Horizon Platform Core Mechanisms
Platform architecture and operating principles
Horizon, an independent lending marketplace built on Aave Protocol v3.3, focuses on deep integration of RWAs. The platform allows qualified users to use tokenized RWAs (such as money market funds, US Treasuries, index funds, or individual stocks) as collateral for overcollateralized lending, transforming traditional financial assets into a vibrant source of DeFi liquidity. To date, the total value of RWAs on-chain has exceeded $26 billion, signaling the rapid growth of institutional tokenization adoption.
The platform is designed around two user groups: qualified institutional investors can supply RWA collateral and borrow stablecoins, while anyone can supply stablecoins to earn a yield from institutional borrowers. This dual structure creates a unique ecosystem that seamlessly connects traditional assets with decentralized finance.
Core issues solved
Currently, tokenized real-world assets face a fundamental dilemma. While these assets provide institutions with on-chain exposure to traditional assets, they are largely isolated from the DeFi ecosystem, resulting in capital inefficiencies and inability to be used as collateral, effectively excluding them from on-chain capital markets.
Horizon changes this by enabling RWA to be used as collateral directly in DeFi. Institutional investors can unlock stablecoin liquidity without having to sell or redeem tokenized assets, transforming RWA into a productive foundational component of on-chain finance.
Detailed explanation of the loan process
Borrowing Mechanism: Financial institutions or individuals can supply tokenized RWA (such as assets from Converge or xStocks) to the Horizon marketplace. When RWA tokens are deposited as collateral, Horizon issues a non-transferable aToken representing the collateral position. Users can borrow stablecoins based on a set percentage of their collateral value, with each collateral type having its own loan-to-value (LTV) parameters.
Supported Assets: Eligible RWA users can borrow a variety of assets, including Ripple's stablecoin (RLUSD), Aave's decentralized stablecoin (GHO), common stablecoins like USDC, and other assets such as USDT or DAI. These stablecoins have multiple use cases in the DeFi ecosystem, including earning an APY (appreciable yield) in lending markets, decentralized exchanges (DEXs), and other protocols, significantly increasing expected returns.
Lending Process: Providing stablecoins to Horizon does not require any permission restrictions. Stablecoin liquidity providers (LPs) can earn interest by lending assets. Users provide their selected stablecoins to the market and receive aToken representing their deposit, which can earn interest and be withdrawn at any time.
Strategic partners and ecological support
Horizon’s success is inseparable from its strong partner network, including Circle, Superstate, Centrifuge, Ant Digital Technologies, Chainlink, Ethena, KAIO, OpenEden, Ripple, Securitize, VanEck and WisdomTree.
At launch, Horizon supports a variety of high-quality RWA collateral options. Circle's USYC offers accredited investors the opportunity to earn USD yield by investing in a diversified portfolio of high-quality, short-term U.S. Treasuries. Superstate's USTB and USCC provide accredited investors with yield opportunities through short-term U.S. government securities and cryptocurrency arbitrage strategies, respectively. Centrifuge's JRTSY and JAAA offer yield opportunities through tokenized exposure to U.S. Treasuries and AAA-rated mortgage-backed securities.
Converge, powered by Wormhole and Chainlink, serves as the settlement layer between traditional finance and the digital dollar. xStocks allows for the tokenization of S&P 500 index funds, individual stocks like Apple and Nvidia, and US Treasuries, with support for operations on Solana and other chains. These assets are not only 1:1 tokenized, but also offer the ownership and composability benefits of DeFi, allowing users to perform operations such as lending, liquidity provision (LP), and swaps.
Risk Management and Technological Innovation
Comprehensive risk framework
As Aave's primary risk provider, Chaos Labs partnered with Aave Labs to build Horizon's comprehensive risk infrastructure, ensuring institutional-grade reliability and operational scale. Unlike crypto-native assets, RWAs need to handle complex scenarios such as market closures, custody coordination, and redemption risks.
Chaos Risk Oracles, integrated into Horizon's governance and execution layer, automatically adjust parameters such as interest rates, loan-to-value (LTV), and liquidation thresholds based on real-time market conditions. These oracles continuously monitor utilization, volatility, and redemption risk, cross-validate NAVs against external benchmarks such as the Bloomberg Index and Treasury yield curves, and enforce dynamic buffers and time-based liquidation logic during market closures.
The risk framework includes: agent simulation to model user behavior, protocol stress, and extreme redemption scenarios; real-time dashboards and alerts tracking collateral composition, NAV updates, market access windows, and lock-up periods; risk scenario modeling to predict asset performance under stress; and custom liquidation mechanisms that account for issuer constraints, custody delays, and qualified liquidator access.
Technical security assurance
Horizon employs multiple safeguards to ensure platform security. Smart contracts execute deterministic operations, without matching logic, order books, or quote mechanisms. A non-custodial architecture means users retain control, and Aave Labs cannot move funds. aTokens are designed to be non-transferable to respect the transfer restrictions of the issuer.
The platform also leverages Chainlink’s SmartData technology, initially deploying NAVLink, to provide accurate net asset values for tokenized RWA collateral and enable real-time, overcollateralized stablecoin lending within a compliant DeFi framework. Pricing accuracy is ensured by RedStone, while risk profiles are overseen by a dedicated entity.
The revolutionary significance of traditional finance (TradFi)
Traditional financial institutions are often confined to a "sandbox" environment, unable to fully leverage the advantages of DeFi, such as top-tier risk-adjusted opportunities and composability. Horizon changes this by providing a gateway for TradFi to enter DeFi.
Improved asset liquidity and unlocked opportunities
Traditional institutional assets, such as government bonds or stock funds, are often static and have limited liquidity. Horizon allows these institutions to supply tokenized RWA to the Aave platform and then lend these assets in exchange for stablecoins without having to sell them. Institutions can borrow stablecoins by lending tokenized RWA, tapping into the $167 billion DeFi market and transforming traditional assets from static holdings into active liquidity.
Users can borrow stablecoins and earn higher APYs across multiple protocols, enjoying yields significantly higher than traditional bank deposits or bonds. This model provides TradFi with a more efficient capital utilization method, reducing intermediaries (such as bank wires and brokers) and lowering costs.
Bridging a multi-trillion dollar market
With the entry of players like BlackRock, Horizon is bridging the gap between TradFi and DeFi, driving the tokenization of a multi-trillion dollar market. The platform's institutional-grade design (including risk management provided by Chaos Labs) makes TradFi easier to adopt without worrying about compliance or security.
Far-reaching impact on decentralized finance (DeFi)
DeFi faces challenges such as difficulty in access, regulatory issues, liquidity scaling, and reputational challenges (due to hacks and exploits). Horizon helps address these challenges and drive DeFi's maturity and mainstream adoption.
Liquidity expansion and ecological maturity
DeFi is maturing through regulatory adaptation, new, more accessible primitives, and better detection methods. Horizon enriches DeFi's asset pool by introducing RWAs, allowing users to deposit RWAs and borrow stablecoins, thereby increasing overall TVL. Aave's TVL on Ethereum currently stands at $59 billion, and the launch of Horizon further increases this figure.
The platform improves DeFi's overall liquidity and reputation, attracting more traditional participants through institutional-grade risk management. It supports multiple use cases for stablecoins, improves DeFi's capital efficiency, and attracts more institutional capital inflows, potentially addressing liquidity fragmentation.
Development of innovative design space
Aave leads the DeFi space with its credibility and institutional approach, and Horizon is a natural extension, driving the deeper integration of RWAs into DeFi. Unlike traditional DeFi lending, Horizon is optimized for the unique characteristics of RWAs, such as their adherence to a restricted schedule (e.g., daily or weekly NAV updates, market closures), which requires the protocol to handle liquidity that is not available 24/7.
Future Outlook and Market Significance
Horizon represents a new design space for RWAs in DeFi, with the goal of expanding to more chains and asset classes. Chaos Labs’ risk infrastructure ensures reliable scaling, while partners like Converge and xStocks will drive further innovation.
Overall, Horizon marks the convergence of TradFi and DeFi, potentially unlocking trillions of dollars in opportunity while enhancing protocol security through automation and real-time monitoring. For institutional investors, Horizon offers unprecedented capital efficiency; for DeFi users, Horizon opens new avenues to access institutional-grade borrowers, creating a true win-win for all and driving the entire ecosystem towards greater maturity and inclusion.
Click here to learn about BlockBeats' BlockBeats job openings
Welcome to join the BlockBeats official community:
Telegram group: https://t.me/theblockbeats
Telegram group: https://t.me/BlockBeats_App
Official Twitter account: https://twitter.com/BlockBeatsAsia
