Aave has officially revealed its upcoming V4 architecture, marking a major evolution in DeFi lending design.
Author: Sahil Thakur
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.
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.
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:
Liquidity Hubs unify capital and simplify management, increasing usage and unlocking better borrowing rates.
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:
This modularity enables new markets without fragmenting capital. Spokes can also be paused or upgraded independently, improving safety and flexibility.
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.
The new architecture offers major advantages:
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