Here is the English translation of the text, with the specified terms retained and not translated:
The AAVE, which has always been popular with the community, has recently sparked an unprecedented wave of questioning from the community.
Aave Labs recently launched a new program called Horizon, which plans to develop products that enable institutional adoption of decentralized finance (DeFi) through real-world assets (RWA), i.e., a product that allows institutions to use tokenized money market funds (MMF) as collateral to scale borrowing of USDC and GHO. Aave Labs hopes that through this product, it can further bridge the gap between traditional finance and DeFi.
However, within a few days of the proposal's release, the community has shown strong opposition to the Horizon plan, particularly questioning the potential issuance of new tokens and the profit distribution mechanism of Horizon.
**"Temperature Assessment" Awaits Community Approval, Horizon's Profit Distribution and New Token Distribution Become Controversial Focal Points**
According to the Temp Check proposal, Aave Labs stated that the demand for tokenized real-world assets (RWA) is rising, as tokenization can improve liquidity, reduce costs, and enable 24/7 programmable transactions, making traditional assets more accessible on-chain. The tokenization of US Treasuries has grown 408% year-over-year to $4 billion, with the pace of institutional adoption accelerating, and the on-chain RWA market is expected to reach $16 trillion in the next 10 years. To meet this growing demand, Horizon, an Aave Labs-initiated project, proposes to launch an RWA product as a permissioned instance running on the Aave protocol. Horizon will allow institutions to use tokenized money market funds (MMF) as collateral to scale borrowing of USDC and GHO, unlocking stablecoin liquidity and expanding institutional access to DeFi.
After obtaining Aave DAO approval, Horizon's RWA product will be launched as a permissioned instance of Aave V3 and migrated to a custom Aave V4 deployment as soon as possible. To align with the long-term interests of the Aave DAO, Horizon will implement a structured profit-sharing mechanism, allocating 50% of the revenue to the Aave DAO in the first year, and using strategic incentives to drive ecosystem growth.
According to Aave Labs, Horizon will have several key design components, including a permissioned RWA token supply and withdrawal mechanism, a permissionless USDC and GHO supply function, qualified user stablecoin borrowing, a dedicated GHO minter, support for on-demand GHO minting, a permissioned liquidation process, integration with ERC-20 tokens on the RWA allowlist, and asset-level permission controls managed by the RWA issuers.
Aave Labs stated that Horizon will implement a structured profit-sharing mechanism, with 50% of the profits allocated to the Aave DAO in the first year, 30% in the second year, 15% in the third year, and 10% in the fourth year and beyond.
Additionally, if Horizon issues a token, 15% will be allocated to the Aave DAO, with:
- 10% distributed to the Aave DAO treasury
- 3% reserved for Aave ecosystem incentives
- 2% distributed as an airdrop to Staked Aave (stkAAVE) holders
In terms of operational support, the Aave DAO and its service providers will oversee the operational functions of the Horizon RWA product. At the same time, Horizon will maintain independence, responsible for configuring the instance and guiding the strategic direction of the product, including adapting to market changes, meeting institutional demands, and expanding to new networks.
**Strong Community Reaction: Profit Sharing Ratio Drops to 10% After 4 Years, New Token Use Case Unclear**
However, the launch of the Horizon plan has not received widespread support from the community, but rather has sparked fierce opposition. Aave DAO independent representative EzR3aL stated, "I think this declining rate (of profit sharing allocation) is too aggressive, and it doesn't even follow the guidelines here. Because we can all agree that the first year and second year might be the market launch phase, so the revenue might not be that high, unless Aave Labs commits to providing liquidity support upfront, which if there is, should be shared with the DAO to estimate potential revenue. Otherwise, I think the truly meaningful revenue might only come in year 3 and beyond, but by then the profit-sharing ratio has already dropped to 10%, which I find confusing."
EzR3aL mentioned the guidelines: Aave's profit sharing: 20% monthly distribution; Aave DAO token supply: 7% of the total supply at TGE (token generation event) or before deployment (if TGE has already occurred). If the token is rebaselined or inflated in the future, the Aave DAO will receive additional tokens to avoid dilution.
EzR3aL stated, "Next is the token distribution alignment, which is the part I'm most confused about. Is it for independent governance? For a permissioned market that only allows qualified institutions, is decentralized governance really necessary? Is it to compensate Aave/Avara investors? Because if there's no other way to share profits, VCs usually expect this kind of arrangement. Is it a way for Aave Labs/Avara to generate profits? Because it might contain a profit-sharing mechanism as one of its features?"
Furthermore, he raised questions about how the GHO minting process will work - will the Aave core instance mint GHO first and then lend it to this instance, or can this instance directly mint GHO to capture the revenue from GHO lending? Finally, "The Aave DAO and its service providers will oversee the operational functions of the Horizon RWA product." What does this mean? Under the V3 version, what parts of the instance will the DAO control? But once the V4 version is launched, will the DAO no longer have any relationship with it?
EzR3aL stated that more worryingly, the Aave token seems to be abandoned, while another product entirely based on the Aave codebase (which the DAO has funded the development of through multiple grant proposals, costing $12 million for the V4 version alone last year) is being launched.
"It seems that AaveLabs and Avara are looking for ways to monetize this product, which is completely fine. To get large institutions on-chain, it certainly requires a lot of resources. But this can be done in other better ways to align with the community and the DAO. For example, Horizon could pay fees in USDC and GHO, and the DAO could retain those fees, and there could also be some degree of governance restriction on Horizon due to legal issues."
EzR3aL believes that if done this way, we can create a super DApp - Aave, and split it into two branches:
- Aave Market: Serving the on-chain DeFi ecosystem and on-chain government bonds
- Horizon Market: Serving institutions that want to be fully compliant and legally on-chain
Meanwhile, other community members have also criticized the issuance of the new token. gregrwalsh said: "I don't really like the proposed token issuance method. I don't understand why the Aave token needs to be diluted. If a new token is needed for some reason, it should maintain a 1:1 relationship with the Aave token, and holders should receive proportional distributions. Additionally, the Aave DAO's revenue sharing is also declining. This is clearly a plan to operate as a new entity. I don't support this proposal." ParkerB123 said: "In my view, there is no reason to issue a new token. If it's for governance purposes, the $AAVE token itself should be used as the governance token, after all, this is an initiative of AAVE Labs."
**L1D investment partner 0xLouisT more harshly pointed out that launching a new token for a new business line is a scam.**
**Did Amazon spin off AWS as a new company? Did Apple launch a separate stock for AirPods?**
Clearly not. Investors support protocols for their current business as well as their future potential. Splitting tokens is the opposite - it's a huge red flag. The market will punish it. If we want cryptocurrencies to be taken seriously, projects need to start operating like serious businesses.
Aave Founder Stani Responds: DAO Consensus Will Be Respected
After the event had been brewing for a few days, Aave's founder and CEO Stani Kulechov (@StaniKulechov) responded on March 16 that the overall consensus of the Aave DAO is that there is no interest in other tokens. This consensus will be respected, and the Aave DAO is a true DAO. Once a suitable approach is found, the RWA exploration will continue.
"It is now clear that the DAO has reached a consensus that even if the token could accelerate Aave's revenue growth through the launch of liquidity, it would not generate widespread interest. Our team also does not intend to persist with the proposal, especially since this is the least exciting part of the temperature check, and I believe there are other ways to find how to drive liquidity and revenue streams through centralized businesses and products that are interested in using the Aave technology stack."
Stani further pointed out that RWA is an extremely important revenue exposure for the Aave DAO, as previously mentioned, and should not be overlooked, so we will revise the proposal to consider the feedback. We must remember that the Aave DAO is a true DAO, and any preliminary discussions and consensus reached must be respected, and our team has no interest in pushing anything that the DAO deems inappropriate. This is why smart money is betting on $AAVE.
Crypto researcher @0xCoumarin said that the AAVE Horizon proposal could actually be split into smaller sub-proposals. The DAO's demands are actually very simple: 1. No new tokens, the money to attract liquidity can come from the AAVE DAO; 2. The share of protocol revenue to the AAVE DAO needs to be increased. The trend of DeFi protocols moving towards institutions is a big one, and the launch of Horizon can increase the revenue of the AAVE DAO, to a greater or lesser extent. In addition, Horizon will support $GHO as the primary borrowed stablecoin, which can increase the market size and revenue of AAVE's stablecoin business.
The community's concerns can also be understood. If new token issuance and reduced profit-sharing ratios are allowed, the team will certainly focus more on building Horizon from a profit-making perspective. Horizon is also an institutional-oriented product, and it does not need the expectation of new tokens for point-based growth activities, and the analogy of $AERO to $VELO does not apply here.
The details of the new token distribution are also strange. Only 15% will be allocated to the Aave DAO, 10% will go to the Aave DAO treasury, 3% will be reserved for Aave ecosystem incentives, and 2% will be airdropped to Staked Aave (stkAAVE) holders. So it can be reasonably inferred that AAVE Labs will receive a large amount of token-denominated revenue from the remaining 85%, which is why the community believes the team is launching a new project to make money.
In summary, the launch of Horizon is a good thing, it remains to be seen how the community and the team can reach a consensus on the distribution of interests.
