[Temp Check] Building Horizon’s RWA Product: An Aave Licensed Instance for Institutions

Governance
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Hello everyone, I’m a long-term investor of AAVE. I have been holding and following the development of ETHlend since its ICO.

As the founding team of AAVE, and as the AAVE Labs team led by Stani, proposing such selfish, greedy and shameless proposals, without considering the interests of AAVE DAO and investors at all, is extremely disappointing. Let me help you analyze why this proposal is shameless:

  1. Stani said on Twitter that traditional financial institutions are very willing to cooperate with AAVE. Obviously, he has identified this demand (taking advantage of AAVE’s reputation)
  2. Stani also said in previous posts that the revenue of the RWA market within 5 years will exceed the current revenue of the AAVE project (Everyone is optimistic about this direction, and it is also the only and largest incremental market for AAVE and the entire DeFi)
  3. Horizon project is going to issue tokens (obviously, AAVE Labs wants to launch a new project to make more money. Have we AAVE DAO owed money to AAVE Labs? Or did we give AAVE Labs too little AAVE before? So that they still have to launch new projects to make money? Or is AAVE Labs too greedy?)
  4. The share of revenue that Horizon project gives to AAVE DAO is only 10% (taking advantage of AAVE’s reputation, only giving such a small income? Who needs whom more? Can Horizon survive without AAVE? Can AAVE survive without Horizon? Can AAVE do RWA without Horizon?)

In summary: As the founder of AAVE, Stani, during his interactions with traditional financial institutions, discovered the huge market potential of RWA. Then, in order to earn more money for himself and the AAVE labs team, he decided to launch a project called Horizon. He aimed to collaborate with traditional financial institutions using AAVE’s reputation and seize 90% of the profits from this unique and largest incremental market for AAVE, while only distributing a meager 10% of the profits to the AAVE DAO. Isn’t this extremely shameless? Like a thief?

Let me talk about several principles that cannot be compromised:

  1. RWA is the largest market for AAVE and the entire DeFi. It is a strategic market, involving cooperation and profit distribution within this strategic market. It needs to be discussed separately with AAVE DAO. It is completely different from Trump’s WLFI and does not apply to the 80% and 20% framework of previous partners. (Can the deposits of WLFI exceed AAVE itself? Clearly, it’s just a fraction).
  2. Since RWA is a strategic market, AAVE DAO itself needs to hold the majority of the shares (at least over 80%). AAVE DAO has the willingness and ability to make capital investments to ensure market dominance. If AAVE labs is short of funds, it can try to communicate and coordinate, but not like a greedy thief.
  3. New token issuance is not acceptable and will harm all AAVE holders. This is unacceptable. The reasons have been mentioned by many.

If AAVE labs continues to disregard the feelings of AAVE DAO and investors, and goes against the interests of AAVE DAO, we can definitely come up with a new proposal: consider replacing the AAVE labs team. There’s no need to escalate things to this extent, right?

Charlie Munger once said something very good: If you want to obtain what you desire, you have to make yourself worthy of it (do the right things, earn what you deserve, and don’t be too greedy).

2 Likes
106

Avara, the owner of Aave Labs is the culprit in this whole stinky scheme.

1. Avara doesn’t own Aave DAO or its value flow

  • Avara is the parent company behind Aave Labs (and other products).
  • Aave Labs built the Aave Protocol and GHO, but they’re owned and governed by Aave DAO.
  • As a result, Avara doesn’t directly profit from the protocol’s success unless the DAO pays Aave Labs.

2. Aave Labs is effectively a contractor

  • Aave Labs works for the DAO and gets funding through governance-approved grants or proposals.
  • Any code or products it builds (e.g., smart contracts, GHO) become public goods for the DAO, not private assets which can be capitalized on by Avara.
  • So while Aave Labs generates revenue for Avara, Avara doesn’t own the end product—the Aave DAO does.

3. Avara sees a ceiling on its ability to profit under this model

  • Aave DAO controls the treasury, governance, and protocol decisions.
  • Avara, as a private company, can’t extract recurring profit from Aave directly unless:
    • It gets ongoing funding proposals approved (uncertain),
    • Or it finds a way to create a new revenue stream outside of the DAO’s control.

4. Horizon is Avara’s attempt to change the model

  • Horizon was to be a new, centralized RWA protocol, developed by Aave Labs but owned and controlled by Avara.
  • It would be legally independent, and value (via revenue or tokens) would flow to Avara and its backers, not Aave DAO.
  • The original proposal gave Aave DAO a minimal cut (10% revenue, 15% tokens), while Avara and its affiliates retained the lion’s share.

5. The goal: privatize the upside of Aave-funded R&D

  • Horizon is planned to be built with infrastructure, know-how, and branding developed through Aave DAO-funded work.
  • But rather than extending AAVE’s value accrual, Horizon was structured to reroute future upside into Avara’s hands, giving the DAO just enough to make it look cooperative.
  • It was an attempt to claw back ownership and profit that Avara doesn’t get under the existing Aave DAO structure.

Avara wants us to believe RWA wont work under Aave DAO control. Any way it was a gross attempt to get 85% of value accrual to a private business (Avara).

6 Likes
107

Having gone through the feedback once again, it’s clear that apart from the token being a clear no-no, a 20% revenue share for the DAO for such an important use case that could define the DAO’s future is not enough and needs to be re-discussed.

Moreover, we’re not entirely sure of the need to create another instance and fragment liquidity - reserves can be created on Aave and risk and liquidity can be isolated. We appreciate the legal and regulatory effort required to onboard RWAs, but as @devenmatthews pointed out, Horizon can house the KYC/ALM requirements while the DAO holds the reserves (to which a whitelist can be added) and makes the final decisions on onboarding assets and other key decisions.

5 Likes
108

I’m a proud Aave holder, being silent most of the time. But I’m deeply disrupted by this Temp Check as well as the response of @stani. No wonder the community were so offended on various subjects including tokenomy, fee sharing and others, I would like to add a few extra points here:

“My bet is that in 5 years the revenue from Horizon would supersede the existing revenue from the all the existing Aave markets combined.”

Revenue is frequently brought up in this Temp Check but until now I still do not understand how Horizon can generate revenue…

By “enabling institutions to use tokenized money market funds (MMFs) as collateral to borrow stables at scale”?

MMFs are used by institutions or corporates as a liquidity management tool or part of cash management solutions; they are never a yield generating investment for institutions. Thus liquidity is the key, and the yield is never prominent.

Why would institutions collateral their MMFs (with around 4% annual yield atm) and borrow stables (with borrowing rate higher than the return of the collateral) in DeFi, while at same time they can simply collateral longer term Treasuries or agency debt or MBS (with better yield than MMFs) and borrow FIAT at SOFR (4.35% for O/N, 4.06% for 1y )?

By enabling institutions to utilize GHO for institutional products? As mentioned in the Temp Check:

“Being able to utilize GHO for institutional products would scale the revenue beyond anything seen before.”

it’s even more disruptive… after Stani whining his team “had to do most of the offchain leg work on legal and compliance to make the market comply with the institutional requirements”, they do not seem to understand that the setup of GHO today does not allow it to be adopted by financial institutions given the regulatory environment.

Unless Avara has another project undergoing about GHO which is not made aware by the community. Otherwise, I have to say that “leg work” stays leg work. It’s as important as all the other work done by services providers, delegates etc. but it should be paid at “leg work” market price not plus.

But it does not prevent GHO to be a great product of Aave; GHO has its own edge and its target communities!

I join the majority Aave holders in the forum that RWA is a logic step and Aave should search for its edge in this market. Though I’m deeply disappointed by the quality of this publication in which the author does not even bother to search for an updated market projection rather than relying on an old report of $16 trillion market potential by BCG in 2022…

Launching a business without understanding the market scale, future clients’ needs nor competitors’ positioning, with no thoughtful revenue generating model, is disastrous.

As @EzR3aL said so well, we need to think about the potential consequences and alternative solutions to make Aave even stronger and Horizon a great RWA instance.

6 Likes
109

Hey @stani @AaveLabs,

Any idea when we can expect a “V2” of this temp check to go live? :eyes:

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What’s the status of this proposal @AaveLabs?
If the DAO considers that Horizon is the best option for intersecting Tradfi with Defi we should push for this proposal, if not, we need to start considering other options too. We can’t sleep on the RWA field.

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made an account just to say no token

AAVE has a great reputation with trad-fi and i believe horizon would be a great sucess for AAVE and would legitimise web3 at large

you can see nobody in the community wants a token and it would destory the great reputation which you guys have spend half a decade building.

you guys have done a better job than any other project in this whole industry and it would be a shame to burn that reputation unnecessarily.

why no token?
precedent → all aave labs initiatives will have new tokens?
betrayal → aave holders invested in the team and assumed that to include new servies.
optics → looks like this new token would be used to dilute AAVE’s brand to make a bag which doesn’t algin with who we think the team are.

best of luck with horizon, advise you listen to your community.

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