Aave V4 is a modular protocol upgrade slated for Q4 2025 that replaces Aave’s monolithic markets with a “hub and spoke” architecture, adds dynamic risk controls, a health-targeted liquidation engine and a Position Manager to reduce liquidation risk and improve UX.
-
Modular hub-and-spoke design
-
Dynamic risk configurations and health-targeted liquidations reduce forced closures.
-
Position Manager and multi-call batching aim to streamline user flows; TVL context: DeFi total value locked ~ $156B (DeFiLlama).
Aave V4 update: modular hub-and-spoke design, health-targeted liquidations, Position Manager — learn what changes and when to expect the Q4 2025 launch. Read on for details.
What is Aave V4 and when will it launch?
Aave V4 is a major protocol upgrade planned for the fourth quarter of 2025 that introduces a modular “hub and spoke” architecture to enable custom lending markets while keeping liquidity composable. The update also adds dynamic risk controls and a Position Manager to improve user experience and reduce liquidation risk.
How does the hub-and-spoke modular design work?
The hub holds base liquidity while individual spokes create isolated markets with distinct risk profiles. Each Spoke draws liquidity from the Hub, returns a base rate set at the Hub level plus an asset-specific risk premium tied to collateral composition. This preserves capital efficiency while enabling market-level parameter variation.
A diagram illustrating Aave V4’s “hub and spoke” architecture. Source: Aave
Why will health-targeted liquidations matter for users?
Health-targeted liquidations only close the minimum portion of a position required to restore collateral parameters. This prevents full-position liquidations and preserves borrower exposure where possible. The mechanism should reduce unexpected losses when global parameters change across multiple positions.
What user-facing features does Aave V4 add?
Key user-facing features include a unified wallet-level UI that surfaces modular spoke details, a Position Manager to automate withdrawals, borrows and repayments, and a multi-call function to batch actions into a single transaction for efficiency.
Aave V4 introduces a Position Manager that can execute actions on behalf of users. Source: Aave
How will risk configuration change in V4?
V4 supports per-spoke risk profiles and dynamic risk parameters to avoid cascading liquidations from global parameter shifts. Administrators can tune spoke-level collateral thresholds and premiums to reflect asset composition and risk tolerance.
What is the expected rollout timeline?
The team plans to publish a V4 whitepaper, open the codebase publicly, and launch a testnet prior to mainnet release. The target for the mainnet deployment is sometime in Q4 2025, subject to audit and testnet validation.
The total value locked in Aave crossed the $40 billion level in August. Source: DeFiLlama
How does Aave V4 compare to V3?
| Feature | Aave V3 | Aave V4 |
|---|---|---|
| Architecture | Monolithic markets | Hub-and-spoke modular markets |
| Risk configuration | Global parameters (uniform) | Per-spoke dynamic configurations |
| Liquidation model | Fixed-sum/full-position liquidations | Health-targeted partial liquidations |
| User automation | Limited | Position Manager and multi-call batching |
Frequently Asked Questions
Question: How can users prepare for the V4 testnet?
Users should follow official Aave announcements, allocate test funds for experiments, and evaluate Position Manager settings on testnet before mainnet. Confirm smart contract addresses and audit reports before interacting on mainnet.
Key Takeaways
- Modularity: Hub-and-spoke design enables per-market customization while keeping liquidity composable.
- Risk reduction: Health-targeted liquidations and dynamic risk profiles aim to lower unexpected losses.
- User experience: Position Manager, multi-call and unified UI simplify portfolio and transaction management.
Conclusion
COINOTAG reporting: Aave V4 is a structural upgrade designed to improve capital efficiency, risk management and user workflows. With a target launch in Q4 2025, the protocol’s hub-and-spoke model and health-targeted liquidations mark a significant evolution for DeFi lending markets. Monitor official Aave publications, the forthcoming whitepaper and testnet reports as the release approaches.
Meta description: Aave V4 update: modular hub-and-spoke markets, health-targeted liquidations and Position Manager — planned Q4 2025. Learn what changes and how to prepare.
