Aave V4 launches Avalanche, unlocking $15 million in incentives and new credit market

Aave V4 officially launched on Avalanche, unlocking US$15 million in incentives and new credit markets.

Aave V4 has been officially launched on the Avalanche network, the first deployment of the decentralized lending protocol outside the Ethereum main network. As a rapidly emerging Layer 1 blockchain, Avalanche claims that this launch will lay the foundation for a new generation of on-chain credit markets and is expected to include tokenized assets and traditional assets in the future.

Aave introduces a "center-spoke" model into Avalanche

The deployment of Aave V4 introduces a "center-spoke" framework into Avalanche. The architecture separates shared liquidity pools from individual lending markets, each using specific risk parameters. Through this structure, Aave aims to improve capital efficiency and provide customized financial products for different types of borrowers and collateral.

Aave Labs stated that Avalanche has a mature DeFi environment and has been robust in supporting Aave V3 since 2022, making it an ideal choice for expansion. The network successfully handled clearing, oracle updates, and market pressure periods, which built confidence in bringing V4 to the Avalanche ecosystem.

The Avalanche Foundation promises to provide milestone incentives of up to $15 million to promote rapid adoption and growth. These rewards are linked to the launch of new mobility centers and the achievement of growth benchmarks in specific markets.

The launch of Aave V4 on Avalanche introduces a professional lending infrastructure with strong risk control and shared liquidity, laying the foundation for an expanded credit market that may include tokenized assets.

Liquidity Centers and Radios Details

The original version of Aave V4 in Avalanche had a central liquidity center and three spokes, each designed to support different lending arrangements. The central liquidity center provides shared asset pools including wAVAX, sAVAX, BTC.b, USDC, USDT, wETH.e and EURC. Users can use these core assets to supply or obtain liquidity, thereby connecting borrowers and lenders in the network.

The main and spoke branch is aligned with the central asset list in terms of lending and collateral requirements, making it easy for users to seamlessly use the most widely used cryptocurrencies and stablecoins. In addition, the AVAX-related radiating branch focuses on using sAVAX and WAVAX as collateral options, with WAVAX being the main loanable asset. At the same time, the foreign exchange radiation branch is specially designed for stablecoin transactions and supports EURC, USDC and USDT as collateral and loan issuance.

Radial branches and asset details

The following table shows the collateral and loanable assets of each radial branch:

Main radial branch: mortgaged assets wAVAX, sAVAX, BTC.b, USDC, USDT, wETH.e, EURC; loanable assets wAVAX, sAVAX, BTC.b, USDC, USDT, wETH.e, EURC

AVAX-related radial branch: mortgaged assets sAVAX, WAVAX; Borrowing assets WAVAX

Foreign Exchange Radiation Branch: Collateral assets EURC, USDC, USDT; Borrowing assets EURC, USDC, USDT

This multi-level structure is designed to meet the flexibility of different users 'needs while maintaining the integrity and efficiency of protocol liquidity.

Planned RWA Center and Governance Steps

After the initial launch, a new real-world asset (RWA) center proposal is expected to be presented. The center will focus on institutional-level collateral from tokenized real-world assets, such as investment funds or traditional financial products, but all of its operations are done on-chain. The RWA center will be independently governed, with separate asset lists, risk control parameters, and dedicated oracle settings.

Independent risk consulting provider LlamaRisk will conduct community feedback collection and risk analysis before final governance decisions. The process will first go through the ARFC snapshot phase and may then move to a full Aave Improvement Proposal (AIP) vote for final confirmation.

Small Dictionary: RWA (Real World Assets): Refers to tangible or traditional financial products, such as investment funds or bonds, represented on the blockchain through tokenization for integration with decentralized financial protocols.

By isolating institutional collateral from major retail liquidity pools, the RWA Center aims to mitigate cross-market risks and promote broader institutional participation.

Aave, one of the world's largest decentralized lending agreements, continues to expand its business scope with Avalanche's powerful DeFi infrastructure, which heralds possible shifts in the on-chain credit market in the coming years.