Aave v4 Deposits Double in One Month, Surpassing $1 Billion
On-chain data shows that the new version v4 of the decentralized lending protocol Aave has seen its deposit scale surpass $1 billion, doubling from a month ago; active loan scale is approximately $300 million.
In terms of growth pace, v4's deposits were less than $340 million at the beginning of August, exceeded $600 million in late August, around $577 million at the beginning of September, and increased to about $1.16 billion by late September, setting a historical high. Active loans grew from about $115 million in August to over $200 million, currently around $300 to $310 million. Based on $300 million in loans and $1.16 billion in deposits, the capital utilization rate is approximately 26%.
v4 launched on the Ethereum mainnet on March 30, 2026, using a "hub-and-spoke" architecture. Liquidity is concentrated in a central pool (hub), with various specialized markets (spoke) obtaining limited credit lines from the central pool and setting independent collateral rules and risk parameters. The first three central pools are Prime (low risk), Core (risk-adjusted), and Plus (risk-return focused). This design addresses the liquidity fragmentation issue seen in v3 while limiting the overall risk exposure when a single market encounters problems.
Initial partners include liquidity staking protocol Lido, re-staking protocols EtherFi and Kelp, synthetic dollar protocol Ethena, and Bitcoin staking protocol Lombard. Supported assets include stablecoins like USDT, USDC, EURC, frxUSD, USDG, Tether's gold token XAUt, and cbBTC issued by Coinbase. Oracles are exclusively provided by Chainlink. During this growth phase, deposits in EtherFi Cash-related markets exceeded $300 million, making it the largest single driver.
In terms of security, v4 underwent over a year of testing, with the last eight months dedicated to strengthening infrastructure. It has passed third-party audits, formal verification, invariant testing, and a six-week public security competition, starting with a limited scope and conservative parameters. The core Aave protocol has never been hacked across various chains. v4 also launched the Aave Pro interface for professional users, integrating Aave's native stablecoin GHO and its yield-bearing version sGHO, and introduced a "reinvestment module" to direct idle liquidity to other yield sources. The team is also evaluating deployment on other chains like Avalanche, requiring approval from Aave DAO governance votes.
In terms of scale comparison, Aave v3 still has total deposits of about $31 billion, while v4 accounts for less than 4% of Aave's total deposits. Aave founder and CEO Stani Kulechov advocates for a gradual phase-out of v3, despite its current significant revenue contribution. He stated that v4 aims to "focus on the borrowing side, leveraging on-chain liquidity to create substantial borrowing demand and directing it back to the real economy." Different data platforms have varying statistical standards for v4, with specific numbers based on real-time on-chain data.
In terms of market mechanisms, this growth phase is primarily driven by the launch of new products and partner traffic, rather than overall DeFi market expansion. Depositors mainly consist of users holding staked ETH, re-staked tokens, and stablecoins, as well as large accounts migrating funds from v3; borrowers are mainly arbitrageurs engaging in leveraged staking cycles and stablecoin lending. The flow of funds is from Aave v3 and other lending protocols into the various specialized markets of v4. Beneficiaries include Aave DAO's protocol revenue, partner protocols like EtherFi, and oracle provider Chainlink; those under pressure include competing protocols like Morpho, Euler, and Spark, which also focus on modular lending. The current 26% utilization rate indicates that the speed of new deposits is significantly outpacing borrowing demand.
Supplementary data: During the rapid growth of v4 deposits, the price of AAVE tokens faced resistance around $145.
ABAB AI Insight
Aave originated as a peer-to-peer lending platform called ETHLend, founded by Stani Kulechov in 2017, which raised approximately $16.2 million through an ICO but stagnated due to low matching efficiency. It was rebranded to Aave in 2018, shifting to a liquidity pool model, launching v1 in January 2020, v2 in December of the same year, v3 with cross-chain capabilities in March 2022, and the native stablecoin GHO in July 2023, growing to become the largest lending protocol in DeFi. It has faced risk events in its history: in November 2022, trader Avraham Eisenberg attempted to manipulate prices by shorting CRV, leaving Aave with about $1.6 million in bad debt. At the end of 2025, Aave Labs and Aave DAO had governance disputes over front-end fee income and brand ownership, exposing conflicts of interest between the development company and token holders.
From a capital pathway perspective, Aave is expanding its revenue sources from crypto-native leveraged trading to institutional and real-world assets. In April 2025, Aave DAO initiated a buyback plan for AAVE tokens, returning approximately $1 million weekly of protocol revenue to token holders. In August of the same year, it launched Aave Horizon, a lending market for real-world assets (RWA) aimed at institutions, allowing them to use tokenized government bonds and other assets as collateral for stablecoin loans. The hub-and-spoke architecture of v4 is designed to enable these institutions and RWA markets to share the same liquidity pool while isolating risks. Collaborating with protocols like Lido, EtherFi, and Ethena directly integrates the assets of the entire Ethereum staking ecosystem into Aave's lending system.
Historically, major version upgrades of DeFi protocols often encounter migration challenges. Uniswap v4 launched in January 2025, introducing a "hooks" plugin mechanism, but for a long time after launch, trading volume and liquidity remained primarily on v3. Compound launched v3 (Comet) in 2022, shifting to isolated markets for single borrowing assets, which resulted in Aave capturing its market share. The most direct competitor is Morpho: launched in 2024, Morpho Blue adopted a minimalist modular lending design and was used by Coinbase in January 2025 to provide Bitcoin collateral loans, with deposits at one point exceeding $10 billion. Aave v4's approach of "centralized liquidity plus modular risk" indicates that on-chain lending is transitioning from a single liquidity pool to a modular architecture.
Essentially, this represents a restructuring of the industry chain. The previous generation of on-chain lending had a single protocol responsible for liquidity, risk pricing, collateral review, and liquidation, with all assets pooled together, where adding a new risk asset could compromise the security of the entire pool. The new generation architecture separates these processes: the underlying shared liquidity center, specialized markets responsible for specific assets and clients, and risk management handled by different institutions. This shift is occurring because institutional funds and RWAs are entering the market, leading to highly differentiated risk preferences, making a unified parameter pool unable to simultaneously satisfy conservative government bond collateral loans and aggressive leveraged staking. The entity that can serve the most risk tiers with the least liquidity will gain the scale advantage in the next phase of on-chain credit. The doubling of v4 deposits in one month but with only a 26% utilization rate indicates that funds are beginning to migrate, but borrowing demand still needs time to catch up.
ABAB News · Cognitive Laws
- Liquidity is concentrated together, while risks are managed separately.
- The real challenge of version upgrades is getting funds to be willing to move.
- Deposits prove trust, while borrowing proves demand.