Grayscale Horizen Trust Navigates Major ZEN Protocol Shift

TL;DR

**HZEN is a high-risk bet on a rapidly evolving crypto asset that just underwent a massive protocol overhaul, making it a speculative play on Ethereum Layer-2 growth rather than a privacy coin.**

AI Summary

Grayscale Horizen Trust (ZEN) (HZEN) filed its 10-K for the fiscal year ended September 30, 2025, detailing significant changes to its underlying asset, Horizen (ZEN). The Trust's purpose is to hold ZEN, and as of September 30, 2025, it held approximately 5.5% of the ZEN in circulation. A major business change occurred in July 2025, when the Horizen Network fully migrated ZEN from its legacy standalone blockchain to the Base Network, an Ethereum Layer-2 network, transforming ZEN's utility from a transaction fee and governance token on its own chain to a token used in privacy-focused projects and governance on the Horizen Protocol on Base. This followed a September 2023 update that deprecated privacy-preserving features, causing it to no longer be considered a 'privacy coin.' The Trust's Shares, quoted on OTCQX under HZEN, are issued in Baskets of 100 Shares to accredited investors in exchange for ZEN, but there is no ongoing redemption program. The market value of Shares held by non-affiliates was $17,487,245 as of March 31, 2025, with 11,425,100 Shares outstanding as of November 20, 2025. The Reference Rate for ZEN pricing also changed, with CoinDesk Indices, Inc. no longer determining it as of June 20, 2023, replaced by the Coin Metrics Real-Time Rate (Secondary Reference Rate).

Why It Matters

Grayscale Horizen Trust's 10-K reveals a critical transformation for ZEN, moving from a standalone blockchain to an Ethereum Layer-2 solution. This migration to the Base Network in July 2025 fundamentally alters ZEN's technical foundation and utility, impacting its long-term value proposition for investors. The deprecation of privacy features in September 2023 also shifts its market positioning, potentially broadening its appeal but also intensifying competition with other Layer-2 tokens. For HZEN investors, the lack of an ongoing redemption program means Shares may trade at a substantial premium or discount to NAV, a significant risk exacerbated by the underlying asset's volatility and evolving regulatory landscape.

Risk Assessment

Risk Level: high — The risk level is high due to the extreme volatility of digital assets like ZEN, as explicitly stated in the filing. The 'largely unregulated nature and lack of transparency surrounding the operations of Digital Asset Trading Platforms' also poses significant risk. Furthermore, the 'uncertain medium-to-long term value of the Shares due to a number of factors relating to the capabilities and development of blockchain technologies' and the 'possibility that the Shares may trade at a price that is at, above or below the Trust's NAV per Share' due to the absence of an arbitrage mechanism, contribute to substantial investment uncertainty.

Analyst Insight

Investors should exercise extreme caution and conduct thorough due diligence on the Horizen Network's migration to Base and its implications for ZEN's utility and adoption. Given the high volatility and the Trust's lack of a redemption program, HZEN is suitable only for investors with a high-risk tolerance and a long-term view on the success of Ethereum Layer-2 ecosystems.

Financial Highlights

debt To Equity

0.0

revenue

$0

operating Margin

Not Disclosed

total Assets

Not Disclosed

total Debt

$0

net Income

Not Disclosed

eps

Not Disclosed

gross Margin

Not Disclosed

cash Position

Not Disclosed

revenue Growth

+0%

Key Numbers

• $17,487,245 — Aggregate market value of Shares held by non-affiliates (As of March 31, 2025, indicating the Trust's market capitalization for non-affiliated holdings.)
• 11,425,100 — Number of Shares outstanding (As of November 20, 2025, representing the total issued shares of the Trust.)
• 5.5% — Percentage of ZEN in circulation held by the Trust (As of September 30, 2025, indicating the Trust's significant but non-influential position in the Horizen ecosystem.)
• July 2025 — Date of Horizen Network migration to Base Network (Marks a fundamental shift in ZEN's underlying technology and utility.)
• September 2023 — Date of Horizen Network privacy feature deprecation (Indicates a strategic change in ZEN's market positioning away from a 'privacy coin'.)
• June 20, 2023 — Date of Reference Rate change (Coin Metrics Real-Time Rate replaced CoinDesk Indices, Inc. for ZEN pricing.)

Key Players & Entities

• Grayscale Horizen Trust (ZEN) (company) — Registrant and issuer of HZEN Shares
• Horizen (ZEN) (company) — Underlying digital asset held by the Trust
• Grayscale Investments Sponsors, LLC (GSIS) (company) — Sole remaining Sponsor of the Trust since May 3, 2025
• Base Network (company) — Ethereum Layer-2 network to which Horizen migrated in July 2025
• Digital Currency Group, Inc. (DCG) (company) — Parent company of the Co-Sponsors
• Coinbase Custody Trust Company, LLC (company) — Custodian of the Trust
• Coin Metrics Real-Time Rate (company) — Secondary Reference Rate for ZEN pricing since June 20, 2023
• U.S. Securities and Exchange Commission (SEC) (regulator) — Regulatory body overseeing the filing
• OTC Markets Group Inc.'s OTCQX Best Market (company) — Exchange where HZEN Shares are quoted

FAQ

Risk Factors

• Underlying Asset Volatility [high — market]: The Trust's value is directly tied to the price of Horizen (ZEN). The migration of ZEN to the Base Network and the deprecation of privacy features in September 2023 have fundamentally altered its utility and market perception, increasing volatility. The market value of Shares held by non-affiliates was $17,487,245 as of March 31, 2025, subject to significant fluctuations.
• Custody and Security Risks [medium — operational]: The Trust holds ZEN, and any compromise of the digital assets held in custody could result in a total loss of the Trust's assets. While the filing mentions cybersecurity, specific details on the Trust's custody arrangements and security protocols are not elaborated upon in the provided sections.
• Evolving Digital Asset Regulation [medium — regulatory]: The regulatory landscape for digital assets, including tokens like ZEN and the networks they operate on (e.g., Ethereum Layer-2), is rapidly evolving. Changes in regulations could impact the Trust's ability to operate, the classification of ZEN, or the compliance requirements for holding such assets.
• Liquidity and Redemption Risks [medium — market]: The Trust issues Shares in Baskets to accredited investors but has no ongoing redemption program. This lack of redemption mechanism means that the market price of HZEN may trade at a significant premium or discount to the net asset value (NAV) of the underlying ZEN, impacting liquidity for shareholders.
• Reference Rate Changes [low — market]: The change in the Reference Rate for ZEN pricing from CoinDesk Indices, Inc. to the Coin Metrics Real-Time Rate as of June 20, 2023, introduces a new pricing mechanism. Any inaccuracies or volatility in the Coin Metrics rate could affect the Trust's NAV calculations and the perceived value of its holdings.

Industry Context

The digital asset trust industry is characterized by evolving regulatory scrutiny and technological advancements. Grayscale Horizen Trust operates within a niche focused on specific cryptocurrencies. The broader crypto market is seeing a trend towards Layer-2 solutions for scalability and a re-evaluation of token utility, as evidenced by Horizen's migration to the Base Network.

Regulatory Implications

The shift of ZEN to an Ethereum Layer-2 network and the deprecation of its privacy features may subject it to different regulatory frameworks than its previous iteration. The Trust must navigate potential changes in how digital assets are classified and regulated, particularly concerning utility tokens versus securities.

What Investors Should Do

1. Monitor the performance and volatility of Horizen (ZEN) on the Base Network, considering its altered utility and market positioning.
2. Evaluate the potential impact of the new Coin Metrics Real-Time Rate on the Trust's Net Asset Value (NAV) and share price.
3. Assess the risks associated with the lack of an ongoing redemption program, which can lead to significant premiums or discounts in HZEN's market price relative to its NAV.
4. Stay informed about evolving regulations concerning digital assets and Layer-2 networks, as these could affect the Trust's operations and the underlying asset.

Key Dates

• 2025-07-01: Horizen Network fully migrated ZEN to the Base Network — This migration fundamentally changed ZEN's utility from a standalone chain token to one used on an Ethereum Layer-2, impacting its ecosystem and potential use cases.
• 2025-03-31: Aggregate market value of Shares held by non-affiliates was $17,487,245 — Provides a snapshot of the Trust's market capitalization for public investors as of a specific date.
• 2025-09-30: Trust held approximately 5.5% of ZEN in circulation — Indicates the Trust's significant holdings within the Horizen ecosystem, though not a controlling stake.
• 2025-11-20: 11,425,100 Shares outstanding — Represents the total number of Trust shares available in the market as of a specific date.
• 2023-09-01: Horizen Network deprecated privacy-preserving features — This strategic shift meant ZEN is no longer considered a 'privacy coin,' altering its market positioning and appeal.
• 2023-06-20: Reference Rate for ZEN pricing changed — The pricing benchmark shifted from CoinDesk Indices, Inc. to the Coin Metrics Real-Time Rate, impacting how ZEN's value is determined for the Trust.

Glossary

Basket

A unit of creation for Grayscale Trusts, typically comprising a specific amount of the underlying digital asset, used to issue Shares to accredited investors. (Explains the mechanism by which the Trust issues new shares in exchange for ZEN.)

Base Network

An Ethereum Layer-2 network designed for scalability and efficiency, now hosting the Horizen Protocol and ZEN. (Crucial for understanding the new technological foundation and utility of ZEN after its migration.)

Accredited Investor

An individual or entity that meets certain income or net worth requirements, allowing them to invest in securities not typically available to the general public. (Defines the target audience for the Trust's share issuances.)

Reference Rate

The benchmark price used to value the underlying digital asset (ZEN) for the Trust's net asset value calculations. (Highlights the importance of the pricing mechanism, which has recently changed.)

Net Asset Value (NAV)

The total value of a trust's assets minus its liabilities, representing the per-share value of the underlying holdings. (Key metric for assessing the intrinsic value of the Trust's shares relative to the market price.)

Year-Over-Year Comparison

The 10-K for the fiscal year ended September 30, 2025, details significant structural changes to the underlying asset, Horizen (ZEN), including its migration to the Base Network in July 2025 and the deprecation of privacy features in September 2023. These events fundamentally alter ZEN's utility and market perception compared to previous filings. While specific financial metrics like revenue and net income are not applicable to this type of trust, the market value of shares held by non-affiliates ($17,487,245 as of March 31, 2025) and the number of outstanding shares (11,425,100 as of November 20, 2025) provide key operational data points. The change in the reference rate for ZEN pricing also represents a notable shift in valuation methodology.

Filing Documents

• hzen-20250930.htm (10-K) — 2746KB
• hzen-ex31_1.htm (EX-31.1) — 26KB
• hzen-ex31_2.htm (EX-31.2) — 25KB
• hzen-ex32_1.htm (EX-32.1) — 9KB
• hzen-ex32_2.htm (EX-32.2) — 9KB
• img53334777_0.jpg (GRAPHIC) — 1097KB
• img53334777_1.jpg (GRAPHIC) — 788KB
• img53334777_2.jpg (GRAPHIC) — 734KB
• 0001193125-25-297573.txt ( ) — 12752KB
• hzen-20250930.xsd (EX-101.SCH) — 423KB
• hzen-20250930_htm.xml (XML) — 904KB

Forward-Looking Statements

Forward-Looking Statements This Annual Report on Form 10-K contains "forward-looking statements" with respect to the financial conditions, results of operations, plans, objectives, future performance and business of Grayscale Horizen Trust (ZEN) (the "Trust"). Statements preceded by, followed by or that include words such as "may," "might," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or "continue," the negative of these terms and other similar expressions are intended to identify some of the forward-looking statements. All statements (other than statements of historical fact) included in this Annual Report that address activities, events or developments that will or may occur in the future, including such matters as changes in market prices and conditions, the Trust's operations, the plans of Grayscale Investments, LLC ("GSI"), the sponsor of the Trust before January 1, 2025, Grayscale Operating, LLC ("GSO"), the co-sponsor of the Trust from January 1, 2025 to May 3, 2025, and Grayscale Investments Sponsors, LLC ("GSIS"), the co-sponsor of the Trust from January 1, 2025 to May 3, 2025 and the sole remaining sponsor thereafter (each of GSI, GSO and GSIS, the "Sponsor," as the context may require, and GSO and GSIS, together, the "Co-Sponsors"), and references to the Trust's future success and other similar matters are forward-looking statements. These statements are only predictions. Actual events or results may differ materially from such statements. These statements are based upon certain assumptions and analyses the Sponsor made based on its perception of historical trends, current conditions and expected future developments, as well as other factors appropriate in the circumstances. Whether or not actual results and developments will conform to the Sponsor's expectations and predictions, however, is subject to a number of risks and uncertainties, including, but not limited to, those described in "Part I, Item 1

Business

Business 1 Item 1A.

Risk Factors

Risk Factors 51 Item 1B. Unresolved Staff Comments 84 Item 1C. Cybersecurity 84 Item 2.

Properties

Properties 84 Item 3.

Legal Proceedings

Legal Proceedings 85 Item 4. Mine Safety Disclosures 85 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 86 Item 6. [Reserved] 86 Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 87 Item 7A.

Quantitative and Qualitative Disclosures about Market Risk

Quantitative and Qualitative Disclosures about Market Risk 94 Item 8.

Financial Statements and Supplementary Data

Financial Statements and Supplementary Data 95 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 95 Item 9A.

Controls and Procedures

Controls and Procedures 95 Item 9B. Other Information 96 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 96 PART III Item 10. Directors, Executive Officers and Corporate Governance 97 Item 11.

Executive Compensation

Executive Compensation 98 Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 98 Item 13. Certain Relationships and Related Transactions and Director Independence 100 Item 14. Principal Accountant Fees and Services 102 PART IV Item 15. Exhibits and Financial Statement Schedules 103 Item 16. Form 10-K Summary 105 Glossary of Defined Terms 106 iv PART I

B usiness

Item 1. B usiness Overview of the Trust and the Shares Grayscale Horizen Trust (ZEN) (formerly known as Horizen Investment Trust) (the "Trust") is a Delaware Statutory Trust that was formed on July 3, 2018 by the filing of the Certificate of Trust with the Delaware Secretary of State in accordance with the provisions of the Delaware Statutory Trust Act. The Trust's purpose is to hold Horizen ("ZEN"). The Horizen Network was originally launched as an alternative software implementation of the Bitcoin network in 2017 by a group that forked Zclassic, which is a clone of Zcash. Although the Horizen Network began similar to the Bitcoin Network, the Horizen ecosystem has undergone major systemic transformations. In September 2023, the Horizen Network implemented an update that removed many of these privacy preserving features. More recently, in July 2025, the Horizen Network executed a full migration of ZEN and the Horizen protocol from its legacy standalone blockchain to the Base Network, an Ethereum Layer-2 network that provides the underlying consensus and security. The Horizen protocol on Base has been described by ecosystem contributors as "Layer-3" blockchain environment "built for modular privacy and sustainable on-chain utility." Whereas ZEN previously operated as the transaction fee token on the Horizen Network's standalone blockchain and as a governance token for the Horizen DAO, after the July 2025 migration to Base, ZEN is now used throughout privacy-focused projects on the Horizen Protocol and in governance. The Horizen Network is one of a number of projects intended to enhance blockchain technology. One of the Horizen Network's primary enhancements of blockchain technology was to add additional layers of confidentiality to traditional blockchain infrastructure so that users could engage in transactions and selectively disclose details related to those transactions. ZEN accomplished this level of confidentiality by using novel cryptographic protocols

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View this 10-K filing on SEC EDGAR