Interprétation d'Aave V4 : une transition du produit à la « banque »

Original title: “Decoding Aave V4: A Shift from Product to ‘Bank’”

Original author: Eric, Foresight News

Beijing time March 30 evening, the Aave V4 version officially launched on the mainnet, marking the first good news since the Aave DAO governance debate.

V4 can be seen as a complete overhaul of Aave, with the most core change being the integration of previously independent lending markets into a unified liquidity pool architecture: Hub and Spoke.

In V4, each chain or L2 has a single liquidity center (the Hub), where all assets deposited by users for lending are stored in a single liquidity pool. The Hub is responsible for overall coordination, credit limit control, system-level constraints (such as “total borrowing ≤ total supply”) and emergency pauses. The Hub does not directly face users but manages liquidity centrally in the backend.

It is worth noting that, on each chain, there is not just one Hub, but different Hubs designed according to different needs, which is essentially a form of risk isolation. For example, V4 currently上线了 Core Hub、Prime Hub 和 Plus Hub。其中 Core Hub 包含主流资产，面向所有用户，Prime Hub 为寻求更“可控”抵押品的供应商设计。Plus Hub 则是为策略型稳定币设计，其参数设计需要考虑项目的规模。

As for Spoke, you can understand it as an independent market, each with its own lending functions, risk parameters, and collateral rules. In a Hub, user assets are stored in the same liquidity pool, and borrowers need to select different Spokes based on their needs. For example, as shown in the diagram above, users can deposit WETH as a borrowable asset, and borrowers can borrow WETH across the first four Spokes, but only the EtherFi Spoke allows collateralizing weETH.

Although the official statement is that it can integrate fragmented liquidity, in practice, for users borrowing against high-quality assets, the difference is not significant. For example, if you want to collateralize ETH to borrow assets, the operations in V3 and V4 are similar, as long as you ensure the health factor does not become too low.

Therefore, in terms of liquidity integration, V4 is indeed more refined than managing independent markets, but it is not a qualitative leap. What truly makes a difference are the customized parameters of Spokes and the new liquidation engine.

In V4, the interest rate for borrowers depends on the base rate and risk premium. The base rate still uses the utilization curve similar to V3, rising slowly below the optimal utilization and sharply above it. The risk premium depends on the nature of the collateral asset; if the collateral is more stable assets like USDT, ETH, WBTC, the risk premium will be very small or even zero, but for high-risk altcoins, the risk premium will be high to prevent “good assets subsidizing bad assets.”

A simple example: in V3, interest rates depend entirely on supply and demand. Borrowing USDT, although the maximum LTV and liquidation thresholds may differ, the interest rates for collateralized ETH and LINK are the same under the same supply-demand conditions. However, LINK’s volatility is higher than ETH. If interest rates are the same, borrowers collateralizing LINK will increase utilization, causing the borrowing cost for ETH collateral users to rise instead of fall.

V4 optimizes this flaw: users borrowing high-risk assets must pay higher costs, and providers of funds can also earn higher yields. At the same time, higher interest rates limit borrowing demand, making the cost advantage for users collateralizing quality assets more apparent.

Regarding the liquidation mechanism, liquidators will only restore the health factor to the target value preset in the Spoke, and the lower the health factor, the higher the liquidation bonus. This design not only gives borrowers more operational space but also reduces the platform’s bad debt risk. Additionally, the new liquidation engine introduces a “dust protection mechanism,” where if remaining debt or collateral falls below a threshold (e.g., $1000), the liquidator must fully close the position to prevent small residuals from reducing capital efficiency.

Finally, idle liquidity in the Hub can be automatically invested in low-risk yield strategies approved by governance (such as short-term government bonds, stablecoin LP, money market tools, etc.), increasing income for liquidity providers and also boosting DAO revenue. This may be one of the few advantages of “unified liquidity.”

Overall, the benefits of Aave V4’s unified liquidity in lending are not very significant, and the so-called composability—where borrowers can manage positions across different Spokes centrally—does not make things much more convenient than V3. But as I mentioned in the title, V4 transforms Aave from a product into a kind of “bank” infrastructure.

Setting aside complex business logic, the core business of a bank is to accept deposits, keep a portion as reserves for daily payments and transfers, and earn interest rate spreads through lending. Idle funds can also be allocated to different investments within the bank’s risk appetite.

St. George’s Bank Headquarters at St. George’s Palace

Founded in 1407 in Genoa, Italy, St. George’s Bank is often considered the world’s earliest bank. It not only provided deposit and loan services but also handled government debt management, currency exchange, and fund transfers, meeting the commercial needs of Genoa as a major European trade center at the time.

From launching ETHLend in 2017 to the上线 of Aave V4 in 2026, less than 10 years, Aave has become somewhat like a traditional bank. Of course, the difference between Aave and a bank is significant; here, it is just an analogy. Compared to P2P, the model of a bank that has endured hundreds of years of black swan events is naturally a better choice, just as V4 is an evolution of V3.

If you observe carefully, you’ll find that many “innovations” in the DeFi space have almost become history’s dust, for example, the hot DeFi 2.0 in late 2021. In contrast, projects like Aave, with simple business models and logic matured over centuries in traditional finance, have survived and thrived. After years of exploration, many DeFi projects have realized this: the ceiling of DeFi is high, but the path taken by traditional finance is indispensable.

Aave V4 consolidates liquidity, enabling many future possibilities, such as investing idle assets exceeding a certain period (e.g., one year) into higher-risk investments, like providing ETH/USDT LP on Uniswap, operating entirely like a commercial bank, and gradually expanding into other banking services, such as credit cards (referencing Ethfi’s model of collateralized stablecoin borrowing for spending).

Further, Aave could expand into an “investment bank.” For example, launching an ICO platform where users earning interest on deposited assets can lend USDT, USDC for investments, without withdrawing assets to sell for stablecoins to participate in ICOs. This way, the platform can charge project fees and earn interest simultaneously.

Although the Hub&Spoke mechanism itself does not bring significant innovation to lending, it lays the most important groundwork for the next steps.