Aave launched v4 on Ethereum using a hub-and-spoke architecture, while v3 remains active after DAO governance concerns. The split — with v3 holding $24 billion in deposits as of March 2026 — revealed that protocol upgrades can change liquidity design without forcing an immediate migration.

What changed

The core event was a move to a hub-and-spoke deployment for Aave v4 on Ethereum, an architecture intended to let different markets and pools operate with distinct parameters while sharing a central liquidity hub. The launch was publicly announced by Aave founder Stani Kulechov, who framed the upgrade around the new structural model.[https://x.com/StaniKulechov/status/2028186201455251955]

At the same time, v3 remains operational rather than being deprecated, a decision tied to governance friction inside Aave’s DAO. That coexistence means the protocol now runs multiple major codebases in parallel against the same user base and liquidity pools.

What the episode exposed

The move exposed two connected realities. First, the hub-and-spoke design is a deliberate response to a known problem in DeFi lending: liquidity siloing. By separating markets into spokes while preserving a hub, the architecture aims to reduce the trade-off between isolated risk controls and capital efficiency. This design choice is explicitly meant to address liquidity fragmentation in lending markets.

Second, leaving v3 live alongside v4 shows a governance and risk-management preference for staged transitions instead of immediate migrations. That split leaves significant capital distributed across legacy contracts — a practical constraint that can shape how quickly new risk regimes actually take effect. Aave Labs also acknowledged the layered rollout in its communications about the upgrade.[https://x.com/aave/status/2038614626099716165?s=20]

The founder’s broader vision of routing Aave capital toward physical infrastructure remains aspirational rather than immediately operational, and should be read as strategic direction, not a near-term product fact.

What this means for collateral operations

For lenders and collateral managers, the most actionable point is that architecture now encodes optionality. The hub-and-spoke model allows teams to set different risk–reward profiles for distinct markets without forking the entire protocol — a direct avenue to tailor collateral parameters, liquidation thresholds, and incentives by market. That capability can reduce the need to rely on external wrappers or bespoke protocols to isolate risk.

Practically, collateral operations will need to track which version of the protocol governs a given asset or pool, since coexistence means governance, oracle configurations, and param sets can diverge across v3 and v4. That divergence changes operational bookkeeping: the version that controls a collateralized market, not merely the protocol brand, now determines margining and recovery mechanics.

What this changed for collateral markets

At the market level, the upgrade is likely to shift competitive dynamics among decentralized lenders. A modular, spoke-oriented setup makes it easier for Aave to offer differentiated products and to compete with niche lenders that previously relied on bespoke deployments. That could compress some product differentiation advantages but expand on-chain choices for borrowers and institutions.

Assetify judgment: The Aave v4 launch exposed that protocol architecture is now a primary lever for managing liquidity and risk across markets — not just an implementation detail. For crypto-backed lending, that means counterparty and collateral risk will increasingly be defined by which protocol instance and market configuration holds an asset, so lenders and custodians must treat version boundaries as real operational distinctions.