The world’s largest DeFi protocol just got an upgrade. Aave Labs on Monday launched Aave v4, a redesigned version of its $24 billion predecessor, Aave v3. V4 will run alongside v3, Aave Labs executives stressed. The company backtracked on plans to push v3 users to the newer protocol after an outcry from members of the Aave DAO cooperative, which governs the Aave protocols.
Aave v3 is the largest protocol in decentralised finance, with nearly $24 billion in user deposits. It enables peer-to-peer lending of crypto assets. V4 introduces what Labs calls a hub-and-spoke model in which hubs serve as liquidity pools and spokes serve as tailored lending markets. “This represents the first complete rework of the Aave protocol since Aave V1,” Emilio Frangella, head of engineering at Aave Labs, said on X.
The new design will prevent the siloing of liquidity, the Aave Labs executive said. “This also reduces or completely eliminates the need to bootstrap liquidity through incentives or other initiatives whenever a new borrowing configuration (identified as a market in previous iterations) is deployed.” In a lengthy post last month, he said he envisions a future in which Aave finances the development of real-world infrastructure, such as solar energy arrays, data centers, and water desalination plants. Aave founder and Aave Labs CEO Stani Kulechov has said the new protocol will be flexible enough to lead Aave into new markets.
In a slick, three-minute video released on Monday, Kulechov recounted Aave’s origins and hinted at that future once again. “Aave v4 is actually taking Aave into a new environment where we can start funding opportunities in the real world,” he said. Aave v4 launched on Ethereum with just three hubs, part of a gradual rollout that prioritises security over “immediate growth.”
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