The largest DeFi lending protocol launched its biggest upgrade in two years, redesigning how markets are organized as it targets institutional borrowers and real-world assets.
Posted March 30, 2026 at 5:17 pm EST.
Aave, the largest decentralized lending protocol by market share, launched V4 on Ethereum mainnet on Sunday after more than two years of development. The upgrade replaces V3’s monolithic pool structure with a modular “hub-and-spoke” system that separates lending markets while sharing underlying liquidity, a redesign aimed squarely at attracting institutional borrowers and real-world credit activity into DeFi.
Under the new architecture, three liquidity hubs (Prime, Core, and Plus) serve as concentrated funding sources with distinct risk profiles. Individual lending markets, called spokes, draw credit lines from these hubs while maintaining their own collateral rules and borrowing parameters. Launch partners operating spokes include Lido, EtherFi, Kelp, Ethena, and Lombard. A reinvestment module will automatically sweep idle liquidity into low-risk yield strategies when hub utilization drops.
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“Capital goes where the best risk-adjusted opportunities are,” Aave Labs CEO Stani Kulechov told The Block. “Now what we want to focus on is the borrow side, creating significant borrow demand by using the onchain liquidity and channeling that back into the real economy.” The platform, which controls roughly 60% of the DeFi lending market and has surpassed $1 trillion in cumulative loan volume, will also deepen integration of its native GHO stablecoin and support lending collateralized by NFTs and data.
The launch arrives during a turbulent period for Aave’s governance. BGD Labs, a core technical contributor for four years, announced its departure effective April 1, citing disagreements over the protocol’s direction. The Aave Chan Initiative, which drove an estimated 61% of governance actions over the past three years, is also winding down after clashing with Aave Labs over a roughly $51 million budget request tied to V4 development.
Kulechov has proposed converting Aave Labs into a DAO subsidiary and transferring its brand assets and revenue streams to the community. V4 launched with conservative settings, and permissionless spoke creation remains gated behind DAO governance for now. Whether the modular upgrade can attract the institutional capital Kulechov envisions will depend in part on whether Aave’s community can stabilize its internal fractures.
