[Temp Check] Horizon’s RWA Instance

Governance
1

Summary

Horizon, an Aave Labs tokenization initiative, creates RWA products tailored to institutions, where regulatory compliance requires some centralization for permissionless DeFi integrations.

This Temp Check 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 a 50/50 revenue share with the Aave DAO from the Horizon instance’s Reserve Factor and GHO revenue. 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.

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.

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.

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.

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

  1. Engage with the community and service providers to refine the detailed proposal
  2. If consensus is reached on this TEMP, escalate this proposal to the Snapshot stage
  3. If the TEMP snapshot outcome is YAE, incorporate stakeholder feedback and move proposal to ARFC stage

Copyright

Copyright and related rights waived via CC0.

18 Likes
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This is such a refreshing shift from the previous proposal. It’s clear that real listening happened — and the result is a solution that truly reflects the DAO’s values and long-term vision. Huge kudos to @AaveLabs and @stani for the thoughtful pivot. This is how strong communities grow: one aligned decision at a time.

The future is bright & the ticker is AAVE.

8 Likes
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Like @ApuMallku I think this is a very considered and thoughtful response from @AaveLabs and its clear that feedback has been taken on board.

I do have a couple of queries.

Revenue Share Longevity

The 50/50 revenue split is generous, but it’s unclear whether this is a fixed arrangement or subject to renegotiation as Horizon scales. A suggestion here would be to include a clause that allows the DAO to revisit the split after a defined period (e.g., 3-4 years) or once certain revenue milestones are hit. This would give the DAO flexibility to adapt if Horizon’s growth exceeds expectations, ensuring the split remains fair as the initiative matures.

Incentive Distribution Details

The $1M incentive pool is a great start, but the proposal could benefit from specifying how these incentives will be distributed. Will they target institutional borrowers, liquidity providers, or both? A breakdown of allocation (e.g., 70% for borrowers, 30% for LPs) and a timeline for disbursement would provide clearer expectations and help the community assess the incentives’ effectiveness. Additionally, tying a portion of the incentives to GHO borrowing milestones could further amplify its adoption.

GHO Facilitator Scalability

Scaling the GHO Facilitator from 1M to 5M based on Liquidity Committee recommendations is a solid plan, but it might be worth outlining the criteria for this scaling more explicitly. For instance, will it depend on RWA collateral volume, GHO borrowing demand, or stability metrics? Adding a few concrete triggers the process is data-driven and aligned with GHO’s long-term health something I’m sure @TokenLogic could incorporate into their dashboard?

Final Thoughts

Overall, the amended Horizon proposal is a well-crafted and promises to unlock significant value for the Aave DAO while positioning the protocol at the forefront of institutional DeFi adoption. Its focus on revenue generation, GHO utility, and structured governance is impressive, and the adjustments made based on prior community feedback reflect a collaborative spirit. I’d encourage the community to support this Temp Check and look forward to seeing how Horizon evolves with DAO input.

4 Likes
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Could you expand on that?
Is it time limited?
When will revenue share start to kick in? Day one, or treshhold based?

Also in the first version of the Horizon proposal @stani made this comment:

But this version of the proposal is now suggesting 50% of GHO revenue goes to Aave Labs. And as GHO is the big driver for revenue growth for the Aave DAO I do wish that this proposal as well contributes to this and gives 100% of GHO revenue to the Aave DAO as well.

Who will be in charge of distributing these rewards? Will it be like a Merit program or something Aave Labs will decide and manage?

Overall I like this proposal way more than the first iteration of it.
Feedback has clearly been taken and worked into this one.
This is something I could see being approved by the DAO as it benefits the DAO and Aave holder as well as GHO adoption.

5 Likes
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The ACI supports this proposal.

7 Likes
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To clarify the dynamics of GHO revenue and the integration in horizon:

GHO will be integrated as a standard stablecoin (non mintable) in the Horizon market. This means liquidity can come either from secondary (minted directly on the core market or purchased on secondary, and then supplied in horizon) or through D3M style facilitators configured by the Aave DAO. In the first scenario (liquidity coming from secondary) the Aave DAO automatically, and by default, earns 100% of the revenue for every GHO supplied from the original minting source (this is what stani meant), plus 50% of the reserve factor as per this tempcheck. For GHOs that are “D3M’d” into the Horizon market, the Aave DAO also earns the full yield rate plus 50% of the reserve factor. This is standard for any GHO integration into any Aave market and not specific to horizon.

9 Likes
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Thank you for the engagement. Below are clarifications addressing the points raised:

  • The Revenue Share is set to be fixed similarly to other markets to ensure predictability on cost protection. Nonetheless, there’s room for adjustments in the future to address significant changes in the market conditions. This DAO decision would be discussed in an individual proposal.

  • The Incentives Distribution and allocations planning will rely on existing expertise and experience from @ACI and @TokenLogic, together with our research of RWA assets. We agree that incentivizing GHO is critical for GHO adoption.

  • The GHO Facilitator will start with a small capacity and, if the market proves to be successful, it will be the DAO decision to grow this capacity with a separate proposal in the future.

  • The revenue share will be on-going and start from the launch of the instance. Regarding the incentives planning, Aave Labs will collaborate with other existing Aave DAO service providers such as @ACI and @TokenLogic to organize and distribute the rewards.
3 Likes
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The updated terms are a clear improvement over the initial ones. Hats off to AAVE Labs for seriously listening to community feedback. I fully support this temp check

9

Supportive, thanks for considering community notes.. encouraging to see the Aave devs jump in for Q&A too. Looking fwd to seeing this develop further

1 Like
10

The revised proposal is on better standing for AAVE DAO and Aave Labs.

More details on revenue share 50/50 split is required;

  1. Is sharing kicked in from first $ revenue accured?
  2. Is sharing ongoing or fixed?
  3. Can the sharing be negotiated by AAVE DAO as this is a new market on AAVE which may require realignment of value after being live for 12 months or so?
11

Wanted to chime in here and say that this is a significant improvement on the initial proposal. A 50-50 revenue share is better than what any other white-label instance of Aave has proposed, and the level of legal and regulatory effort that will need to be done shouldn’t be underestimated.

@Emilio’s answer around how GHO will be integrated into Horizon is also encouraging and we’re glad to see Aave Labs engage deeply with the community and take feedback clearly into account. Working closely with the likes of @TokenLogic and @ACI is the right move for this market and to ensure it is as closely aligned with the DAO as possible.

2 Likes