Grayscale’s Deeper Dive into Horizen

Last Update 12/10/2021

In December 2021, we hosted a conversation with Rob Viglione and Liat Aaronson, co-founders of Horizen Labs. Horizen is a blockchain ecosystem that aims to enable privacy-preserving decentralized applications, and ZEN is its native token.


Ray Sharif-Askary: Hi everybody. Welcome. I'm fortunate enough to be joined today by Rob Viglione and Liat Aaronson from the Horizen Team. We are going to give everybody a few minutes to join and then we will kick things off.

Rob Viglione: Happy to be here. Love the painting in your background, Ray.

Ray Sharif-Askary: Thank you. So I think as folks join, I can kind of quickly run through the run of show. We will, the purpose of doing these is that we have projects that we're excited about, that we have products for, and we're lucky enough to have connectivity with the teams so we really can just make these more accessible, make them more tangible for our investors and for the investment community out there. Just a couple of housekeeping items. Obviously none of the things we're covering here are investment advice. We are not investment advisors. Anybody listening should consult their own broker or advisor. And the Grayscale private placements, including Grayscale Horizen Trust, are only available to accredited investors. So again, for the folks that are joining now, thank you Rob and Liat. Thanks everyone for dialing in. We're going to just jump in with some questions that we have set up and we'll do some, we have some questions from investors that we'll do at the end. So to kick things off, can you each just give us a quick high level intro and a little bit of background on yourselves?

Rob Viglione: Sure. My name is Rob and I am co-founder of Horizen, the public blockchain and also CEO of Horizen Labs. So my background actually came from the hard sciences working with the military, Air Force in my early career, on the software, actually software procurement side. So large software projects for sophisticated satellite programs, launch vehicles to get the satellites up there. And then I went back to academia and got my PhD in finance.

Liat Aaronson: My name is Liat Aaronson. I started my career in mergers and acquisitions, did a few years of that in Israel in a big law firm that was tapping into the growth of Israeli tech at the time. From there I took a segue into entrepreneurship education and ran an entrepreneurship program at IDC Herzliya called the Zell Entrepreneurship Program funded by Sam Zell of Chicago. Ran that program for 10 years and I stepped out of it to take an operational role at an Israeli high growth company as COO at Selina. And from there joined Rob and Dean, my co-founders, to create Horizen Labs with the idea of thinking about how to bring data privacy into a more accessible world using blockchain. And that's how we're connected here today.

Ray Sharif-Askary: Great, and thank you again for being on with me. So privacy, data privacy is something that Grayscale, DCG, Barry have been focused on for a long time so I will ask you guys to provide some context around that. Before doing that, we created a poll, so I'm going to launch that now. And basically the question is that there was a Pew, read the privacy survey that they did a year and a half ago and how are Americans thinking about data privacy and how secure their data is today versus historically. So I'm going to launch that now and I think everybody has the ability to vote. So we'll give it like 25 seconds. This is really interesting though.

Okay. So I'm going to turn off the polling and go over the results. So apparently people got the right answer. The collective sentiment is in fact that most Americans, 70% of Americans really think that it's hard to get data privacy today and it's a lot harder than it was five years ago so that, we couldn't be having this discussion in a more timely way.

Liat Aaronson: Wow. Super impressive poll results. And I think this really gives testament to what Rob and team were thinking when they created the Horizen blockchain in the first place. And I think what we are trying to do in Horizen Labs. Rob, do you want to give some more thoughts on, your thoughts on privacy?

Rob Viglione: I would, yeah, and I would say the tools for data privacy have never been better. They're just not evenly distributed and people really aren't taking advantage of them. I think we're hitting a point where in the market and just the way the economy has evolved, we're hitting an inflection point where people are realizing number one, their data's a heck of a lot more valuable today than it ever has been. And really that's because of the advance of AI and machine learning and training algorithms and that has real economic value. And number two, they're not the ones benefiting from the value of their data. So that's the economic [inaudible 00:06:16] where we product to market if people back their sovereignty over their data and they can either not allow it to be collected on the platforms that they use or they can be the ones harvesting the economic rewards of that.

And really this is actually one of the macro points of why Horizen exists and the technology that we're bringing to market is really to disrupt what has become a trillion-dollar business model for platforms. Throwing a platform out there for free and then harvesting the data on the back end, we're kind of inverting that.

Ray Sharif-Askary: And who does benefit from that data?

Rob Viglione: So it would be, the way the world works right now it's the platform providers. So it's the Facebooks of the world, the Googles of the world, really the big data collection platforms themselves and then in the end they really harvest the economics of it.

Ray Sharif-Askary: And how has this changed? How has this narrative changed in a post-COVID world? Because I know we're talking about a lot of, you want to start contact tracing and things have really shifted. How do you see that?

Rob Viglione: Yeah, I would say it's more valuable than ever in particular because people are realizing now that data could really impact their lives. For instance, you may not be able to report to your job if you don't have a test and that test isn't made available. You may not be able to travel if you don't have a vaccine, that vaccine information is not made available publicly. Now I think this is the unique opportunity that we have as a technology provider or as an industry, is to be able to provide tools and services so that you can actually make use of data without revealing it. And this is really the big gist of our technology effort using zero-knowledge proofs and we can get into that in a bit. But Liat, I would love to hear what your thoughts on this in a post-COVID world.

Liat Aaronson: Yeah, and I think it connects to the connection between the pre-COVID world and the post-COVID world. So I think the idea of using privacy and trying to make sure that it's not only in the silos of different providers and actually as Rob was saying, owned by people themselves. I think zero-knowledge proofs, which we are experts in and we are developing a lot of technology and expertise around it from the layer zero to above in our sidechain technology is to be able to make sure that data stays in the places where it needs to stay, but the underlying, so whether it's your testing or whatever it is that you need to be able to proclaim gets approved without having to give that information.

And I think actually the more that we get into the deeper dive of where data becomes a little bit trickier and we need to share more of it, actually zero-knowledge proofs, which is kind of our claim to existence, is really a way to be able to harness both the ability to actually verify that things happened and on the other hand not be able to reveal a lot of sensitive information that today is actually being very overly presented and exploited. So I think in a post-COVID world, I see there's more and more use for the technology that we're providing.

Ray Sharif-Askary: And zero-knowledge proofs was apparently featured in MIT's technology review. It's one of the 10 breakthrough technologies in 2018 I think. So it's something definitely that is really front and center. And so I think this is a good segue to talk about just before we dive too much into the protocol, where Horizen came from. So I know it's a fork of a fork of Zcash, which is a fork of Bitcoin, but for everyone else, do you wanted to speak about that a little bit?


Rob Viglione: Yeah, exactly. And so the tech stack does have its legacy coming through Bitcoin through Zcash, and that's really where we picked up the zero-knowledge proofs was from Zcash, and then we started extending that into different data structures. But I mean the point of what we were doing back in 2017 when we launched was to solve two problems in the blockchain industry. One was we wanted better economics and what we're calling more sustainable economics of these public networks. Because you can look at sustainability to us as very specific. It's on the margin you reward contribution. So there are many different types of contributors to a public blockchain other than miners. Miners are extremely important, but there are many other people like developers, people that run nodes, actually instances of your software to keep the network up and persistent. They're all contributing. And the first point that we wanted to do was actually kind of create an economic system that has this endogenous reward mechanism that keeps the network actually growing and sustainable.

So we were, I would say phenomenally successful in one way in that we have one of the largest node networks in the industry. So the network itself has exploded. We have something like 45,000 servers around the world running our software, which is more than say the first 10 projects added up. So going beyond that, data privacy and extending this beyond just coin transfer was the other big innovation that we wanted to bring to the industry with the premise that the world is not going to put its sensitive information on a public ledger unless it has strong guarantees of privacy. So that's really where Horizen Labs comes in and the R&D that we've been doing for the last three years is about bringing this technology to market at scale so that you can actually have enterprise grade privacy tools built into blockchain as basically an infrastructure service to the world.

Ray Sharif-Askary: Right. So now I think, and this is something I want to spend a lot of time on, what exactly is Horizen? I think people appreciate the high level, the general goals, but it's not really tangible for people and that's a lot of why we're doing this. Can you explain it in layman's terms as though I was a 12-year-old? I think it's important, so let's spend some time on this.

Rob Viglione: So there's probably two answers and then Liat, I would love to hear you make this palatable for people. The two answers, there's a crypto answer, a blockchain crypto answer, and then there's kind of a functional technology answer. So the crypto answer is you can think of a sidechain, a chain, a blockchain system like Polkadot and swap out those validators with cryptographic circuits and we have a decentralized version of Polkadot that uses also kind of Cardano-like technology. There's proof of stake blockchains as our sidechains and also a blend of Zcash with privacy tools and Nina actually for state succinctness to keep it scalable.

Anyway, so that's a mouthful of blockchain crypto terminology. It was painful to say, but important for the crypto audience. On the other side it's what is this technology? And the technology itself is really a decentralized network that provides infrastructure for people to have decentralized applications that are programmable. It's persistent, it's like an AWS like an Amazon Web Services in the blockchain world where anyone can take our tools, launch their own blockchain, join a blockchain within our ecosystem, have best in class privacy tools so they can actually do enterprise type services where you could put information on a public ledger and have guarantees that that information is actually secure and not visible to the world but still make use of it. Even that's probably a mouthful and maybe Liat can distill it a little bit better.

Liat Aaronson: I'm actually sure that you distilled it perfectly, but thankfully for me because I can't probably do that as well, I'm just going to show some slides and I would actually love you to join in. So I'm just going to share a portion of my screen and walk us through a little bit. And Rob, please join me in kind of walking us through. So this is essentially a little thought about our blockchain infrastructure. We've got the Horizen blockchain, which is the blockchain infrastructure with the 45,000 nodes that we talked about. And what we've built and spent some time developing incredible technology for is an ability to create blockchain instances that are absolute complete blockchains in and of themselves. But they do connect through a cross chain transfer protocol to our main Horizen blockchain, which is that public blockchain. I'm not going to go through the whole thing of it, but what is absolutely interesting about what we've done is that our technology is completely permissionless and decentralized so that our blockchain instances act as their own decentralized blockchains.

They are fully customizable so that you can build them and program them to be able to do whatever it is that you need to do through the SDK. So it could be with whatever consensus protocol that you need to do, but when it connects with the Horizen blockchain, it knows how to at least prove that whatever consensus protocol was chosen is the consensus protocol that was actually run, and so gets validated in that way. So it's a decentralized validation. And what's unique to our system is that in that blockchain instance, you can build in economic rewards, transaction fees to the developer building the blockchain. So unlike what you can do in Ethereum, here you can actually build in rewards into the blockchain instance. So that's the kind of main instruction. We'll go through some use cases going forward. But Rob, would you like to add a little bit more input into how this works?

Rob Viglione: Yeah, and maybe even the opportunity here is we've been building this for the last three years. What you see as Horizen, the public network today is really the cryptocurrency legacy from Zcash and Bitcoin before that. This system, this blockchain of blockchains, massively decentralized, scalable privacy preserving system is something we're launching in three months. So the tools have all been built, they're going through third party audit and integration testing right now. So this is probably the most exciting time for the project and probably the perfect moment for us to have this webinar so that people can really get exposure to what we're doing because a lot of the market, and I think the way that we're perceived in the market is as a cryptocurrency, like others with just some privacy tools. No, we're actually a massive scalable blockchain infrastructure system with programmable blockchains. Now ZEN is the transaction gas of the system, ZEN the cryptocurrency and it's used much like ETH is for smart contract gas on Ethereum, Zen is that here.

So really you can look at the economics of this is you're going from a constrained money supply like Bitcoin, like cryptocurrency, ZEN that is now going to have Ethereum smart contracting utility on this massively scalable network. And to give you some sense of the scale, we're talking about a network that V1 of it can host up to 1,000 blockchains that operate in parallel with something like 3 million transactions per block with two and a half million block times. So basically like 20,000 transactions per second across a thousand different blockchains. It is massive and highly secure and really enterprise grade.

Ray Sharif-Askary: And Rob, when you speak about ZEN, you touched on scarcity. Can you talk about the economics a little bit and governance and how it's like Bitcoin or Ethereum or other protocols because I think that's important for people to wrap their head around.

Rob Viglione: Absolutely. So stability was the most important thing for us, especially coming out of an industry that itself is just inherently volatile. We focused on stability and getting the right infrastructure and foundations in place over the last four years. So the money supply is just like Bitcoin. We chose to inherit the Bitcoin money supply path. 21 million ZEN capped, that's all that can ever exist. Now the utility here, like I said, is completely different than Bitcoin because Bitcoin is a transaction currency, really store value, transaction currency, however you want to look at that but really a unit of value for transfer. This is a gas for operating or executing computation on a global infrastructure. So the utility there is completely different, but it still retains the scarcity of Bitcoin.

So that's a unique and really interesting value proposition. Now, governance of this is governed in a way that's very similar to the Bitcoin network in that we have a decentralized network. We have, in our case, a non-profit foundation with an independent board of directors that oversees just the kind of science and technology community building. But then we have other companies that have joined the ecosystem or spun out of that, like Horizen Labs that are actually providing specific services. So we have an ecosystem comprised of multiple players including I would say DCG and Grayscale are important new members of this ecosystem by offering products that make joining the ecosystem significantly easier.

So in itself it's a well governed stable ecosystem that has Bitcoin-like governance at the protocol level. So we do have an open source blockchain project with rules for contributing to the open source environment and everything that's completely transparent all the way down to the granular level of you can see that the foundation and Horizen Labs hosts a joint team call weekly. So you can actually join our weekly team calls, we call them the weekly insiders. So you can see actually our workflows, how the teams are operating, what we're working on. We post everything in a very transparent open way so that the community and other stakeholders can participate directly.

Ray Sharif-Askary: So you've combined zero-knowledge proof abilities of Zcash with the governance and supply schedule of Bitcoin and then added utility in the way that Ethereum is used. You've kind of combined those three things. Is that a way someone can think about it?

Rob Viglione: It is and it goes from the utility perspective, a more or different scaling solution for Ethereum where we have a blockchain of blockchains, we're all kind of like Polkadot or Cosmos for those that care about those projects or are familiar with those projects, but that's exactly right, Ray.

Ray Sharif-Askary: Great. So lets talk about the use cases and let's talk about how, what are the applications? How might I, Ray, interact with this today? And maybe it's not today, maybe there's a future state, cause I think that's something people can really sink their teeth into.

Rob Viglione: Yes, and Liat actually has more slides on this so we can go through specific examples, but this has been our challenge. So we've been focusing on, we've been kind of protocol blockchain geeks for the last four years and now we're at that transition point where, okay, we're happy with the geekiness and the foundations at the protocol level and now we're actually, we spun up a product team about six months ago. It's just really hitting the market hard with our BD team and cultivating these use cases. This is I think my favorite use case to highlight because it shows how the technology interplays with a real world problem. And this is how we view our strategy is we're not going after the smart contract developers on Ethereum and trying to convince them to come over to us. We're solving specific problems as infrastructure basically as a service to the enterprise marketplace.

Celsius being a great example because Celsius is the largest or one of the largest peer-to-peer lenders in the cryptocurrency market where they take in a whole bunch of cryptocurrency collateral and their users have to trust the company that they're managing that collateral effectively. They're not going to lose it, they actually have it. They're not rehypothecating it in ways they're not supposed to and so forth. So what we've done with Celsius is actually built a privacy preserving blockchain application that near real time audits all of the cryptocurrency reserves starting with Bitcoin on the Celsius platform.

So basically instead of relying on Celsius and maybe one of their auditors with an annual audit that they actually have managing their reserves appropriately, you have a tool that near real-time audits all of their reserves and using privacy technology. So you can't see their institutional clients, you can't see their institutional fund flows, but cryptographically we can prove that they actually have control of all of the reserves that they claim they do. And you can see architecturally how it fits into the Horizen ecosystem is Horizen Labs is providing a blockchain specifically for this audit tool that Celsius is using as a customer. And that fits into the overall Horizen ecosystem as one of those thousand blockchains that operate in our ecosystem.

Ray Sharif-Askary: So you're set up to play a really meaningful role in a use case like this where lending and the development of credit and capital markets so to speak, continues to proliferate in the blockchain and crypto world, which is really interesting.

Rob Viglione: Yeah, exactly. And by the way, I should specify that this tool can apply to every exchange in the marketplace, every financial service provider in our marketplace, and it can be extended to provide proofs for private blockchains. So you don't even have to be proving reserves, you can prove transactions that are happening on a private blockchain that you don't want to be revealed to the world, but you still want the proofs to be revealed and verified to the world.

Liat Aaronson: We call it audit chain, but it's essentially a proof of reserve, a proof of liquidity, a proof of transactions. It's really a kind of registry of whatever transactions happened. And to the extent that if you look on this diagram, we've got our Horizen Labs audit chain that is able to connect between whatever private transactions happen and whatever sidechain representations happen on different blockchains, but we're able to create those sidechains for different blockchains and so run those in parallel. It's actually a unique ability and an ability for us to mesh together and create incredible synergy to be able to validate a lot of transactions across our ecosystem.

Rob Viglione: And I want to say this is a tangible business use case of our technology. Now we are a geeks platform, so we have an SDK, a software developer kit where any developer can take that kit and deploy their own blockchains to really do anything. Their own programmable blockchains, that are very similar in consensus to Cardano because that was the open source protocol that we modeled the first sidechain implementation on. But basically you can have your own mini version of Cardano that's programmable and you can build your own blockchain applications using our SDK. So it's tangible, you could use it today. And that's really for the developers of the world where we're actually focusing our expansion.

Liat Aaronson: Yeah, and this is a good point to kind of throw out there that we're building a, right now a Zen Ventures initiative where we are going to be incentivizing a lot of ecosystem players. So any kind of startups or developers who want to build with our blockchain and in our blockchain ecosystem in whatever kind of ways in a very fluid open thinking into a grant program. So we're going to be offering grants, but also in order to make it really viable and interesting for startups, we're also partnering with a lot of VCs in the ecosystem who are interested in investing in the Horizen ecosystem, and so putting those two together. I think we're going to go through some more use cases, but this is just a really kind of a small sample of what the opportunities are for building on the Horizen ecosystem. So Rob, I'm going to take you to the next one to talk a little bit about another use case that we have.

Rob Viglione: Yeah, sure. So probably our bread and butter is, again, I call us infrastructure. Now the first use case for infrastructure, the first demand for infrastructure is from the blockchain industry itself. So we're partnered with IOTA, one of the large public blockchain projects out there that specializes in IOT, “internet of things” use cases, and we're providing a privacy layer to the IOTA tangle and partnering with Sigfox, actually Sigfox, Puerto Rico, it's their Latin American operation to provide real use cases in this case on the smart city side. So it's not that we're smart city specialists at all and we don't really know much about IOT. That's why we're partnering with Sigfox and IOT global leader IOTA on the blockchain or tangle side for IOTA. And we provide what we're good at, which is a privacy layer to actually aggregate this information, make use of the information for smart city applications without revealing that information to the world. So it really shows the power of privacy technology that can scale.

Ray Sharif-Askary: So I think as we go through these, I want to just keep bringing it back to the ZEN token and just really keep painting that picture for everybody as to how the role that ZEN plays, how value might accrue to ZEN and how they should be thinking about that.

Rob Viglione: Yeah, so thank you Ray for queuing that because this is important. Now, the system that we built is a proof of stake blockchain system and ZEN is the stake. So right now ZEN is a cryptocurrency that is used for value transfer. When this system goes live at the end of Q3, and like I said it's in process of migrating to main net right now, then all of a sudden ZEN becomes this big utility for computations, smart contract applications, computation, all of these sidechains that, and there could be up to a thousand of them with the first version here are proof of stake where you have to commit ZEN into the sidechain to actually, for one of these security layers, and actually to win the right to earn part of the transaction flows that happen on those sidechains. ZEN is also the transaction gas.

So this is important that every transaction that gets broadcast gets broadcast with a ZEN micro transaction. Part of that transaction payload gets allocated to the sidechain developer or the company, the developer that launched that sidechain, they actually get a cut of the transaction flow. Miners on the Horizen main net get a part of the transaction cut, and then also node operators on the sidechain side, these are the people that actually commit ZEN and it's proof of a stake. So your ability to win the right to write that block is proportional to the amount of ZEN that you commit. So economically speaking, you can think of the cash flow spinning off of these sidechains for the real value being created to solve a real problem will actually dictate the amount of ZEN based on a required rate of return for investors.

So as a simple example, if you as an investor have a 10% required rate of return and there's $10,000 per month or say annual, $10,000 per month of cash flow going on here, then you are willing to commit an amount of ZEN that makes the $10,000 worth of cash flow going to the node operator equivalent to a 10% rate of return. So you just multiply that by 10. So 10,000 would be $100,000 worth of ZEN should be committed into that sidechain to actually have a 10% rate of return on the $10,000 worth of ZEN cash flow. I know that that's a mouthful from a finance perspective, but it shows there's real finance behind this. There's real economics of solving problems, ZEN to utility and there's going to be a very large organic shift in demand for ZEN to provide utility on this network.

Ray Sharif-Askary: And the supply of course is capped.

Rob Viglione: It's fixed.

Ray Sharif-Askary: Just like with Bitcoin.

Rob Viglione: Exactly.

Ray Sharif-Askary: Yeah. So you know what it looks like on the supply side, it's identical to Bitcoin.

Rob Viglione: So it'll be an interesting... Yeah, sorry.

Liat Aaronson: No, I think this is perfect without all of the deep financial thinking behind it. It's a capped supply like Bitcoin, but it's a programmable infrastructure like Ethereum. And so what we're actually building here is an ability to actually create usability for ZEN throughout the platform. And I think that's the really interesting issue here. And I think Rob, I'll take you to the next use case, which is a marketing incentivization platform. And all of these use cases are based on companies that we've been talking to. We don't want to provide the names because we just don't feel comfortable providing things that haven't been kind of locked, stocked and barreled. But these are real companies that we're talking to and getting some serious validation for the market. Our BD team is absolutely rocking it with getting some really interesting companies and logos on the table. We're just giving you the kind of the general overview before we sign on to anything in particular. But this is a marketing incentivization platform which has a different usability from referrals through the marketing chain. I think Rob will be happy to explain.

Rob Viglione: I would love to, and this is with the top 25 blockchain project out there, so we just haven't announced it publicly yet. So the news on this will be forthcoming. We're drafting the PR right now, but basically it's to provide a marketing tool to make blockchain more accessible to real users in the real world, starting with kind of just evangelizing the project. But that's all one thing really. That's a whole bunch of business logic on how to propagate, do marketing services for a blockchain project.

What we do for that project is actually we encase all of that business logic in zero-knowledge proofs in a circuit on a decentralized application in our ecosystem. So basically Horizen sidechain is being used as a marketing engine where the business logic, the payouts, the participants, all of the flows and connectivity between these participants, all of that logic is made private with zero-knowledge proofs and it just automates the process that I think will have a big impact in evangelizing cryptocurrency. This is just one example again of how you can use our technology as a product to solve real problems out there, and ZEN is key to this.

Liat Aaronson: And if we could just go to the last use case, although we have a gazillion more, but these are just ones that are really kind of lined up in our pipeline. And again, some of them we're not going to show the names, but this is actually some negotiations with a mainstream Fortune 500 company that is super interesting, but it's something that I think has very broad application.

Rob Viglione: Yeah, so for this one, this kind of goes to our mantra of what are we going to do? The first step for us was providing services, infrastructure for our own industry. The second is providing these types of services and infrastructure outside of the industry, in this case with one of the largest media companies in the world, wants to build a vertically integrated blockchain platform that does everything from bulk enterprise-grade NFT issuance, campaign tracking, tokenization, basically create and launch their own token. That token has real value in the consensus of their own blockchain that they launch with us.

So there's this whole suite of services that we're basically the backend for and ZEN is running in the background where if we do this right, their users won't even realize that ZEN's being used in the background. They're just getting a whole bunch of really cool services that they're trying to revolutionize the media industry and we're just the quiet guys in the background where you need our infrastructure to execute this stuff.

Liat Aaronson: Which Rob, that's really the goal at the end of the day for most of the stuff that we're doing. Blockchain itself is just the underlying piece of it. From the user perspective, this is going to be a way to get very privacy enabled, very decentralized and secure information, but for the users that are going to be using this, it's not going to be something that they're going to have to be involved in. They're not going to be involved in the blockchain layer, not in the node layer, not in anything of it. From a user perspective, they're just going to get all of the benefits that we're able to offer.

Ray Sharif-Askary: So coming back, so it's interesting, I was just looking back at when I was fortunate enough to meet both of you in 2019. We had a dinner, it was at Flatiron and we were telling people about Horizen and at that time the price of ZEN was $4. And now, last I checked today it was $86 so clearly a ton of development has been done. What's different between now and fall of 2019? Can you just talk a little bit about what's taken place and how that might have informed some of this price action in the token?

Rob Viglione: Yeah, so it's night and day entirely because back then we were really selling a vision and an idea and really it was all aspirational. We had a functioning cryptocurrency, it was out there, we had a big community that was excited. Now we're pivoting where within three months of actually turning on this huge platform service that is entirely different. The economics have entirely shifted to be, I think on steroids. Now the thing is, I think that we're just seeing a little bit of leading action into it where more people now are catching on to what we're delivering, but I still think that until we get out there and we showcase these real examples of what's being done, as soon as people see some of the big companies that we're working with, I think then we'll be getting a lot more traction. But the project today is completely different than it was even as early as when we had that dinner in 2019.

Ray Sharif-Askary: And what about network fundamentals? I think we were chatting about this. How has that changed over the last few years, months? Transaction value, hash rate, the number of nodes seems to have grown meaningfully. Can you just break this down? And you might even have to define some of these terms just to let's keep it super basic.

Rob Viglione: Yeah, I mean it's exploded and Liat, I don't know if we have any graphs that can actually speak to that, but there there's a bunch of information publicly available. Our mining hash has exploded. So right now I believe we're the second largest Equihash minable coin out there. So that's a big deal because you have miners that just algorithmically shift between the two and we're up there. So it is between us or Zcash really, we're the two leaders in that class of mining, which is important for security. On the other hand, we lead the industry on number of nodes. I think right now we might be number two in the marketplace, but we have 45,000 nodes that run on our network.

So the network, this does provide real utility of course maybe with diminishing returns, but there are other networks out there that have you like a hundred nodes or less. And some of these networks have actually gone down where blocks stop getting produced. So there is a real risk that if your network is not large enough and distributed enough, your network could actually go down. Ours, that risk asymptotically goes to zero. Transactions have exploded on the network with adoption, usage. I'm not sure, I don't want to quote the latest numbers on that, but they're significantly higher. All of our other communications statistics are through the roof in terms of community size, engagements. We have a whole bunch of other programs that just get our community and certain elements of our community, like developers, evangelists, to really just catalyze them and get them productive. So things have really taken off. The project is significantly different, more mature than today than it was when we had that dinner back in 2019.

Ray Sharif-Askary:  And on that note, thinking more future, what's your vision? Where is this thing in five years? And how do you quantify the opportunity, the size of the opp? And maybe that's dollars, I don't know, but I think people would really be interested in hearing about that.

Rob Viglione: Liat, do you want to...

Liat Aaronson: I think we are geared to being incredibly accessible for mainstream usage. We have a lot of use cases that we've been trying out with the many companies. We feel that at the end this will be a backend experience. So it's not like everyone will need to understand blockchain to be able to use us. We've been talking to players from the blockchain industry through mainstream and we think we are at a tipping point where this is going to be super, super interesting. So I think we're literally just at the tip of the iceberg of what this can be and we're getting a lot of validation from the market from all kinds of companies.

And our technology I think is incredibly interesting in its ability to really tap into zero-knowledge proofs on the one hand and their ability to focus privacy in a way that's actually usable and relevant to market needs. And on the other hand, infrastructure innovation that is able to tap into the great things about blockchain but also be able to improve about some of the challenges of blockchain like scalability and throughput and getting things out there. So I think we've got a lot of the interesting parts of Bitcoin, the programmability of Ethereum. I think we're able to bring in scalability, security, privacy, and so I think we're kind of the next generation of what blockchain technology is going to be and super excited about that.

Rob Viglione: That was really eloquent. Can I be a little bit sloppier and bold here and say I think we're going to be a top 10 project and we're going to explode just into the scene as we get our technology out there. We're going to be everywhere in that we're going to have DeFi running on Horizen and privacy preserving DeFi, which is going to be huge for the financial industry itself because ever heard of front running on DeFi? With zero-knowledge proof we want to actually eradicate that problem. We're going to have NFTs. A whole suite of all the use cases that you see on Ethereum and popular networks today are going to be on Horizen. All of this stuff is in our very near future, it's just we were focusing on taking the time to get the right foundations in place and now we're about to get that to market. So things are going to change significantly.

Liat Aaronson: I don't know how that was sloppier Rob, but that was actually more eloquent than I did.

Rob Viglione: I'd say intellectually maybe. I don't like to be too bold on predictions because I realize that I'm terrible at predicting things.

Liat Aaronson: No, I think that was a pretty spot-on prediction and way more eloquent, but thank you.


Ray Sharif-Askary: So one more question and then I'm thinking that if it's okay with you all, we'll take some of the questions that investors have sent in. So the last question from us is are there any recent exciting updates you can share? As a reminder, we obviously can't share anything that is material non-public information.


Liat Aaronson: Whoa. Well I think we did share some really interesting public but materially interesting information. Rob, do we have anything else that we can pull up our sleeves? Because I think we are being very careful and...


Rob Viglione: Can I mention the... So Liat, I think I can probably mention the fundraising for Horizen Labs, which has been, so I think everything's filed, so that may even be public to those that snoop already. We haven't done PR on it. But we have, Horizen Labs has just raised another $6.6 million in a priced seed round, which is really important because now we're building a whole new engineering center in New York City. So right now we have an engineering R&D center in Milan, Italy. We have another center in Ukraine and now we're building a center in New York City because we have a product backlog that we just can't service and we're trying to hire as many product engineers as we can. So we're using those funds to build out that team.

And then I think the VC consortium is huge. We haven't actually, I know you slipped that information in there. We haven't done a public announcement on it yet, but it's a really big deal, getting 20 or 30 VCs to the table, they're committing capital into the Horizen ecosystem, is huge. Now the treasury, the public treasury for the ecosystem is going to be matching, not matching one for one, but providing some matching funds as grants to funded startups and developers within the ecosystem. So really as this technology gets ready to go into production, we're going to be launching fast, we're going to be doing things really fast and the tempo of development, the tempo of use cases is going to accelerate significantly as capital pours in, as the grants really get into action and as the tools and teams get in place that are just now forming.

Liat Aaronson: And I think one of the differentiations here too is that we are bringing VCs to actually vet the deals. So we're not just throwing money on projects that we think are neat, we're actually getting third party validation for projects. And so we're going to be supporting projects that we know because the VCs that are connected with us and that have joined forces are interested in those projects and are willing to put capital where their mouth is. And so I think it's a kind of unique grant program and I think it's going to be super exciting. And just to mention that this fundraises at a $50 million pre-money valuation, so we are definitely priced up there in a really interesting space and I think it lends us to go ahead and really start looking at building an incredible team out in New York and also Milan and Ukraine like Rob said, and everywhere else that we are. We are a highly distributed team and we are looking for incredible talent anywhere they are.

Ray Sharif-Askary: Great, thank you for that. And thank you again for doing this with us. I think we'll start going through some of the investor questions that people have sent in. So to kick things off, the first one is how do you plan to compete with the established networks like Bitcoin and Ethereum that have large network effects favoring them?

Rob Viglione: That is the question we think about obsessively and I would say we're not going head-to-head, we're going to compete intelligently, and the way that we're doing that is actually we find the gap in the market that's not being serviced and we charge into that gap. So we're not, like I said, we're not going after the store of value use case that Bitcoin is. We're not going after the smart contracts and developers on Ethereum. We're going directly to these really high profile, important and massively scalable enterprise use cases, and then providing tools to actually augment in significant meaningful ways, things that are popular today like DeFi. Like I said, privacy, preserving DeFi could be absolutely a killer application that we see DeFi is exploding, but actually layering in zero knowledge proofs into that marketplace could be enormous. And providing tools for entrepreneurs, developers to come in there and that's just tools, but then catalyzing them with capital and providing the framework, the environment where we don't have all the resources in the world.

The foundation right now in the treasury has a budget that's still fairly significant, meaningful. It has 120 years’ worth of funding ahead of it because it's part of a block reward and it's millions of dollars a month. So that's tangible capital that now will be used in a smart way because rather than deploying that all unilaterally, we're partnering with 20 or 30 of the best VCs in the world that are coming in with their monitoring screening capabilities and their own capital. So we're basically augmenting that. The way we're going to compete is not by going head-to-head, but finding the way, really the path to market that really forges our own path.

Ray Sharif-Askary: What do you think, what differentiates you, excuse me, from Zcash?

Rob Viglione: I mean a significant differentiation in that they're focusing on the currency application and we're on the programmable blockchains side. So for us, we're providing blockchain infrastructure where ZEN is the currency that's needed for the micropayments to keep the network decentralized, but we're not going after that singular use case that Zcash is and they're doing it really well. We're just tackling a completely different market.

Ray Sharif-Askary: How do I buy ZEN? It's a smaller cap coin that isn't really offered on any legitimate exchanges.

Rob Viglione: So it is on a few dozen exchanges I will say, but probably the best way to do it is through Grayscale and I think Liat is going to chime in on that one. For accredited investors, if you want to buy ZEN at scale, really Grayscale's the place to go because you have the infrastructure in place to make that possible. But we are out there. So for those that are part of the cryptocurrency markets, we are on I think four or five dozen different exchanges and many of the big ones out there including Binance and some, Binance US and some of those other ones.

Ray Sharif-Askary: Thank you for that, Rob. I think it is harder for folks in the US specifically to get access to some of those exchanges for sure.

Liat Aaronson: And especially in New York I think, but I think Grayscale also offers some other opportunities for anyone who doesn't want to deal with the actual whole infrastructure of buying, custody, taxation, all that. Grayscale is obviously an amazing solution to be able to get into ZEN and what it means and be able to hold it, and hopefully come out obviously wildly ahead because I think the infrastructure that Grayscale provides gives a lot of security for investors who don't want to deal with the nitty gritty of owning cryptocurrencies.

Rob Viglione: Hey, fun fact, as a founder of a cryptocurrency, I'm still a Grayscale client. So it is actually significantly easier and nice to have someone else take care of some of the hard things.

Liat Aaronson: Right, and especially in tax season.

Ray Sharif-Askary: Likewise. Obviously I'm a little bit biased, but I am an investor in our Horizen trust, and this is a softball question that somebody is the Horizen trust open for subscriptions? What is the minimum? The answer is yes, it's $25,000. Again, our products are all open to accredited investors. Feel free to reach out to me or my team if you have questions. Let's see.

Okay, here's a question that comes up, not as specific to Horizen, but Grayscale, what are your plans? Are you really going to turn your products into ETFs? So I will run with that one. Yes. First of all, we are fully committed to converting our Bitcoin trust into an ETF as well as all of our products at Nav. We have published a blog post where we showed the product lifecycle, which is private placement, public quotation, SEC reporting, and then ETF. And to that point, we have our Horizen trust. Our intention is still to get a public quotation for Horizen as well.

We don't know when regulators are going to be comfortable with an ETF. There's obviously a lot of public filings and a lot of noise out there and people kind of often forget that it is possible to file applications publicly and privately just like you can do with an S1. ETF applicants can do the same thing. And as a business practice, we obviously don't speak to the specifics, but we would reassure our investor base and everyone out there that we're confident in our engagement and our positioning with regulators and that GBTC and ETH are the only SEC reporting funds out there, which we did to ensure a smooth process with the SEC.

So I think that's, unless, that's the last of the questions that we have from investors. I want to take a second to thank Liat and Rob for being on with me today. We really appreciate it. This is really wonderful and thank you everybody for dialing in

Liat Aaronson: And thank you Ray for the opportunity. It's always great for us to be able to get out there in front of Grayscale investors and just tell a little bit more of our story. I think we are, as Barry says it, not necessarily an undervalued, but certainly an underappreciated project. So we're hopeful to get definitely into that stratosphere of interested and appreciated project. So great to have this platform and thanks so much, Ray.

Rob Viglione: Yeah, and I would say our mantra has been to be the quiet professionals of the industry where we don't really get out there and shout too loudly usually, but the timing for this webinar could not have been better with our actually core platform getting released in the next few months.

Ray Sharif-Askary: Awesome. Well thanks again. If folks have questions, feel free to reach out to me or my team or send an email to [email protected]. We're happy to answer questions or if we need to, pass them along to the Horizen team and I hope everyone has a really great rest of their week. Bye everyone.

Liat Aaronson: Thank you Ray.

Rob Viglione: Thanks Ray. Thanks Liat. Bye.

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