Institutional-level Decentralized Finance products spark controversy in the AAVE community

AAVE's recent proposal has sparked unprecedented scrutiny from the community. The plan, named Horizon, aims to develop products based on real-world assets (RWA) to facilitate institutional adoption of Decentralized Finance. Specifically, this is a RWA product that allows institutions to use tokenized money market funds (MMF) as collateral to borrow USDC and GHO at scale.

However, within a few days after the proposal was released, the community showed strong opposition to the Horizon plan, especially questioning the potential new token issuance and profit distribution mechanism.

Overview of the Horizon Project

According to the temperature assessment proposal, AAVE Labs points out that the demand for tokenized RWA is rising, and it is expected that the on-chain RWA scale could reach $16 trillion in the next 10 years. Horizon aims to meet this growing demand and operates as an authorized instance of the AAVE protocol.

The main features of Horizon include:

• Licensed RWA token supply and withdrawal mechanism
• Unpermissioned USDC and GHO supply functionality
• Qualified users can engage in stablecoin lending.
• Exclusive GHO promoters facilitate on-demand minting of GHO
• Licensed Clearing Process
• Integrate with ERC-20 tokens within the RWA whitelist

In terms of profit sharing, Horizon proposed to allocate 50% of the revenue to the AAVE DAO in the first year, 30% in the second year, 15% in the third year, and 10% in the fourth year and thereafter.

If a new token is issued, plan to allocate 15% to AAVE DAO:

• 10% allocated to the DAO treasury
• 3% for ecosystem incentives
• 2% airdrop to Staked AAVE holders

Community Response

However, the plan has sparked strong opposition from the community. The main points of contention include:

1. The profit distribution ratio has decreased too quickly, leaving only 10% in the fourth year.
2. The necessity and use of the new token are unclear.
3. The details of the GHO minting process are unclear.
4. Inconsistent with the interests of AAVE token holders

Some community members believe that there is no need to issue a new token and that AAVE itself should be used as the governance token. Others have pointed out that launching a new token for a new business line could be seen as inappropriate behavior.

Founder Response

In response to the doubts, AAVE founder Stani Kulechov stated that the consensus of the AAVE DAO will be respected. He said: "It is clear that the DAO has reached a consensus, even if the new token could accelerate revenue growth, it will not generate widespread interest. Our team does not intend to insist on the proposal and will revise it to consider feedback."

Kulechov emphasized the importance of RWA to the AAVE DAO, but acknowledged the need to respect the decisions of the DAO. He stated that the team will continue to explore how to guide liquidity and revenue streams through centralized business and products.

Expert Opinions

Researchers have pointed out that the Horizon proposal can be split into more refined sub-proposals. The main appeal of the DAO is:

1. Do not issue new tokens; the funds to attract liquidity can be provided by the AAVE DAO.
2. Increase the protocol revenue share to AAVE DAO

The trend of DeFi protocols aligning with institutions is significant, and Horizon is expected to increase AAVE DAO's revenue. Supporting GHO as the primary lending stablecoin can also expand AAVE's stablecoin business scale.

Overall, the launch of Horizon is positive in itself, and the key lies in how the community and the team reach a consensus on profit distribution. AAVE Labs may adjust the proposal based on feedback to better balance the interests of all parties.