Grayscale Horizen Trust (ZEN) HZEN

Grayscale Horizen Trust (ZEN) is a Delaware Statutory Trust that holds Horizen (ZEN), a digital asset designed to enable privacy-focused applications and community governance within the Horizen protocol. The Trust’s primary function is to provide investors with exposure to ZEN through the issuance of Shares, which represent fractional undivided beneficial interest in the Trust’s holdings of the cryptocurrency. It operates as a passive investment vehicle, issuing Shares only in Baskets of 100 in exchange for deposits of ZEN from Authorized Participants, with Shares quoted on the OTCQX market under the ticker symbol HZEN.

The Trust generates revenue indirectly through the Sponsor’s Fee, which is paid by the Trust in ZEN to the Sponsor for administrative and operational services, calculated as an annual rate of 2.5% of the NAV Fee Basis Amount. This fee accrues daily and is paid monthly in arrears, with the value derived from the Trust’s ZEN holdings. Revenue is not generated from product sales or service fees but rather from the Sponsor’s compensation for managing the Trust’s affairs, including custody, transfer agency, and marketing functions, all of which are Sponsor-paid Expenses assumed by the Sponsor as partial consideration for receiving the Sponsor’s Fee.

The company operates through the following segments:

• Sponsor Services: This segment encompasses the administrative and operational functions performed by the Sponsor on behalf of the Trust, including preparing and issuing periodic reports, processing creation orders for Baskets, calculating and publishing NAV and NAV per Share daily, and selecting and monitoring service providers such as the Custodian, Transfer Agent, and Trustee. The Sponsor also handles communication with Authorized Participants and ensures compliance with the Trust Agreement and applicable regulatory requirements. These services are essential to the Trust’s ability to issue Shares and maintain its quotation on OTCQX.

• Custody Services: This segment involves the secure storage and management of the Trust’s ZEN private keys by Coinbase Custody Trust Company, LLC, the appointed Custodian. The Custodian employs offline, or cold, storage mechanisms, distributing private key shards across geographically dispersed secure vaults to eliminate single points of failure. It also implements multi-factor authentication and 2-step verification protocols to protect against unauthorized access, ensuring the integrity and security of the Trust’s digital asset holdings.

• Reference Rate Services: This segment refers to the provision of the Reference Rate Price by Coin Metrics, Inc., the Secondary Reference Rate Provider, which determines the daily value of ZEN held by the Trust for NAV calculation purposes. The Secondary Reference Rate Price is calculated using a volume-weighted median price from select Digital Asset Trading Platforms over the prior 60-minute period, incorporating inverse price variance weighting to reduce the impact of outliers. This service is critical for valuing the Trust’s assets and enabling the publication of NAV per Share on the Trust’s website.

Grayscale Horizen Trust (ZEN) operates within the competitive landscape of digital asset investment products, where it faces rivalry from other Grayscale Trusts such as Grayscale Bitcoin Trust (GBTC) and Grayscale Ethereum Trust (ETHE), as well as exchange-traded products and spot cryptocurrency offerings. Its competitive advantage lies in its specialized focus on ZEN, a digital asset with unique privacy-preserving origins and evolving utility on the Base Network as a Layer-3 protocol, combined with the Trust’s structured exposure mechanism through regulated securities-like Shares. The Trust benefits from the Sponsor’s established brand in digital asset investing and its relationships with qualified custodians and service providers, which enhance investor confidence in the security and legitimacy of the investment vehicle.

The Trust’s customer base consists primarily of accredited investors seeking exposure to ZEN through a traditional investment vehicle, including individual investors, family offices, and institutional participants who prefer the convenience and regulatory familiarity of a security over direct cryptocurrency ownership. These investors utilize the Shares to gain indirect access to ZEN without managing private keys, navigating exchanges, or assuming custodial responsibilities, relying instead on the Trust’s infrastructure for safekeeping, valuation, and reporting.