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.”
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 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.
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.
“The architecture is completely modular, which means that it’s easy to extend into new use cases that will emerge. In the future, for example, it can be lending against data.”
Aave v4 launched on Ethereum with just three hubs, part of a gradual rollout that prioritises security over “immediate growth.” Each hub offers a different risk-reward calculus, according to Frangella.
“Core” is most similar to Aave v3, he said. “Plus” offers higher yield. And “Prime” is geared toward lending and borrowing stablecoins, “with a limited set of collaterals selected for maximum stability and predictability.”
The rollout of Aave v4 and its user interface, Aave Pro, follows a contentious period in which Labs and prominent members of Aave DAO fought over the protocol’s future direction and Labs’ growing influence in DAO affairs.
Aave Labs pushed for the DAO to turn its attention from the ongoing maintenance of v3 to promoting v4. That push was among several issues that led to the acrimonious departures of two major contributors to the DAO, Bored Ghosts Developing and Aave Chan Initiative. Both have said they will not seek DAO renewal of their contracts this year.
Asked whether Labs would take a more hands-on approach to running the protocol, an Aave spokesperson said in a statement earlier this month that the company “continues to play an important role in building, offering strategic direction, securing important partnerships, and growing awareness, etc., which the community has supported.”
But the DAO “remains the governing body, responsible for key decisions, including hiring service providers, protocol upgrades, risk parameters, asset listings, treasury allocation, and expansion to new networks,” they added.
Aleks Gilbert is DL News’ New York-based DeFi correspondent. Have a tip? Email him at aleks@dlnews.com.
