Aave V4: Modular Architecture Reshaping the Future of Decentralized Finance Lending

Aave, as one of the important cornerstones of the Decentralized Finance ecosystem, has been a focus of attention in the industry for its latest developments. At the recent ETHCC conference, Aave's founder officially announced the upcoming release of the next major iteration version—Aave V4.

This upgrade is not just a simple routine update, but a key milestone in Aave's long-term strategic roadmap for 2030. Aave V4 is planned to be introduced in May 2024, aiming to systematically address the limitations exposed by the V3 version during operation, particularly achieving breakthroughs in core areas such as scalability and risk management. Through this far-reaching update, Aave hopes to fundamentally reshape the underlying architecture and core functions of the DeFi lending protocol, laying the foundation for future development.

This article will delve into the specifics of Aave V4, review its evolutionary history, analyze the new architecture, and interpret it from the broader perspective of the trends in the Decentralized Finance industry.

The Evolution of Aave

Aave originated from ETHLend, a P2P lending platform. However, the P2P model was inefficient, and after the team realized this fundamental flaw, they upgraded the brand to Aave(, which is the V1 version), and decisively shifted to a liquidity pool-based P2C( model for peer-to-peer contracts), achieving instant lending. The subsequent V2 version further reduced transaction costs by optimizing smart contracts.

The current V3 version has made significant strides in capital efficiency and risk management, introducing several key features:

• Efficient Mode ( E-Mode ): When the prices of the assets deposited and borrowed are highly correlated, it allows for a higher borrowing capacity.

• 隔离模式(Isolation Mode): Allows new high-risk assets to be launched in an "isolated" manner, effectively controlling the risk contagion.

However, V3 also exposes deeper strategic limitations: a single entity architecture struggles to flexibly respond to emerging market and diversified scenario demands. Especially when the industry introduces RWA( such as tokenized government bonds or private credit) as collateral, V3's single architecture appears inadequate.

This is precisely the core issue that V4 aims to fundamentally address: how to evolve from a single product to a flexible platform that supports diverse financial scenarios.

Aave V4: Modular New Architecture

Aave V4 introduces a brand new "Liquidity Hub + Spoke" ( model. This architecture is comparable to the central bank and commercial bank network in traditional finance:

• Liquidity Hub: Aave's "Central Bank" Establish a unified liquidity center on each blockchain network to gather user assets. It focuses on macro liquidity management and risk control, providing stable and deep liquidity for the ecosystem. Liquidity centers on different chains can be efficiently interconnected through the "Unified Cross-Chain Liquidity Layer" )CCLL(.

• Spoke: Aave's "specialized commercial bank" Users interact with various Spokes and protocols. Spoke is a user-oriented modular lending market, with each market designed for a specific purpose. For example:

  • Core Spoke: Handling low-risk, high-liquidity blue-chip crypto asset lending
  • E-Mode Spoke: Optimized for highly correlated currency pairs, providing maximum capital efficiency.
  • RWA Spoke: Customized for real-world assets, integrating stricter access and compliance rules
  • High Leverage Trading Spoke: Designed for professional traders, featuring special interest rate models and risk control parameters

The most important aspect of this architecture is its openness. Developers can build and propose their own Spokes, and after governance approval, they can obtain credit lines from the liquidity hub to launch new specialized markets. This will transform Aave from a single product into a foundational platform for financial innovation.

Comparison: Aave VS. Sky) before MakerDAO(

To fully understand Aave's strategic direction, it is helpful to compare it with major competitors Sky) and MakerDAO(. Sky recently underwent a rebranding and launched the "Finality" plan, also adopting a modular architecture.

) similarities

The architecture of Sky can be described as "Sky Core + SubDAO":

• Sky Core plays the role of a "central bank", inheriting the function of issuing stablecoin ###USDS, originally DAI(. It establishes core rules, maintains the stability of USDS, and serves as the ultimate credit guarantee.

• SubDAO is a semi-independent specialized organization that plays the role of a "commercial bank" focused on specific areas. They are authorized to receive specific collateral and initiate requests to mint USDS to Sky Core.

Aave's "Liquidity Hub + Spoke" is similar to Sky's "Sky Core + SubDAO" model: both adopt a "central bank + specialized commercial bank" structure, where the central authority formulates policies to provide liquidity, and specialized commercial banks develop specific business scenarios.

) difference

Despite the similarities, Aave and Sky have significant differences in core business, economic models, and ecological sovereignty:

• Types of Liquidity: Aave provides liquidity for a wide range of asset classes, while Sky focuses on the issuance and promotion of USDS.

• Economic Model and Sovereignty: This is the fundamental difference. Sky SubDAO has a high degree of economic sovereignty, allowing it to issue its own governance tokens and construct an independent economic model. Aave's Spokes have weaker independence and cannot issue tokens, with the created value flowing back to Aave DAO.

Macro Perspective

The architectural shifts of Aave and Sky reflect the major trends shaping the future of Decentralized Finance:

• Integration of RWA: The modular architecture allows for the creation of independent, customizable environments specifically designed to manage RWA with special legal and compliance requirements.

• The rise of application chains: Aave and Sky both plan to launch dedicated blockchains ###Aave Network and NewChain(, to achieve higher sovereignty and value capture capabilities.

• Impact on Ethereum: The trend of major protocols becoming independent chains requires Ethereum to explore new economic models to adapt to its new role as an "ecological security provider."

![Interpreting Aave V4: Love and Hate with MakerDAO, Different Paths Lead to the Same Goal])https://img-cdn.gateio.im/webp-social/moments-956fdc9027e6e121e459bc00001ff61a.webp(

Conclusion

Aave V4 represents a strategic repositioning and is a comprehensive response to internal challenges and external opportunities. By transforming into a modular open platform, Aave is laying the groundwork to become the next generation of on-chain financial infrastructure. The "Liquidity Hub + Spoke" model enhances capital efficiency and provides developers with unprecedented flexibility.

This evolution resonates with industry trends, marking that DeFi is maturing and preparing for broader adoption and complex financial integration. The launch of Aave V4 will be a key event to watch, with the potential to set new standards in the DeFi lending space in the coming years.