Aave Labs is grateful for the engagement seen in this post, and would like to acknowledge and address the concerns of the community.
As stated in the DAO’s [ARFC ADDENDUM] Updated Framework for ARFC and TEMP CHECK Proposals, the objective of all TEMP CHECKs is to “gauge community sentiment on a specific proposal.” The Horizon proposal aims to do exactly that: foster discussion. By revealing it to everyone simultaneously, the intention is to reduce information asymmetry in the DAO and allow everyone an unbiased, equal opportunity to comment in whichever manner they see fit. Aave Labs remains committed to decentralization and endorses the introduction of new initiatives openly, enabling transparent collaboration across the community.
Aave Labs would like to preface this response by acknowledging the concerns about Horizon potentially having its own token: there is, of course, only one token in the Aave ecosystem, and that is AAVE, full stop. Horizon is a separate, standalone initiative that exists outside of the Aave ecosystem, broadly focused on RWAs and institutional adoption, of which lending and borrowing are only subsets. Given the legal and regulatory requirements of operating such a business, scaling Horizon within the framework of an existing DAO presents challenges that would ultimately limit its ability to function and address institutional interests. This is one of the main reasons why Arc failed in the first place.
Aave Labs also wishes to highlight its clear alignment with the DAO and the success of the protocol, given the large stakes at play and its unwavering commitment to building Aave and the DeFi space over the past seven years. Harming Aave or its token is the last thing Aave Labs intends. In fact, Aave Labs has been promoting the vertical integration of GHO and the Aave Protocol in other independent products of the Avara family. Horizon, along with its RWA market, would serve as another avenue to generate revenue for the Aave DAO.
Additionally, it remains uncertain whether a dedicated Horizon token will be required, but introducing one could potentially facilitate efforts such as incentives and redistribution, ultimately increasing the Aave DAO’s earnings. It would be unreasonable to ask the DAO to allocate AAVE for this purpose, given Horizon’s independent nature. Horizon would be responsible for expanding its own products, like any other business building on the Aave stack in the future, with a focus on returning fair value to the underlying Aave infrastructure.
Lastly, Aave Labs would like to address other topics raised by community members and service providers:
So overall there are a lot questions left open from this proposal but its concerning to see the Aave token kind of being ditched for another product which uses 100% of the Aave codebase which the DAO paid for in several funding proposal and just last year for v4 (12 million).
- Considering that the TEMP CHECK references the [ARFC] Framework for Instances and Friendly Forks for the token component – and that Aave Labs contributed more than double the initial amount, although the community perceives it to be insufficient – it may be worth for the community to revisit the Friendly Fork Framework.
Horizon will likely take months, if not years, to become fully profitable and sustainable. So the decreasing % over four years also feels unfair.
I do think that solid revenue will only begin in year 3 and later, at which point profit share will be only 10%.
- These assumptions are valid and will be taken into account when revisiting the revenue share structure.
The Aave DAO and its service providers will oversee the Horizon’s RWA product’s operational functionality.
What does this mean in the context of Horizon? To some, this can read as “keep the lights on for us and you get a small piece of the pie”. I think this needs clarification, as the profit sharing section is difficult to contextualize otherwise.
- Similar to other Licensed Instances, this initiative is primarily focused on risk management alignment. Aave Labs will elaborate further on this topic if the proposal advances to the ARFC stage.
And we, the DAO, are supposed to use a third of our breadcrumb allocation to incentivize usage of their protocol when they eventually keep 90% of the revenue for themselves?
- The original TEMP CHECK proposes allocating 15% to the DAO, including a 3% portion for Aave ecosystem incentives that is not specifically designated for the RWA market. As previously stated, Horizon will independently pursue the growth of its operations.
That budget was then used to build V4 and cover the payroll for people working on this “Horizon” project, only for them to come back to us, keeping 85% of a (unnecessary & dilutive) new token supply.
- The terms governing the development of Aave V4 are clearly outlined in the original V4 proposal, which this community approved. This innovative undertaking is a complex effort, with costs that may sometimes be underestimated. Aave Labs aims to address any gaps as Aave V4 is formally introduced.
Aave Labs looks forward to gathering additional feedback from the community to further refine this initiative. Maintaining an open dialogue ensures a broad range of perspectives are incorporated, reinforcing the long-term resilience and adaptability of the Aave ecosystem.