Summary
Horizon, an Aave Labs tokenization initiative, creates RWA products tailored to institutions, where regulatory compliance requires some centralization for permissionless DeFi integrations.
This ARFC proposes a friendly fork for Horizon to create a white label instance of the Aave Protocol, enabling the Aave DAO to capture new revenue from the Horizon RWA instance, one that is currently uncaptured.
Motivation
Aave Labs is launching an initiative that works in the RWA space, providing support for existing tokenized assets in the market and tokenizing assets such as Money Market Funds, Credit, Equities and Real Estate. Eligible users can subscribe and redeem these assets onchain. This initiative is also meant to facilitate the flow of value into Aave Protocol through collateralization of these tokenized assets.
Currently, the Aave DAO has limited revenue from RWAs, yet the RWA market is growing substantially with more institutions interested in pursuing RWAs. To accelerate this revenue stream, Aave Labs proposes a white label Aave Protocol instance for centralized and permissioned Horizon assets.
How Does the Horizon RWA Instance Work?
The Horizon RWA instance connects institutions to permissionless stablecoin liquidity while ensuring compliance with issuer requirements. This will allow tokenized asset issuers to enforce transfer restrictions at the token level and maintain asset-level controls, while keeping DeFi composability. Qualified users, permissioned by RWA issuers, can borrow USDC and GHO. With Aave DAO approval, a separate GHO Facilitator will enable GHO minting with RWA collateral, offering predictable borrowing rates optimized for institutions. This enhances security, scalability, and institutional adoption of RWAs in DeFi.
Horizon provides a structured approach to institutional participation, expanding access to permissionless stablecoin liquidity.
Key Design Components
- Permissioned RWA token supply and withdrawal mechanisms
- Permissionless USDC and GHO supply functionality
- Stablecoin borrowing by qualified users
- Dedicated GHO facilitator with newly minted GHO on demand
- Permissioned liquidation workflow
- Integration with RWA-allowlisted ERC-20 tokens
- Asset-level permission management by RWA issuers
Specification
Strategic Benefits for the Aave Community
The Aave Protocol’s permissionless design is a core strength. However, integrating permissioned RWAs presents challenges that go beyond smart contract development, requiring an offchain legal structure, regulatory coordination, whitelisted liquidations and active supervision—functions not readily available within the Aave DAO infrastructure.
To scale RWA adoption in the Aave ecosystem, Horizon’s RWA instance will launch as a licensed instance of Aave V3, maintaining strong alignment with the Aave DAO.
Revenue Share Mechanism
Aave Labs is proposing an on-going 50/50 revenue share with the Aave DAO from the Horizon instance’s Reserve Factor and GHO revenue, starting from the launch of the instance. In comparison, the revenue split in the RealT RWA instance is 20/80, with 80% going to RealT. Since Aave Labs is closely aligned with the Aave DAO, this proposal offers the DAO a larger share of revenue than other RWA partnerships, while covering legal, compliance, finance, operations, engineering, regulatory affairs, institutional onboarding and business development from Horizon’s share. Aave Labs will bear most of the upfront costs and risks to bootstrap Horizon, covering operational functions, with no grant request to the DAO.
GHO will be listed in Horizon as a standard, non-mintable stablecoin. Liquidity may enter the market either (i) from secondary circulation (GHO minted on the Core market or acquired externally and subsequently supplied to Horizon) or (ii) through D3M-style facilitators configured by the Aave DAO. Under the first path, the Aave DAO captures 100 % of the revenue associated with the originating GHO and 50 % of the Reserve Factor specified in this ARFC. When GHO is introduced via a facilitator, the DAO accrues the full yield rate plus the same 50 % share of the Reserve Factor. These mechanics are consistent with every GHO integration across the Aave ecosystem and are not unique to Horizon.
Growth Incentives
Given the permissioned requirements of this instance, we would expect the instance to grow slower than permissionless markets (especially compared to those with incentives). To accelerate the growth of the Horizon RWA instance, Aave Labs will contribute $500k in incentives (paid in AAVE), with an additional proposed $500k matched by the Aave DAO. Creating a total amount of $1M in symmetric incentives, aligned with the revenue sharing structure. Aave Labs will collaborate with other existing Aave DAO service providers, such as @ACI and @TokenLogic, to organize and distribute the rewards.
GHO Adoption & Revenue
We are also proposing that the Aave DAO dedicates a direct minting GHO facilitator, with initially 1M GHO, that can be scaled up to 5M GHO based on the recommendations of the Liquidity Committee. If the market proves to be successful, it will be the DAO decision to grow this capacity with a separate proposal in the future.
Horizon enables institutional borrowing against RWAs with GHO as a primary liquidity option, alongside USDC, which is expected to:
- Drive GHO adoption
- Enhance the liquidity and stability of GHO
- Strengthen GHO’s role as a settlement asset
- Generate revenue through GHO borrowing
Operational Support for the Horizon Instance
Similar to the WLF instance approach and its configuration, and considering the nature of the market and supported assets, Aave Labs proposes a dual-role setup with clear separation between “Operational” and “Executive” responsibilities for the instance. While the Operational role encompasses basic management of the instance (ownership and upgrade of the contracts, execution of governance proposals), the Executive role oversees risk management, assets listing, and general configuration.
The proposed framework assigns the Operational role to the Aave DAO, enabling the community and its service providers to manage the Horizon RWA instance and ensuring that governance and basic operational administrative controls are aligned with DAO oversight.
In parallel, the Executive role would be assigned to Aave Labs, providing the independence necessary to effectively configure and manage the instance. This division of responsibilities enables agile adaptation to evolving market conditions, alignment with institutional requirements, and supports strategic expansions into new networks.
This structure ultimately strengthens the DAO’s institutional revenue streams, fosters ecosystem growth, and leverages Aave Labs’ institutional expertise to navigate complex regulatory environments.
Role application across Aave V3 and V4:
- Aave V3: Aave DAO will manage the instance’s operations (for example code upgrades), while Aave Labs retains permissions to enable/disable assets, collaborate with risk managers to configure risk parameters and price oracles, target specific networks for deployments, and administer supply/borrow caps.
- Aave V4: With Aave V4’s modular design, Aave Labs will propose the optimal configuration of the instances upon release.
Permissioning Framework
The Horizon instance introduces asset-level permissioning controls that align with issuer compliance requirements while maintaining open access to stablecoin liquidity. Permissioning occurs at the asset issuer level, with each RWA token issuer enforcing asset-specific restrictions directly at the ERC-20 token level.
- RWA Collateral Supply: Each RWA issuer enforces its own allowlist mechanism, permitting only addresses verified through its compliance framework to be issued eligible RWAs and subsequently use them as collateral
- Stablecoin Supply: Any user can supply USDC to the Horizon instance and earn yield, maintaining broad participation and liquidity access
- Liquidation and Redemption Access: RWA liquidators, typically market makers, must meet issuer-defined investor requirements to liquidate collateral or redeem RWAs
This model enables issuer-level permissioning where required, while preserving the open-access principles of DeFi—bridging institutional standards with composable market infrastructure.
Considerations by the Aave DAO
Based on community discussion of the previous Temp Check, Aave Labs made changes to address community feedback. With the above outlined new structure, Aave Labs requests approval for the Horizon RWA instance—a white label instance based on the existing Aave DAO framework.
Horizon’s RWA instance will expand the Aave ecosystem’s institutional reach while preserving its permissionless integrity. As a licensed instance, it generates new revenue streams for the Aave DAO, accelerates GHO adoption, and reinforces Aave’s leadership in the DeFi ecosystem. Additionally, as mentioned in the previous Temp Check, the Horizon RWA initiative is not meant to exclude other RWA initiatives from other Service Providers or third parties, which are encouraged to further expand the Aave Protocol’s presence in the RWA space.
Next Steps
- Engage with the community and service providers to refine the detailed proposal
- If consensus is reached on this ARFC, escalate this proposal to the Snapshot stage
- If the ARFC snapshot outcome is YAE, incorporate stakeholder feedback and move proposal to AIP stage
Copyright
Copyright and related rights waived via CC0.