Aave V4 launches on Avalanche in first deployment beyond Ethereum

Aave Labs confirmed through its blog that, for the first time since its deployment on the Ethereum blockchain, Aave V4 is now live on Avalanche. 

The deployment is part of the founder Stani Kulechov’s plan to route tokenized real-world assets through the network. 

What is different about V4?

Aave, one of the largest decentralized lending protocols, has launched its upgraded V4 system on the Avalanche blockchain. This marks the first time the new “hub-and-spoke” architecture is running on any network other than Ethereum. 

Aave first launched on Avalanche in 2021, where it has processed over $15 billion in total inflows across its V2 and V3 versions on the network. The current V3 market on Avalanche has stablecoin utilization above 90%. DefiLlama data shows Aave has roughly $14.2 billion in total value locked across all chains.

The deployment of the V4 architecture is backed by a $15 million incentive commitment that Stani Kulechov, the protocol’s founder, described as KPI-tied, which Avalanche will only release for actual growth rather than just for the launch itself. 

The idea of the “hub-and-spoke” design is to separate risk. In older systems, one bad asset in a combined pool could cause problems for everything else, but V4 splits risk across separate liquidity hubs, each managing its own market. 

The Avalanche deployment runs on one Core Liquidity Hub that feeds three markets: 

• The main market, which is expected to hold most of the liquidity and accept the widest set of collateral  
• AVAX Correlated market, which is built around liquid staking
• The forex market, which allows EURC, USDC, and USDT to be used as collateral against one another. 

In the AVAX-correlated market, users can supply sAVAX at a 95% collateral factor and borrow only WAVAX.

The plan is to eventually use Treasury bills, real estate tokens, or private credit as collateral. Kulechov expects the market for tokenized real-world assets to reach $100 billion by the end of 2026, and he wants Aave to capture $1 billion in RWA deposits of its own. 

What is the controversy around the launch of V4?

The V4 rollout had a bumpy start, as Cryptopolitan covered earlier. The Aave Chan Initiative (ACI), a major governance service provider led by Marc Zeller, announced it would wind down its operations over what it called “structural governance problems.”

Zeller pointed to Aave Labs gaining more control over governance. On-chain data showed Aave Labs controlled about 23% of the AAVE token supply, which could be used to sway community votes. 

Chaos Labs, a leading risk management firm, also left the protocol in April, citing rising workload and disagreements over the risk of V4’s new architecture.

Aave’s token dropped as low as $108 due to the ACI news before recovering.

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