Aave Labs has announced Project Horizon, a new initiative that is designed to bridge institutional finance and decentralized finance (DeFi) by leveraging tokenized real-world assets (RWAs). Horizon proposes launching a licensed version of the Aave Protocol to enable institutions to use tokenized money market funds (MMFs) as collateral for borrowing stablecoins like USDC and GHO.
With this move, it is being anticipated that it would increase liquidity, expand institutional access to DeFi, and accelerate the adoption of tokenized assets.
The demand for RWAs is surging, with tokenized US Treasuries alone growing 408% year-over-year to $4 billion. Projections estimate up to $16 trillion in RWAs could be on-chain within the next decade.
Addressing the Institutional Adoption Gap
Horizon addresses the institutional adoption gap by offering compliance, governance, and risk management frameworks tailored for regulated entities while preserving DeFi’s composability.
Profit Sharing Model & Aave Token Distribution
Subject to Aave DAO approval, Horizon will launch as a licensed instance of Aave V3 and transition to Aave V4 upon its release. The initiative includes a profit-sharing model, starting with 50% of revenue allocated to the Aave DAO in its first year.
Additionally, if Horizon launches its own token, 15% will be reserved for the Aave DAO treasury and ecosystem incentives.
Enhancing GHO Adotpion and Stablecoin Liquidity
Horizon’s design incorporates permissioned RWA token mechanisms, stablecoin borrowing for qualified users, and a dedicated GHO facilitator for predictable borrowing rates. By integrating RWAs into DeFi, Horizon aims to unlock stablecoin liquidity, enhance GHO adoption, and strengthen Aave’s position in the evolving financial landscape.
The proposal now invites community feedback before advancing through Aave DAO’s governance stages. If approved, Horizon could redefine institutional participation in DeFi while driving long-term value for the Aave ecosystem.
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