Aave (AAVE)

So, you're telling me that the deprecated Aave V1 has a higher TVL than the much-anticipated Aave V4? https://t.co/u2lJdgCxYa

aave v4 went live recently on eth at first it looked like a normal version upgrade, after digging a bit, the change feels bigger than that the lending system itself got rebuilt liquidity moves differently now 🧵👇 here's what u need to know: → what Aave actually is → the limitation older versions had → what Aave V4 changes → the new hub & spoke system → the new credit model → why the rollout started slow ▫️what Aave actually is Aave is a lending protocol on Ethereum. ppl deposit crypto into it. other ppl borrow that crypto. borrowers pay interest. lenders earn that interest. so it works similar to a bank loan system. difference is the system runs through smart contracts no company holding funds. users interact directly w/ the protocol. ▫️the limitation older versions had earlier versions of Aave worked through many separate liquidity pools. each chain or market had its own pool of money. example: • deposit USDC on eth → only eth borrowers use it • deposit on Polygon → only Polygon borrowers use it liquidity stayed inside those buckets. so sometimes money sat idle in one place while another market needed it. that made the system less efficient. borrowing power depended on the size of that specific pool. ▫️what Aave V4 changes Aave V4 redesigns the system: instead of many isolated pools, it creates a coordinated liquidity system. the idea is simple: money sits in one shared structure. different lending markets access that shared capital when they need it. this means funds can move more efficiently across the protocol. borrowers can tap into deeper liquidity. lenders may see better utilization of their deposits. ▫️the new hub & spoke system the core design of V4 uses something called a hub & spoke model. this is basically a structure for how liquidity moves inside the protocol. the hub acts as the central liquidity source. the spokes are individual lending environments that connect to the hub. users interact mainly w/ the spokes. those spokes pull liquidity from the hub when needed. the hub also limits how much liquidity each spoke can use. this keeps risk contained while still sharing capital across the system. ▫️the new credit model V4 also changes how borrowing risk is handled. in earlier versions, interest rates were mostly uniform across markets. now the system adjusts borrowing costs based on risk. assets considered safer can receive lower borrowing rates. riskier collateral leads to higher borrowing costs. the protocol also tracks positions more precisely through share-based accounting. this helps manage deposits and loans across multiple markets at once. ▫️why the rollout started slow Aave did not release V4 fully open on day 1 the launch began w/ restricted settings. only limited assets and liquidity caps were allowed at first. the goal is to monitor the system closely. governance and the security council can react if something unexpected happens. this approach reduces risk while the new architecture starts operating on mainnet. that's a wrap! if you found this useful, consider reposting it 🤝

Aave 🤝 Chainlink https://t.co/Y0Kz2pDEZb

. @aave v4 it’s a shift in how lending is structured, moving from isolated pools to a shared liquidity layer with modular markets. One liquidity hub holds capital, multiple markets pull from it, and each market has its own rules and risk parameters. This makes capital more efficient, reduces idle liquidity, and allows more precise risk pricing instead of averaging everyone together. It also opens the door for new segments like RWA lending, stablecoin strategies, and more complex DeFi products. Aave is clearly positioning itself as infrastructure, not just a lending app, and this aligns with where the market is going. • shared liquidity instead of fragmented pools • custom risk per market, not one-size-fits-all • better capital efficiency across the system • expansion into RWA and advanced strategies At the same time, the context around the release matters. The upgrade comes alongside internal tensions and changes in key contributors, which puts more pressure on governance and coordination. Modular systems are harder to manage, and success here depends on execution as much as architecture. the direction is strong and forward-looking, but the real test starts now - if the team can stay aligned and execute well, Aave can become a base layer for next-generation DeFi credit.

Was great celebrating Aave V4 launch with friends and partners. https://t.co/VQyirnWXfi

Agentic companies on @eigencloud