Greetings, Aave community!
We would like to share a vision for how Aave V4 could evolve within today’s lending system and highlight the broader potential they unlock for innovation. This post is not intended as a formal recommendation but rather as an educational resource for the Aave community on the capabilities of Aave V4. The goal is to demonstrate the possibilities of the new Aave V4 architecture versus existing onchain lending models and how it could support new business lines and unlock innovation opportunities for the Aave DAO to grow market share and revenue.
What Are Aave V4 Spokes?
Aave V4 introduces a new Hub and Spokes architecture, designed to make the protocol more modular, flexible, and scalable. This design enables liquidity to flow more efficiently across ecosystems where demand exists.
The model removes the “chicken-and-egg” problem often faced when deploying new markets or strategies. Whenever a new risk profile is configured and deployed as a market for the Aave Protocol (such as Aave Prime market), a newly created market requires seeding of liquidity to ensure borrowers are able to borrow. Without liquidity the lending and borrowing markets take time to find the interest rate and liquidity equilibrium and can risk the growth and scalability of the market.
Typically liquidity bootstrapping is handled with native token rewards or by “renting” liquidity from LPs or liquidity aggregation platforms. For both, after the incentives or payment for liquidity dries up, this mercenary capital vanishes from the market. Aave V4’s new liquidity provision model with Hubs and Spokes is designed to mitigate the need of relying on these two methods and use a sophisticated liquidity provisioning model where hubs allocate credit lines to each Spoke that are effectively segregated risk profiles in the system.
Furthermore, the maturity of the current design of the Aave protocol has led to a decrease in developer contributions from the broader DeFi community. Spokes would empower the Aave DAO service providers (SPs) and integrators to build on Aave while accessing its deep liquidity, with each Liquidity Hub configured based on the DAO’s requirements and focus on expanding the innovation within the Aave ecosystem.
The Hubs
At the center are Liquidity Hubs, which stores liquidity and acts as the core settlement layer. Liquidity enters into the Liquidity Hub through a Spoke that defines the conditions such as interest rates and other risk parameters. Liquidity Hubs aggregate the liquidity into one place and enable access to the concentrated liquidity through credit lines that Spokes can draw from. These allowances are determined by the Governor of the hub and are subject to risk management. Liquidity Hubs provide security, efficiency, and liquidity aggregation while serving as the foundation for all connected use cases.
A single network, such as Ethereum, can host multiple Liquidity Hubs, and each Hub can function as a risk ladder segmented by a risk profile or as a special-purpose Hub for a specific lending strategy. This approach allows each hub to enhance its overall risk profile based on the Spokes it is connected to, and each Hub can be constructed to present a risk profile with a combination of lending strategies.
The setup of the above Hubs and Spokes would follow the GTM strategy and risk strategies proposed by growth and risk SPs. From a design perspective, there is a wide range of hubs that can be created; however, it might be intuitive to start with 1 to 3 Hubs at the beginning for simplicity and liquidity concentration.
From a technical standpoint, Liquidity Hubs can be governed directly by the Aave DAO, immutable deployments, or deployed by third-party providers under a revenue share model with the DAO. Decisions on governance, revenue sharing, and permissioning belong to the DAO, not Aave Labs. Our role is to highlight what is technically feasible with the Aave V4 infrastructure and where extensions could be built on top.
The Spokes
Spokes are specialized extensions that connect to Liquidity Hubs. They act like modular “plug-ins,” allowing Aave to expand into new lending strategies and use cases without fragmenting liquidity or suffering from “chicken and egg” problems of liquidity provisioning. Risk is managed through structured credit lines issued from the Hubs based on the governor’s parameters.
From a technical standpoint, it’s possible for each spoke to access liquidity from multiple Liquidity Hubs and we would see this approach as a natural way of scaling a use-case across Aave. Spokes provide a flexible way to scale liquidity while preserving capital efficiency.
Why Do Spokes Matter?
Spokes are purpose-built surfaces where new borrowing logic can be launched without re-designing the core protocol. The center stays opinionated and stable (risk rails, accounting, governance), while extension work happens at the edge, letting contributors target niche or not-yet-imagined use cases or risk profiles.
Materially, Spokes don’t silo liquidity. They can draw from a hub’s reserves, which allow new Spokes to tap Aave’s existing liquidity rather than requiring a fresh market in need of bootstrapped capital. The outcome is higher capital efficiency for the protocol, and less expenditure on liquidity mining programs, naturally reducing exposure to mercenary capital.
Spokes are open by design with developer tools to support community built instances. Because Spokes inherit the Hub’s risk rails and governance, builders can launch by asset set or specialized flow and still grow the innovation surface without eroding Aave’s core architecture.
What Can Spokes Do?
1. Custom Risk Markets
Spokes can serve niche asset classes with tailored risk parameters while still benefiting from hub liquidity. Carefully designed Spokes connected to deep Liquidity Hubs allow Aave to support diverse risk profiles without fragmenting liquidity.
For example, specific Spokes for Ethena’s sUSDe and related Pendle PTs could access capped liquidity from the main Core Hub up to a certain credit line limit. A dedicated Ethena Hub, however, could provide greater liquidity for users comfortable with those risks. Unlike supply and borrow caps on Aave V3, this approach accommodates lenders seeking more exposure, including those conducting their own due diligence in return for enhanced return and risk profile.
Similarly for the actual Ethena use-case, a dedicated spoke would allow liquidity to scale higher as such a Spoke could be connected to multiple Hubs. As multiple Hubs are connected to the Ethena Spoke, it can draw from multiple sources of liquidity while each hub is able to take calculated risk, capped by the credit line allowances.
2. Collateral segregation
One interesting exploration path is the ability to provide collateral segregation while being able to borrow against assets on Aave. Some DeFi users want to borrow liquidity from Aave but not lend out their underlying collateral for the lending risk. At the same time, institutional users express not to see their collateral mixed with other pooled funds of the same asset.
In these use-case scenarios, Spokes can be customised in a certain way where the collateral does not enter into a pool, instead the asset can be stored on a segregated vault (and compatible with similar implementation designs as Lido V3 vaults), while the borrower could gain access to the Hub liquidity through a custom Spoke. A similar approach can be taken for storing the collateral in a Safe while accessing Aave liquidity without adding any additional trust assumptions for the protocol.
Collateral segregation approach can be further developed to include custodians and their user requirements. For example a separate Custodian Liquidity Hub could be deployed with appropriate custodian Spokes in parallel that have custom configurations to enable collateral storage within the custodian while being able to enable borrow capital for borrowers of custodian users. This opens exposure to a market share that was not previously available for the Aave Protocol. Such setup of course comes with similar trust assumptions as lending out centralized stablecoins currently in Aave, but in reverse, trust assumptions are on the custodian and their systemic design, hence such lending strategy could be deployed on a separate Hub, where LPs are comfortable on these trust assumptions.
Collateral segregation provides an example of the flexibility of Aave V4 and catering use-cases that were not previously tapped with Aave V3, opening new potential revenue streams. Collateral segregation is not built yet; however, it is something that can be pursued should sufficient demand and availability of resources suffice.
3. Cross-Chain Liquidity Routing
Spokes can become connectors for Hubs across networks, enabling seamless lending and borrowing across ecosystems. While not part of the initial launch, this presents how Aave could dynamically manage liquidity between networks to reduce liquidity segregation while bootstrapping network opportunities that the DAO is willing to pursue.
4. New Business Lines and Financial Primitives
Since Spokes are independent smart contracts connected to Hubs, they provide a design space for entirely new markets and products.
One immediate application is secondary markets for debt and even collateral. Users could elect to have positions tradable, enabling repricing, exits, or transfer of repayment obligations under transparent rules. That market structure, operated inside a Spoke, introduces fee lines (list, match, settlement) that accrue to the DAO, while preserving user choice and Hub-level safety checks. In effect, it formalizes a behavior that already exists informally (offloading or acquiring risk) into a governed, revenue-producing lane.
A second vector is credit against AMM positions. Because LP shares carry path-dependent risk (impermanent loss, fee accrual, oracle drift), the underwriting has to be context-aware. V4’s Spoke logic can track pool composition, volatility bands, and oracle quality, then tune LTVs and liquidation paths accordingly, which makes AMM-backed borrowing viable at scale rather than a boutique feature. This grants new utility for idle LP capital, and a fresh source of interest spread and liquidation proceeds for the DAO.
Fixed-tenor credit is also straightforward in this model. Supply and borrow intents can be order-matched by duration and rate inside a Spoke, while unmatched liquidity continues to earn yield from the Liquidity Hub via another Spoke until consumed by a successful match. The idea echoes ETHLend’s early marketplace, but with materially better utilization: capital isn’t stranded while waiting for a counterparty, and when a match occurs, funds are pulled into the fixed-term Spoke with clear settlement and rollover rules.
Exchanges and perp venues get a purpose-built margin facility via a Spoke as well. Here, the Spoke handles cross-margin/cross-collateral logic, liquidation waterfalls, and exchange-specific hooks (funding, insurance, circuit breakers), while the Hub supplies standardized liquidity and risk caps. Traders receive leverage that maps to venue mechanics; the DAO captures fees and spreads without rewriting exchange code into the core protocol. This creates an intentional isolation wherein failures in venue-specific logic are ring-fenced to that Spoke.
Finally, tail-end credit primitives, such as undercollateralized lines via credit underwriting or Wildcat-style facilities, fit the architecture without exporting novel credit risk to the main Hubs. A Spoke can enforce KYC/KYB, caps, deleveraging rules, and loss buffers, paired to a Hub that limits aggregate exposure. If the thesis proves out, governance can scale limits; if not, the experiment winds down with contained blast radius.
Net-net: any DeFi use case that benefits from credit can be expressed as a Spoke, being programmable, governed, and opt-in, so the DAO can pursue new utility and fee lines while the Hub preserves unified liquidity and a conservative security posture.
Conclusion
Spokes give Aave V4 the flexibility to scale Aave’s business model both in horizontal and vertical use-cases, while expanding the revenue base of Aave.
We do not claim which use-cases could be feasible to pursue. However, our goal is to demonstrate that beyond the immediate need of Aave V4 to improve the existing liquidity provisioning model of Aave V3 and risk management, there are exciting opportunities for the Aave DAO and service providers to pursue in the future by extending the protocol. In some ways Aave V4 is a financial operating system where Liquidity Hubs are the capital foundation, and Spokes act as applications that extend the functionality, markets and business lines.
Although it is too early to predict the full range of Spokes that will emerge, it is clear that they represent a powerful way to extend the Aave Protocol beyond traditional lending markets. From custom risk profiles to new primitives and cross-chain liquidity, Spokes create a pathway for Aave to become more versatile, resilient, and innovative than ever before.
