V4 revenue model as strong as v3?

[JosueMpia]

@setaavefree

Does all v4 revenue go to the DAO like it does for v3? Any reason for v4 revenue to decrease compared to v3?

This was answered here: Overview of Aave V4’s Liquidation Engine - #3 by Emilio

@Emilio

Hello @EzR3aL thanks for the question.

First, on the V4 liqudation engine: the V4 engine will indeed work with SVR in the same exact way as the V3 engine, with the additional benefits given by decreased gas costs. In terms of expected SVR revenue, this will ultimately be defined by how the risk managers will configure the parameters that determine liquidation bonuses. If the risk managers believe that is beneficial to be less agressive on bonuses (to be more competitive for the users towards other protocols) then the expected revenue could be lower (unless offset by the additional users the protocol may gain due to better competitivity). Otherwise it might be on par or even above the V3 engine, if the decision is to configure it more conservatively (higher bonuses, no dutch auctions, lower competitivity). In general the goal of the new engine is to be more efficient and provide risk managers with more options to address changing market conditions and pressure from competitors.

In terms of additional possible revenue sources coming from V4 developments, while at the beginning the initial configuration will resemble Aave V3 (with only ERC20 collaterals but more diversified venues for yield seekers, see the current Aave V4 developers preview) in the future we expect a variety of new venues to open up due to the modular architecture of V4. Aave labs has in the works, or planning to implement, a variety of new etherogeneous spokes:

1. Vaults spoke, that allow to keep the collateral segregated from the pools while still allow borrowing; this will satisfy long term needs especially of institutional actors or cefi services that currently face regulatory challenges in using Aave due to the pooled nature of the collaterals
2. Debt trading spoke: similar to what Fluid does today, it will be possible to build spokes that leverage the deep Aave liquidity to let users trade with borrowers debt, in order to generate new revenue stream from swap fees directly at the protocol level and reduce borrow rates, increasing competitivity
3. CDP spokes: V4 can be integrated with dexes that support liquidity ranges like uniswap V4 to allow LPs to unlock liquidity by borrowing from Aave V4 while keeping liquidity positions open.

These are just examples - since V4 moves away from the ERC20-as-collateral model, any asset or position that can be moved onchain can become source of new borrowing demand,.