Announced at EthCC in Cannes, the upgrade enables institution-specific borrowing environments, structured credit products, and RWA-backed lending within a unified liquidity system.
Aave V4 is now live on Ethereum mainnet, marking a fundamental architectural overhaul of the largest decentralized finance (DeFi) protocol, which has over $24 billion in total value locked (TVL).
The upgrade introduces a hub-and-spoke design that allows markets to operate independently while sharing liquidity through a unified system — a shift the team says resolves a core limitation that has constrained DeFi lending since its inception.
“DeFi has built deep liquidity. Aave V4 shifts the focus to the demand side, putting that liquidity to work across real credit markets,” said Aave founder and CEO Stani Kulechov.
Modular Architecture
At its core, Aave V4 separates liquidity from borrowing environments. Liquidity is concentrated in shared hubs, while individual “spokes” define independent borrowing markets, each with its own collateral types, risk parameters, and repayment logic. Markets access shared liquidity through governance-controlled credit lines, keeping exposure explicitly limited.
New market types, including fixed-rate lending, borrowing against custodial assets held at qualified institutions, structured credit products, and non-standard collateral like LP positions, can be created without fragmenting Aave’s deep liquidity pool.
V4 also introduces mechanisms to deploy idle liquidity into governance-approved yield strategies, aiming to improve depositor returns without requiring changes to user behavior.
The initial deployment launches with conservative parameters and a deliberately narrow scope. Chainlink serves as the exclusive oracle platform at launch, with dedicated spokes for Lido, EtherFi, Kelp, Ethena, and Lombard. Supported assets include USDT and XAUt from Tether, USDC and EURC from Circle, cbBTC from Coinbase, frxUSD from Frax, and USDG from Paxos.
The original V4 roadmap was proposed in May 2024 as part of a three-year plan, with Aave Labs subsequently receiving a $12 million GHO grant from the DAO in July 2024 to fund development.
Governance Dispute
But the path from proposal to mainnet was far from smooth. In December 2025, a governance dispute erupted between Aave Labs and the DAO over fee distribution and tokenholder rights
BGD Labs, one of the main teams building and maintaining Aave’s technology, announced in February 2026 that it would stop working with the DAO, citing disagreements over the protocol’s direction, specifically what it described as overly aggressive criticism of V3 to promote V4’s new features. Weeks later, Marc Zeller’s Aave Chan Initiative — one of the largest delegated service providers in Aave governance — also announced it would wind down operations and depart the protocol.
Despite the upheaval, V4 passed its ARFC stage on March 23 and moved to final deployment.
The initial V4 deployment will be expanded progressively as governance observes liquidity behavior and market dynamics.
AAVE is trading at around $98, according to CoinGecko, up 3% in the past 24 hours but down roughly 40% over the past 12 months.
This article was written with the assistance of AI workflows. All our stories are curated, edited and fact-checked by a human.
