[ARFC] Deploy Aave V4 on Arc

Governance New Market
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Summary

This ARFC proposes deploying Aave Protocol V4 on Arc Network.

Motivation

Aave Labs proposes deploying Aave V4 on Arc, the institutional-grade public layer-1 blockchain built by Circle, at or near Arc mainnet launch.

The initial deployment would activate with one Liquidity Hub and two Spokes, supporting an initial set of high-quality assets: USDC, EURC, WETH and cirBTC.

Relative to the Temp Check, which proposed an initial scope of USDC, EURC and cirBTC, this ARFC adds WETH as a fourth launch asset in response to demand signals from prospective liquidity providers and to strengthen day-one borrow markets.

Following the Temp Check, this ARFC sets out the proposed initial token listing and parameters.

Deploying on Arc provides several benefits:

  • Positions Aave as a core lending protocol at launch.

  • Increases market access for Circle-issued assets.

  • Expands Aave’s reach into institutional liquidity flows.

  • Generates additional protocol TVL and revenue.

Arc’s infrastructure is designed to concentrate stablecoin and tokenized asset liquidity, making it a logical fit for Aave.

Following the passing of the TEMP CHECK Snapshot, this ARFC sets out the proposed launch topology, asset scope, oracle configuration, incentive structure, and rollout path.

Rollout

The rollout will follow a deliberately conservative, phased path. The deployment would launch at or near Arc mainnet with conservative caps, followed by monitored expansion and cap increases per LlamaRisk recommendations as live conditions support. Additional assets, including further RWA assets, could be onboarded through subsequent governance processes.

Incentive and Revenue Structure

In connection with the deployment, Aave DAO is expected to receive a minimum of $2m per year in protocol revenue from the Aave V4 deployment on Arc, with any shortfalls covered by certain Arc ecosystem participants for the first five years following deployment. This structure provides protection for Aave DAO during the bootstrap phase.

Specification

This section will be updated upon receiving feedback from various stakeholders in the lead-up to the deployment.

Hub and Spoke Configuration

The proposed initial Arc deployment will activate with one Liquidity Hub and two Spokes.

Hub Assets
Arc Core Hub cirBTC, wETH, USDC, EURC
Hub Spoke Collateral Borrowable
Arc Core Hub Main Spoke cirBTC, wETH, USDC USDC, EURC, cirBTC, WETH
Arc Core Hub Forex Spoke USDC, EURC USDC, EURC

Risk Parameters

The initial token listing and parameters will be updated based on the latest risk analyses.

Next Steps

  1. Gather community feedback and risk analysis from LlamaRisk

  2. Escalate the proposal to the ARFC Snapshot stage.

  3. If the ARFC Snapshot outcome is YAE, publish an AIP vote for final confirmation and enforcement of the proposal.

Disclaimer

Aave Labs is not compensated by Arc, nor affiliated with them.

Copyright

Copyright and related rights waived via CC0.

6 Likes
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Can Aave and LlamaRisk share more color on the contemplated risk parameters for the FX Spoke and potential RWA listings, given the guaranteed revenue floor structure…?

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Summary

LlamaRisk provisionally supports the launch of Aave V4 on Arc and presents the initial market parameters for the deployment. Arc has not yet reached mainnet, and this support is conditional on the outcome of LlamaRisk’s network-level and asset-level risk assessments. The parameters in this document are preliminary and may be revised as those assessments conclude and as the network and its markets become observable on-chain.

This document consolidates the hub-and-spoke architecture configuration, liquidation parameters, collateral factors, interest rate model settings, and Add Cap and Draw Cap recommendations. The deployment is structured around a single Core Hub and two spokes, supported by a supply-only tokenized integration layer. The Core Hub serves as the primary liquidity venue, while each spoke targets a specific use case.

The initial configuration adopts a conservative approach to cumulative Add Caps. Because Arc is a newly launching network where on-chain liquidity is not yet established, the caps are set ahead of liquidity being deployed and may be refined once market conditions become observable on-chain.

The assets expected at launch are USDC, EURC, cirBTC, and wETH. USDC, EURC, and wETH are already listed on existing Aave instances, while cirBTC would be onboarded to an Aave instance for the first time.

Market Design

The recommended launch configuration consists of one hub and two spokes. The Core Hub serves as the sole borrowing environment, structured around two spokes targeting a distinct collateral type, user intent, and risk profile:

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image2560Ă—1624 248 KB

Source: LlamaRisk

  • Main Spoke: The Main Spoke is the general-purpose lending venue and is expected to host the majority of liquidity within the deployment. It accepts the broadest collateral set and the broadest borrowable set in the deployment, where USDC, cirBTC, and wETH are collateral against which users can borrow USDC, EURC, cirBTC, and wETH. In the future, the Main Spoke can provide credit lines to specialized Hubs, allowing them to access its liquidity while preserving separate risk profiles.
  • Forex Spoke: It supports trading and hedging across fiat-pegged stablecoins, with EURC and USDC as collateral, which can be borrowed against each other. Due to limited secondary market liquidity for EURC, conservative caps have been set.

In addition to the two spokes above, a tokenized spoke layer will also be created, which is a supply-only integration layer that tokenizes deposits of the Core Hub’s borrowable assets (USDC, EURC, cirBTC, and wETH) into composable positions for external vaults, aggregators, and strategies, without enabling borrowing or introducing additional collateral risk to the Core Hub.

Dynamic Liquidation Bonus Configuration

V4 replaces V3’s static liquidation bonus with a dynamic bonus that scales with the health factor. Each spoke is configured through three parameters: the Target Health Factor (the HF a borrower is restored to after liquidation), the Health Factor For Max Bonus (the HF at which the maximum bonus is reached), and the Liquidation Bonus Factor (which scales the curve so the bonus at an HF of 1.0 matches the corresponding V3 value). The Forex Spoke uses correlated-asset settings, and the Main Spoke applies a wider curve suited to volatile collateral.

Chain Hub Spoke Liquidation Bonus Factor Target Health Factor Health Factor For Max Bonus
Arc Core Hub Main Spoke 90.00% 1.2400 0.90
Arc Core Hub Forex Spoke 100.00% 1.0442 0.99

V4 Spoke Parameters

The liquidation protocol fee is proposed to be set at 10% across all assets, aligning with the configuration used for the majority of assets on Aave V3.

Chain Hub Spoke Reserve Collateral Factor Max Liquidation Bonus Borrowable Collateral Risk Liquidation Fee
Arc Core Hub Main Spoke cirBTC 78.00% 7.22% TRUE 0 10.00%
Arc Core Hub Main Spoke USDC 78.00% 5.55% TRUE 0 10.00%
Arc Core Hub Main Spoke wETH 83.00% 5.55% TRUE 0 10.00%
Arc Core Hub Main Spoke EURC 0.00% - TRUE - -
Arc Core Hub Forex Spoke EURC 90.00% 2.00% TRUE 0 10.00%
Arc Core Hub Forex Spoke USDC 90.00% 2.00% TRUE 0 10.00%

Add and Draw Caps

The Add Cap and Draw Cap values below are preliminary. They are set conservatively ahead of liquidity being deployed on-chain, where secondary-market depth is not yet established, and reflect the hub-and-spoke structure of Aave V4 and the distinct risk profiles of each spoke. These values may be refined once liquidity is deployed and market conditions become observable on-chain. For USDC and EURC, the cumulative Add Cap is distributed across the Main and Forex Spokes. Add Cap and Draw Cap are denominated in token units.

Chain Hub Spoke Reserve Add Cap Draw Cap
Arc Core Hub Main Spoke cirBTC 1,100 220
Arc Core Hub Main Spoke USDC 56,000,000 51,000,000
Arc Core Hub Main Spoke wETH 24,000 4,800
Arc Core Hub Main Spoke EURC 20,000,000 18,000,000
Arc Core Hub Forex Spoke EURC 10,000,000 9,000,000
Arc Core Hub Forex Spoke USDC 13,000,000 11,000,000
Arc Core Hub Core Tokenized USDC Spoke USDC 10,000,000 0
Arc Core Hub Core Tokenized EURC Spoke EURC 9,000,000 0
Arc Core Hub Core Tokenized cirBTC Spoke cirBTC 160 0
Arc Core Hub Core Tokenized wETH Spoke wETH 6,000 0

Tokenized Spokes serve as the standard entry point for integrators, vaults, aggregators, and other strategies routing liquidity into Aave V4 markets. They are supply-only and accept deposits exclusively in each hub’s primary borrowable assets, ensuring a simple, composable tokenized representation.

Interest Rate Curves

The IRM parameters apply to an asset across all spokes within that hub. The parameters follow the same two-slope utilization curve used in V3, defined by a base variable borrow rate, slope below the optimal usage ratio (Slope 1), slope above it (Slope 2), and the optimal usage ratio itself (Uoptimal). The Liquidity Fee is the fraction of borrower interest captured by the protocol treasury, equivalent to the reserve factor in V3. The goal of the initial configuration is to keep the setup as similar as possible to the one currently used in Aave V3.

Chain Hub Reserve Base Slope 1 Slope 2 Uoptimal Liquidity Fee
Arc Core Hub USDC 0.00% 4.10% 10.00% 90.00% 10.00%
Arc Core Hub EURC 0.00% 5.50% 50.00% 90.00% 10.00%
Arc Core Hub cirBTC 0.25% 4.00% 60.00% 80.00% 20.00%
Arc Core Hub wETH 0.00% 2.20% 8.00% 90.00% 15.00%

Oracle Configuration

Oracle assignments for V4 Arc deployment should replicate the existing V3 and V4 configurations. We recommend using the Capped USDC/USD and EURC/USD feeds with an upside cap of 1.04 to price the respective stablecoins, ETH/USD feed for wETH, and the BTC/USD feed for cirBTC.

Disclosure

This review was independently prepared by LlamaRisk, a DeFi risk service provider funded in part by the Aave DAO. LlamaRisk is not directly affiliated with the protocol(s) reviewed in this assessment and did not receive any compensation from the protocol(s) or their affiliated entities for this work.

The information provided should not be construed as legal, financial, tax, or professional advice.

Changelog

The following changes in the parameters were made since the original post was published:

  • Slope1 was change for USDC to 4.10%.
  • WETH Slope1 was decreased to 2.20%.
  • cirBTC base rate was changed to 0.25%, slope2 to 60%, and liquidity fee to 20%, for consistency with to be proposed V4 Core params.
  • CF for cirBTC was increased to 78%
4 Likes
LlamaRisk - Monthly Community Update
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The ARFC to Deploy Aave V4 on Arc has been raised to snapshot. Voting will begin in less than 24 hours. You may vote here

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The proposed minimum revenue commitment is an important part of the deployment case. It would be useful to have clear ongoing reporting on the actual revenue generated by the Arc deployment, including how any shortfall against the $2M annual commitment is calculated and covered during the initial five-year period. This would make the economic performance of the deployment easier for the DAO to evaluate over time.

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Title: Aave V4 Arc Activation
Author: @AaveLabs
Date: 2026-09-14

Aave Labs is finalizing preparations to activate Aave V4 on Arc and wants to give the community formal advance notice ahead of execution. The market was already deployed and remains fully configured but halted, so no supply, borrow, or liquidity movement is possible until it goes live, using the parameters LlamaRisk recommended in this thread.

Execution will happen alongside the Arc network launch on September 16th. The ARFC snapshot is taken as the binding vote for this execution, and Aave Labs is coordinating the activation alongside the network launch.

This activation does not take the form of an AIP. Arc will have the bridge infrastructure for Aave Governance available once the network launches, enabling the standard AIP process going forward. This initial activation comes ahead of that infrastructure, so the payload cannot go through a PayloadsController the way an AIP normally would. Instead, the Aave V4 Protocol Security Council carries it out directly, following the risk recommendations above. The payload follows the same logic as a standard Aave V4 activation, only how it is executed differs. The team has also been working closely with Certora to review the deployment for correctness, applying the same security procedures normally used for AIPs, at a higher level of rigor, to confirm the configuration meets all requirements for a deployment and activation of this kind.

The Aave V4 Protocol Security Council 0x187AAE17d4931310B3fc75743e7F16Bdc9eD77e9 (5-of-8) was deployed successfully on Arc and mirrors the configuration of the Protocol Security Council instances on other chains, including the same signer set as on Ethereum and Avalanche. It comes with the Executor 0x8e79b0541122d3822eC93082cEB1ab03EDBc1Fd5, which holds HUB_CONFIGURATOR_DOMAIN_ADMIN_ROLE on the Arc AccessManager and facilitates execution of the sophisticated set of actions contained in payloads.

These addresses are added to the aave-address-book and permissions-book. For transparency, the list of price feeds used for the Hub’s four reserves, following LlamaRisk’s recommendations, is provided below:

Reserve Price source Kind Feeds
USDC 0x729cFd10FC10A908aE9F9b35245cB6Ee14D44D6B PriceCapAdapterStable Chainlink SVR USDC/USD, cap 1.04 on USDC/USD
EURC 0x3b381530cF032F1B2dc1974D228c8BD70bF41914 EURPriceCapAdapterStable Chainlink SVR EURC/USD and EUR/USD, cap 1.04 on EURC/EUR
cirBTC 0x7777547914e03BCbB04Ae034942765a0dbb26aE3 Chainlink SVR proxy BTC/USD
WETH 0x2c7Dc3567b3490f53A8d32625d766834dd023F60 Chainlink SVR proxy ETH/USD

At execution, the Protocol Security Council lifts the temporary halt placed on the market at deployment, making it fully operational, which marks the launch of the market on Arc with Aave Pro support from the very beginning. The action changes no roles, owners, or oracles. Follow-up proposals will be raised to activate cross-chain governance on the instance as soon as possible.

References

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We are pleased to share that a network technical assessment review has been completed for Arc, covering the infrastructure components material to Aave’s operation on the network. The results are now published in the Risk Assessments category for governance review: AL Technical Assessment Aave <> Arc.

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Aave Labs is pleased to share that a technical assessment review has been completed for every asset in the first listing roster for the launch of Aave V4 on Arc. The asset issuers have been responsive and active in collaborating on the due diligence throughout the review, and the results are now published in the Risk Assessments category for governance review: Assessments.

1 Like
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Aave V4 on Arc has been successfully activated. The Protocol Security Council lifted the temporary halt placed on the market at deployment, following the same execution described in the previous update, and the market is now fully operational.

The instance is live and accessible through pro.aave.com, with USDC, EURC, cirBTC, and WETH available as reserves from launch, per the configuration and price feeds shared previously.

Follow-up proposals will be raised to activate cross-chain governance on the network as soon as infrastructure is ready.

AL Development Update | September 2026
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Summary

This analysis covers the proposed assets for the initial V4 listing on Arc, specifically cross-chain assets already listed on Aave instances. This review provides an overview of key aspects, including chain-specific characteristics, bridging infrastructure, contract implementations, access control, liquidity, and other risk-related factors.

The key findings include that access control across all contracts, including both assets and bridge contracts in scope, relies on EOAs with keys held under Circle’s enterprise-grade key management program, which they claim maintains SOC 2 Type 2 attestation and follows NIST frameworks across the infrastructure. Further, no timelocks gate sensitive contract upgrades, consistent with Circle’s operational model for USDC, EURC, and cirBTC on other networks. For privileged roles, different assigned addresses were observed across the contracts, with no reassignments recorded.

WETH has a different implementation as it is not natively minted on Arc, with its backing escrowed on Ethereum. Its owner and pauser slots remain unclaimed, meaning no party can currently modify its privileged roles or pause the token. However, the Cross Chain Token Service (CCTS) retains ownership assignment authority and can resolve the unclaimed state at any time. The WETH token and the bridge minter contracts for cirBTC, EURC, and WETH, represented by their respective TokenManager contracts, are beacon proxies that do not pin their own implementation and instead resolve it through the CCTS singleton at call time. Consequently, the CCTS owner can replace the implementation for all of these contracts on the chain in a single action. Additionally, WETH has no native blacklist and instead inherits the blacklist functionality of Arc USDC.

Bridge rate limits are also implemented for each asset via their respective bridge minter contracts.

Comparative table

Asset Issuance Bridge Verifier Setup Rate Limits Token Upgradeable
USDC Native mint & bridgeable via CCTP CCTP (burn/mint), 2/2 attester set. Per-account limits via Circle Mint: Account-specific, Per-transfer limit via TokenMinterV2: 10M USDC Yes (via FiatTokenProxy owner)
EURC Native mint & bridgeable via CCTPx Circle Mint, permissioned mint/redemption and CCTPx (burn/mint), uses underlying CCTP 2/2 attester messaging. Per-account limits via Circle Mint: Account-specific, Per-transfer limit via TokenManager: 862K EURC, Per six-hour limits via TokenManager: Inbound/Outbound 4.31M EURC Yes (via FiatTokenProxy owner)
cirBTC Native mint & bridgeable via CCTPx Circle Mint, permissioned mint/redemption and CCTPx (burn/mint), uses underlying CCTP 2/2 attester messaging. Per-account limits via Circle Mint: Account-specific, Per-transfer limit via TokenManager: 9 cirBTC, Per six-hour limits via TokenManager: Inbound/Outbound 135 cirBTC Yes (via FiatTokenProxy owner)
WETH Bridged via Circle’s new CCTPx protocol CCTPx (lock/mint), escrowed on Ethereum, uses underlying CCTP 2/2 attester messaging. Per-transfer limit via TokenManager: 500 WETH, Per six-hour limits via TokenManager: Inbound/Outbound 2,500 WETH Yes (via the Cross Chain Token Service beacon and the token’s own owner slot is unclaimed)

The full assessment for each asset can be found in their corresponding threads:

Disclaimer

This review was independently prepared by LlamaRisk, a DeFi risk service provider funded in part by the Aave DAO. LlamaRisk is not directly affiliated with the protocol(s) reviewed in this assessment and did not receive any compensation from the protocol(s) or their affiliated entities for this work.

The information provided should not be construed as legal, financial, tax, or professional advice.