period to satisfy amounts owed to service providers in full, the amount of any such unpaid expenses will be added to the startup cost balance and accrue interest accordingly. This repayment strategy will enable The Horizen ecosystem and its community to efficiently and effectively establish a sustainable and unimpeded Horizen DAO Treasury.
The Governance Structure was established in line with the Constitution of the Horizen DAO.
Summary of governance powers
1. $ZEN Tokenholder
The Horizen DAO is made up of the $ZEN tokenholders, who play a pivotal role in its system of decentralized governance with the overarching goal of fostering a trustless, transparent, and verifiable Horizen ecosystem. Given that Horizen aims to serve as a public resource, it is only fitting that those benefiting from this public good should be the ones steering its governance.
$ZEN token holders have the ability to propose and vote on ZenIPs and EONIPs with respect to the blockchains and ecosystems governed by the Horizen DAO.
Sections 3 and 4 of the Constitution, and The Horizen Foundation Governing Documents set forth the details relating to the governance by the token holders, as well as their specific authorities and voting powers.
2. Special Council
The "Special Council" is a DAO committee, initially made up of 7 Special Council members, to provide oversight of The Horizen Foundation on behalf of the Horizen DAO as further detailed in Section 6 of the Constitution. The Special Council’s oversight responsibilities include convening emergency operational meetings when necessary to deliberate and mitigate security risks affecting the Horizen DAO related to any protocols utilizing the $ZEN token, tokenholders, or The Horizen Foundation. Additional responsibilities will include community and ecosystem protection functions by overseeing the review of ZenIPs and EONIPs before they are put forth for a vote by the Horizen DAO.
The initial Special Council members, split by cohort, are as follows:
- Special Council members are each paid an annual compensation of 2,500 $ZEN tokens, to vest on a monthly basis, for their time, expertise, and efforts in serving the community.
Special Council Elections:
- Section 6(b) of the Constitution describes the Special Council election process.
The DAO holds the authority to designate and choose individuals for the Special Council, and further retains the capability to modify the Special Council's authority, whether by expansion or reduction, via a Technical ZenIP.
3. Horizen DAO Voting Procedure
Section 5 of the Constitution describes the details of the ZenIP and EONIP processes and voting procedures, as well as the different categories of ZenIPs and EONIPs.
There are a few governance channels and tools available, each serving its own purpose.
Discord: is a social media and messaging application that serves as the main communications platform for Horizen. Anyone is free to join the official Horizen server and engage in discussion with other community members across any of the channels. This is where community members can first propose and socialize ideas before beginning the formal proposal process.
Discourse: is an open forum for governance related discussions. It is where tokenholders can create ZenIPs and EONIPs, view current and past proposals, and comment on proposals. Members of the Horizen community must register for an account before contributing and engaging with posts.
Snapshot: is an off-chain voting interface that allows the community to vote on ZenIPs and EONIPs based on the amount of $ZEN they hold, and delegate voting power to a different delegate.
Because Snapshot is not compatible with Horizen’s mainchain, it is integrated with EON, which is Ethereum-compatible. This means that $ZEN tokenholders will need to “link” their mainchain $ZEN address with an EON address in order to capture their full voting power for proposals in Snapshot. More information on this process can be found here.
The process of voting, choice of any of the tools, and length of voting can be changed by the community through a Technical ZenIP.