Aave V4 Unveils Radical New Architecture

Aave has officially revealed its upcoming V4 architecture, marking a major evolution in DeFi lending design. The protocol’s next iteration replaces the current siloed market structure of V3 with a Hub-and-Spoke system , a move that promises greater capital efficiency, modularity, and flexibility across chains.

Aave V4 is still under development, but the team has offered a detailed first look at how it will work, how it compares to V3, and what makes it different.

From Siloed Markets to Unified Liquidity

In Aave V3, liquidity is locked within isolated markets on different chains or networks. Each market — such as Ethereum Core or Prime — has its own liquidity pool and asset set. That structure fragments capital and makes cross-market borrowing or lending inefficient.

Aave V4 flips this model.

In V4, all assets on a given network are pooled inside a Liquidity Hub. Rather than users interacting directly with these Hubs, they interact through Spokes, modular gateways that access the Hub’s liquidity under specific rules.

What Are Liquidity Hubs?

Each Layer 1 or Layer 2 will have at least one Liquidity Hub. These Hubs act as central vaults for all assets on that network. The Hub:

• Tracks assets and interest using a share-based system
• Sets limits on how much each Spoke can borrow
• Ensures system-wide integrity (e.g., borrowed assets never exceed supplied assets)

Liquidity Hubs unify capital and simplify management, increasing usage and unlocking better borrowing rates.

What Are Spokes?

Spokes are user-facing modules that plug into the Liquidity Hub. Every lending or borrowing action happens through a Spoke — not the Hub itself. Each Spoke can have:

• Its own asset rules and risk profiles
• Unique collateral types
• Specialized use cases (e.g., for real-world assets, vaults, or high-risk tokens)

This modularity enables new markets without fragmenting capital. Spokes can also be paused or upgraded independently, improving safety and flexibility.

Examples of Specialized Spokes

E-Mode Spoke
Built for correlated assets like stablecoins, E-Mode Spokes allow higher borrowing power. For example, USDC can be used more effectively as collateral when borrowing USDT. Each E-Mode Spoke has its own limits and configurations.

Isolation Mode Spoke
Supports new or volatile assets by placing strict caps on how much liquidity can be borrowed. This keeps risk contained and allows experimentation without endangering the entire system.

RWA Spoke (Real-World Assets)
Designed to support tokenized off-chain assets like treasury bills. These Spokes can include tailored custody, redemption, or access rules to meet regulatory and risk demands.

Vault Spoke
Lets users borrow against assets held in external vaults like Safes without directly supplying them to Aave. This allows for advanced collateral management strategies.

Why It Matters

The new architecture offers major advantages:

• Liquidity Efficiency: Capital is no longer split across markets. A single pool feeds multiple use cases.
• Modular Innovation: Builders can create Spokes for new strategies or assets and tap into the Hub’s liquidity.
• Lighter Governance: New features can be added via Spokes without needing protocol-wide upgrades.
• Improved Safety: Each Spoke has defined access to liquidity, limiting systemic risk.

Version	Launch / Mainnet Date	Notes
V1	January 8, 2020	First launch
V2	December 3, 2020	Major upgrades
V3	March 16, 2022 (multi‑chain) January 27, 2023 (Ethereum)	Cross‑chain
V4	Mid‑2025 (planned); unveiled June 17, 2025	In development