The new AAVE plan Horizon has sparked heated discussions in the community

Recently, the AAVE community has been filled with unprecedented skepticism. This stems from the new initiative called Horizon recently launched by Aave Labs. The initiative aims to develop a product based on real-world asset (RWA), allowing institutions to use tokenized money market funds (MMF) as collateral to borrow USDC and GHO on a large scale. Aave Labs hopes to use this product to further bridge the gap between traditional finance and DeFi.

However, just a few days after this proposal was released, it faced strong opposition from the community. The controversy mainly centered around the potential issuance of the new token and Horizon's profit distribution mechanism.

Overview of the Horizon Project

According to the temperature assessment proposal, Aave Labs pointed out that the market demand for tokenized RWA is rising due to the ability of tokenization to enhance liquidity, reduce costs, and enable programmable trading around the clock. Data shows that the tokenized U.S. Treasury bonds have increased by 408% year-on-year, reaching $4 billion. It is expected that the on-chain RWA scale could reach $16 trillion in the next 10 years.

The Horizon project will operate as an authorized instance of the Aave protocol, allowing institutions to use tokenized MMF as collateral, borrow USDC and GHO on a large scale, release stablecoin liquidity, and broaden institutional access to DeFi.

After obtaining approval from the Aave DAO, Horizon's RWA products will initially launch on Aave V3 and migrate to a customized Aave V4 deployment when conditions are ripe. To maintain long-term alignment with the Aave DAO, Horizon will implement a structured profit-sharing mechanism. In the first year, 50% of the revenue will be allocated to the Aave DAO and will drive ecosystem growth through strategic incentives.

Community Response

However, the Horizon plan did not receive widespread support from the community, but instead sparked strong opposition.

EzR3aL, an independent representative of Aave DAO, believes that the distribution rate of profit sharing is decreasing too quickly. He pointed out that the first two years may be the market launch phase, where revenue will not be very high, but by the third year and beyond, when considerable income may appear, the profit-sharing ratio has already dropped to 10%.

EzR3aL also expressed confusion about the use of the new tokens. He questioned whether decentralized governance is truly necessary in a licensed market that is only accessible to qualified institutions. He also raised specific questions about the GHO minting process and the Aave DAO's oversight of Horizon's operational functions.

Other community members have criticized the issuance of the new token. Some believe that AAVE tokens should not be diluted, and if a new token is necessary, it should maintain a 1:1 relationship with AAVE tokens. Others have pointed out that launching a new token for a new business line could be seen as a deceptive act, arguing that if cryptocurrencies want to be taken seriously, projects need to operate like serious businesses.

AAVE Founder Responds

After several days of ongoing disputes, Aave founder and CEO Stani Kulechov responded. He stated that the overall consensus of the Aave DAO is to not issue any other tokens, and this consensus will be respected. He emphasized that the Aave DAO is a truly decentralized autonomous organization, and once a suitable method is found, the exploration of RWA will continue.

Stani acknowledged that even if the new token could accelerate Aave's revenue growth through liquidity launch, it did not generate widespread interest. He stated that the team would not insist on this proposal and believes there are other ways to guide liquidity and revenue streams.

He emphasized that RWA is very important for the income of Aave DAO and should not be overlooked. The team will revise the proposal to take feedback into account. Stani reiterated that Aave DAO is a true DAO, and any preliminary discussions and consensus reached must be respected.

Expert Opinions

Crypto researchers have pointed out that the Horizon proposal can be split into finer sub-proposals. The main demands of the DAO are: no new tokens should be issued, and the funds attracting liquidity can be provided by the AAVE DAO; the proportion of protocol revenue for the AAVE DAO needs to be increased.

The researcher believes that the trend of DeFi protocols moving closer to institutions is significant, and the launch of Horizon is expected to increase AAVE DAO's revenue. In addition, Horizon will support GHO as the primary lending stablecoin, which will help expand the market size and revenue of AAVE's stablecoin business.

However, if new token issuance and a reduced profit-sharing ratio are allowed, the team may focus more on the construction of Horizon. Considering that Horizon is aimed at institutions, there is actually no need for new tokens to drive growth.

Overall, the launch of Horizon is seen as a positive development, and the key lies in how the community and the team can reach a consensus on profit distribution.