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That's right. It's appy varnishing. It will turn completely white eventually.

If I understand right, varnishing genes is something that all horses carry (either varnishing or non-varnishing), but it only expresses when appaloosa is present. It will lighten the coat more each year, similarly to the gray gene, and eventually the horse will be entirely white. That's why when you do a horse search for appies, the ones on top, all the oldest ones, are usually entirely white. The RS herd helper Evergreen Boughs is the only herd helper guaranteed to not carry varnish, so they lighten at a much slower rate. Horses without appaloosa will never varnish, even if they carry for it.