Aave V4 has officially gone live on the Avalanche network, marking the decentralized finance (DeFi) protocol’s first deployment outside of the Ethereum mainnet. Avalanche, a fast-growing layer-1 blockchain, announced that the launch sets the stage for a new generation of on-chain credit markets that could include tokenized and traditional assets in the future.
Aave brings Hub and Spoke model to Avalanche
The Aave V4 deployment introduces its Hub and Spoke framework to Avalanche. This architecture separates shared liquidity pools from individual lending markets, each operating with specialized risk parameters. By using this structure, Aave aims to improve capital efficiency and provide customized financial products for various types of borrowers and collateral.
Aave Labs stated that Avalanche was a natural fit for expansion due to its established DeFi environment and strong track record of supporting Aave V3 since 2022. The network has successfully managed liquidations, oracle updates, and periods of market stress, which helped build confidence in bringing V4 to the Avalanche ecosystem.
Avalanche Foundation has committed up to $15 million in milestone-based incentives to encourage rapid adoption and growth. These rewards are tied to the launch of new liquidity hubs and reaching specific market growth benchmarks.
The launch of Aave V4 on Avalanche introduces specialized lending infrastructure with robust risk controls and shared liquidity, setting a foundation for expanded credit markets that may include tokenized assets.
Details of the liquidity hub and spokes
Aave V4’s initial rollout on Avalanche features one central Liquidity Hub and three Spokes, each designed to facilitate different lending and borrowing arrangements. The main Liquidity Hub offers a shared pool of assets including wAVAX, sAVAX, BTC.b, USDC, USDT, wETH.e, and EURC. Users can supply or access liquidity with these core assets, connecting borrowers and lenders across the network.
The Main Spoke aligns with the hub’s asset list for both borrowing and collateral requirements, giving users seamless interaction with the most widely used cryptocurrencies and stablecoins. Additionally, the AVAX Correlated Spoke focuses on sAVAX and WAVAX as collateral options, with WAVAX as the key borrowable asset. Meanwhile, the Forex Spoke is designed for stablecoin trading and supports EURC, USDC, and USDT for both collateralization and loan origination.
| Spoke | Collateral Assets | Borrowable Assets |
|---|---|---|
| Main Spoke | wAVAX, sAVAX, BTC.b, USDC, USDT, wETH.e, EURC | wAVAX, sAVAX, BTC.b, USDC, USDT, wETH.e, EURC |
| AVAX Correlated Spoke | sAVAX, WAVAX | WAVAX |
| Forex Spoke | EURC, USDC, USDT | EURC, USDC, USDT |
This multi-layered structure aims to offer flexibility for different user needs while preserving the integrity and efficiency of liquidity across the protocol.
Planned RWA hub and governance steps
A proposal for a new RWA (real-world asset) Hub is expected following the initial launch. This hub would be focused on institutional-grade collateral sourced from tokenized real-world assets such as investment funds or traditional financial products, but placed entirely on-chain. The RWA Hub will be governed separately, with distinct asset lists, risk control parameters, and a dedicated oracle setup.
LlamaRisk, an independent risk consulting provider, will perform community feedback gathering and risk analysis before any final governance decisions are made. The process will proceed through the ARFC Snapshot phase before potentially reaching a full Aave Improvement Proposal (AIP) vote for affirmation.
Mini dictionary: RWA (Real World Assets): Refers to tangible or traditional financial products, such as investment funds or bonds, that are tokenized and represented on a blockchain for integration with decentralized finance protocols.
By isolating institutional-grade collateral from the main retail liquidity pools, the RWA Hub seeks to mitigate cross-market risks and facilitate greater participation from institutions.
Aave, one of the largest decentralized lending and borrowing protocols globally, continues to expand its reach by leveraging Avalanche’s robust DeFi infrastructure, signaling a potential shift for how on-chain credit markets develop in the coming years.
