When a lending protocol you already use releases a new version, your questions are practical ones: where your deposit goes, which contract you sign, and whether the rules that protect your loan have changed. Upgrade announcements usually explain the architecture first, so the answer for an ordinary supplier or borrower takes some digging.
Aave's two newest versions now run side by side, with Aave V3 still the production version of the protocol (source: Aave, Introduction To Aave V3). Aave V4 went live on Ethereum on March 30, 2026, built around a central Liquidity Hub with Spokes connected to it (source: Aave Labs, Aave V4 is Live on Ethereum). V4 then launched on Avalanche on July 15, 2026 (source: Aave Labs, Aave V4 Launches on Avalanche). It also runs on Base (source: Aave Labs, Coinbase Tokenized Stocks Now Live on Aave V4).
What is the difference between Aave V3 and V4?
Aave V3 and V4 are two versions of one pool-based lending protocol, and they differ mainly in how they hold liquidity. V3 gives each market its own pool, so your deposit is lent only inside the market you chose. V4 holds supplied assets in a shared Liquidity Hub that several Spokes, the modules you use, can borrow from.
In pool-based lending, lenders add funds to a shared pool and borrowers take loans from that pool (source: ethereum.org, Decentralized finance). The same model sits behind lending on Ethereum in general, and both versions keep the process that defines how Aave works: you supply an asset, earn interest on it, and can borrow against it as collateral.
Aave V3 applies the pool model one market at a time. Ethereum Core and Ethereum Prime are separate V3 markets, each with its own pool and its own list of assets, which gives each market its own risk profile. Liquidity in one market cannot meet borrowing demand in another. USDC you supply to Ethereum Core can be borrowed only by Ethereum Core users (source: Aave Labs, Understanding Aave V4's Architecture). A new V3 market therefore starts with an empty pool and has to attract its own suppliers.
V4 replaces that market-per-pool design with a Liquidity Hub that holds the assets and keeps the accounting, while each Spoke carries its own borrowing rules. Every Spoke gets two limits from the Hub, a credit line that caps how much it can borrow and a debit line that caps how much it can supply (source: Aave, Aave v4 Overview). The Hub sets those lines, which is how the Aave V4 Hub and Spoke design stops one Spoke from draining the shared liquidity.
Take 10,000 USDC as a worked case: supplied to the V3 Ethereum Core market, it joins Core's USDC pool and funds Core borrowers only. Supplied through a V4 Spoke, it joins the Hub's USDC balance, and a borrower on another Spoke connected to that Hub can take it as long as that Spoke still has room on its credit line. Shared liquidity still has a limit, then: a Spoke can turn down a borrow once its credit line is used up, even while the Hub holds idle USDC. V4 is the newest release in Aave's version history, and this shared pool is its biggest change for suppliers.
Where you supply and borrow on each version
On V3 you supply and borrow inside one market, and that market's pool issues the aTokens that track your deposit and its interest. On V4 every supply or borrow goes through a Spoke, which moves your assets to and from the Hub in the background, so you choose a Spoke and the Hub stays out of view.
The V3 process starts with picking a market and then supplying an asset to that market's pool, which gives you aTokens that represent your share of the pool and begin earning interest at once. The assets you supplied can also back a loan while they keep earning, because V3 is a set of smart contracts built for overcollateralized borrowing (source: Aave, Introduction To Aave V3). Choosing the market comes first among the steps to supply on Aave, and the market name on the confirmation screen tells you which pool your deposit joins.
V4 changes the contract you deal with: when you supply to V4, your assets are stored in the Hub, but every supply or borrow you sign goes through a Spoke, which serves as your entry point to the protocol (source: Aave Labs, Understanding Aave V4's Architecture). Each Spoke sets which collateral it accepts, its risk parameters and its liquidation rules, so two Spokes on one Hub can offer different terms on the same USDC. Aave Pro, the V4 interface, shows every Hub and Spoke in one place (source: Aave Labs, Aave V4 is Live on Ethereum).
On V4 a Spoke is also called a market: the Equities Hub on Base, for example, has one lending Spoke, described as a market, that accepts several collateral tokens against a single USDC reserve (source: Aave Labs, Coinbase Tokenized Stocks Now Live on Aave V4). A V4 market name therefore points to a Spoke and the Hub behind it, which matters when a V4 market and a V3 market carry similar names on the same network.
A common mistake is to treat shared liquidity as a shared position. Your Health Factor comes from your own collateral and debt on the Spoke you used, so another borrower's position on a different Spoke cannot push it down. The same check applies before you open a loan with the steps to borrow on Aave: confirm the market or Spoke name on the review screen, because that name decides which collateral rules your loan follows.
Efficiency Mode and riskier collateral on V3 and V4
Efficiency Mode, or E-Mode, raises your borrowing power when your collateral and your debt tend to move together in price, such as two stablecoins. On V3 you switch it on inside the market you already use. On V4 the same idea runs as its own Spoke, with settings written for that group of correlated assets.
On V3 you enable an E-Mode category inside the market you already use, and the higher borrowing power applies while your collateral and debt both belong to that category. You stay in the same pool, so a stablecoin loan in E-Mode draws on the USDC that every other borrower in that market uses. If you borrow up to the higher limit that Aave E-Mode allows, your Health Factor starts closer to 1, which gives you less room before liquidation.
Aave V3 removed Isolation Mode in its v3.7 upgrade, whose second phase governance executed on May 28, 2026 (source: Aave Governance, Upgrade Aave instances to v3.7 Part 2). Until then, Isolation Mode had let a newly listed or riskier asset back a loan only as your sole collateral, up to a debt ceiling and against a short list of borrowable assets. V3 now limits riskier collateral through E-Mode categories, a loan-to-value (LTV) of 0 on chosen assets, plus supply and borrow caps on each asset (source: Aave DAO, Aave v3.7: Isolation Mode & Siloed Borrowing Removal).
An E-Mode category can also be flagged isolated. Inside it, only the category's own collateral adds to your borrowing power, and every other asset you supplied is treated as LTV 0: it still counts toward your Health Factor but cannot back a new borrow (source: Aave DAO, Isolated eMode in Aave v3.7). On V4, an isolated market for riskier collateral can be built as a dedicated Spoke. The Hub caps how much liquidity that Spoke can draw (source: Aave Labs, Understanding Aave V4's Architecture).
The Avalanche deployment shows the design in practice, with one Core Liquidity Hub supplying every market there so that liquidity stays in a single pool. The Main market takes the widest range of collateral for general lending. In the AVAX Correlated market, sAVAX is the collateral for liquid staking strategies and WAVAX is the only asset you can borrow. The Forex market lets you borrow EURC, USDC and USDT against one another, with conservative caps at launch (source: Aave Labs, Aave V4 Launches on Avalanche).
What changes for you is how you enter the correlated rules. On V3, E-Mode is a switch on your existing position in a market. On V4, you pick the correlated Spoke itself, and your position there has its own loan-to-value and Health Factor, separate from anything you hold on a general Spoke, even though both draw on the same Hub.
Borrow rates on V3 and V4
Both versions set the base borrow rate from utilization, the share of an asset's liquidity that is currently borrowed. On V3 that figure comes from each market's own pool. On V4 it comes from the asset's total liquidity on the Hub, and a User Risk Premium is then added to your loan based on the quality of your collateral.
The V4 rate has two parts, and the first of them, the base rate, follows the utilization curve for that asset on the Hub, measured as borrowed liquidity divided by total liquidity. The User Risk Premium is a percentage surcharge on top of that shared base rate, set by how strong your collateral is (source: Aave, Aave v4 Overview).
The premium is calculated from Collateral Risk, a score each asset receives from its volatility, liquidity and market conditions, so low-risk assets such as ETH score lower than riskier collateral. Your premium is the weighted average Collateral Risk of the assets needed to cover your debt, counted from the lowest-risk asset upward. Interest then builds in two parts: drawn debt that grows at the base rate and premium debt that grows at the base rate times your premium (source: Aave, V4 protocol overview).
In a simple case with a 5% base rate and a User Risk Premium of 10%, the premium adds a tenth of the base rate, so your loan accrues interest at five and a half percent a year in total. Another borrower on the same Hub asset whose collateral is all ETH could carry a lower premium and pay closer to the base rate, even though both loans draw on the same USDC.
On V3 the rate you see belongs to the market you chose, and every borrower of that asset in the market pays the same variable rate. On V4 two people can borrow the same asset from the same Hub at different rates, so compare the rate Aave Pro quotes for your own position. A rate estimate based only on Hub utilization would miss the premium.
Health Factor and liquidation on V3 and V4
Health Factor is your eligible collateral value divided by your debt, and on both versions it has to stay above 1 to avoid liquidation. What changed in V4 is how much of your position a liquidator can close once you drop below 1, and how large a bonus that liquidator earns.
On V3, a liquidator can normally repay half of your debt in one liquidation, because the default close factor is 50%. The close factor rises to 100% when your Health Factor falls under 0.95 or the position is very small. The liquidation bonus on V3 is fixed, whatever your Health Factor (source: Aave, V4 protocol overview).
V4 removes the default close factor, so a liquidator repays only enough debt to bring your Health Factor back to a Target Health Factor, a value set for each Spoke. The bonus grows as your Health Factor falls, in the style of a Dutch auction, which pays the liquidator more for a deeper shortfall (source: Aave, V4 protocol overview).
Take the same loan under both rules: you supply ETH worth $10,000, your market counts 80% of it as eligible collateral, and you borrow 7,000 USDC, so your Health Factor starts at 8,000 divided by 7,000, about 1.14. When ETH falls until your collateral is worth $8,500, eligible collateral drops to $6,800 against 7,000 USDC of debt, which puts your Health Factor at 0.97. For a clean comparison, assume a 5% liquidation bonus on both versions, although a real V4 bonus moves with your Health Factor.
On V3, the 50% close factor lets a liquidator repay 3,500 USDC and take $3,675 of your ETH, which is the repayment with the 5% bonus added. You end with $4,825 of ETH against 3,500 USDC of debt, a Health Factor of about 1.10. On a V4 Spoke with a Target Health Factor of 1.05, each USDC repaid removes $1.05 of ETH, of which 80% counts toward your Health Factor, so your eligible collateral falls by 0.84 for every USDC repaid. Solving (6,800 - 0.84R) / (7,000 - R) = 1.05 gives R of about 2,619 USDC.
The V4 liquidator therefore takes about $2,750 of your ETH, and you keep $5,750 of collateral against about 4,381 USDC of debt, a Health Factor of exactly 1.05. You keep more collateral, but the position comes out closer to a Health Factor of 1, so a further price drop can trigger another liquidation sooner. Keeping a buffer well above 1 is the same Health Factor and liquidation discipline on both versions.
Holding V3 and V4 positions at the same time
You can hold V3 and V4 positions in the same wallet. V4 going live moved nothing out of V3, so your aTokens and loans there stay as they are until you withdraw or repay. A V4 position exists only after you supply or borrow through a Spoke.
The V4 design lets governance add features or markets while liquidity stays where it is (source: Aave, Aave v4 Overview). Governance can add Spokes with new borrowing options and retire outdated ones, with no costly migration of the assets already in the Hub (source: Aave, V4 protocol overview). For you, that means V4 grows by attaching Spokes, and your V3 position remains a separate V3 position the whole time.
The two versions keep separate accounts: a V3 loan and a V4 loan each have their own Health Factor, a liquidation on one has no effect on the other, and a deposit on V3 cannot back a loan on V4. Moving a position is a manual withdrawal from V3 followed by a fresh supply through a V4 Spoke, with gas paid on both transactions and a different rate and set of collateral rules on the other side. Until you move, your V3 USDC funds only V3 borrowers in that market.
Running both is normal during the overlap, and a wallet can show a healthy V3 borrow beside an empty list of V4 Spokes, or the reverse, while both interfaces work correctly. Each version tracks its own positions, rates and caps, so you read each one separately when you check your exposure. Both are deployments of the Aave protocol, whose AAVE governance token holders vote on decisions for both versions, including protocol deployments and parameter changes (source: Aave, AAVE Token).
If following the V4 rollout has you looking at the AAVE token itself, another way to act on that view is to trade it on BloFin. AAVE/USDT Spot buys the token, the AAVEUSDT Perpetual is a contract on its price, and the costs of both are listed on the BloFin fee schedule.
Side-by-side differences for suppliers and borrowers
For a supplier, the versions differ mainly in who can borrow your deposit. For a borrower, they differ in how your rate is priced and how much of your loan a liquidator can close. Liquidation below a Health Factor of 1 and the basic supply and borrow actions stay the same on both.
| Topic | Aave V3 | Aave V4 |
|---|---|---|
| Liquidity | A separate pool for each market | A shared Liquidity Hub with Spokes connected to it |
| What you use | A market | A Spoke, also called a market |
| Who can borrow your deposit | Borrowers in the same market | Borrowers on any Spoke connected to the same Hub, within each credit line |
| Efficiency Mode | A setting inside a market | A separate Spoke for correlated assets |
| Borrow rate | Utilization of the market's pool | Utilization of the Hub asset, with a User Risk Premium for your collateral |
| Liquidation size | Half the debt by default, all of it under 0.95 | Enough to restore the Spoke's Target Health Factor |
| Liquidation bonus | Fixed | Rises as Health Factor falls |
| Liquidation trigger | Health Factor below 1 | Health Factor below 1 |
| Moving between versions | Stays on V3 until you withdraw | Opt in by supplying through a Spoke |
| Networks | Ethereum, Avalanche and other networks | Aave-run markets on Ethereum, Avalanche, Arc and Base, with an ether.fi-run instance on OP Mainnet |
Your plan decides which difference matters. If you only supply, the liquidity structure decides where your interest comes from, since on V3 your USDC earns from one market's borrowers while on V4 it earns from every Spoke that draws on the Hub. If you borrow near your limit, the liquidation rules matter most, because a V4 Spoke closes a smaller part of your loan and pays a liquidator more as your position weakens. If your collateral is volatile, the rate model matters, because the same asset can cost you more on V4 than it costs a borrower posting ETH.
Market lists, caps and Spoke settings change through governance, so treat the interface in front of you as the live configuration for your wallet. The architectural differences between the two versions stay the same even when the listings change.
Which Aave version to use
Use V3 if your position already sits in a V3 market that suits you, since V3 remains the production version and nothing forces a move. Choose a V4 Spoke when its collateral list, rate or liquidation terms fit your plan better, and supply there as a separate position.
Five checks settle the decision for most positions:
- Find which version your current position is on: the V3 interface lists markets, while Aave Pro lists V4 Hubs and Spokes.
- Compare the borrow rate you would actually pay, including the V4 User Risk Premium for your collateral.
- Read the Spoke's Target Health Factor and bonus settings if you borrow close to your limit.
- Count the cost of moving: a withdrawal on V3, a fresh supply on V4, and gas on both.
- Keep each Health Factor well above 1, because each version liquidates on its own.
The network you use narrows the choice as well. Aave's own V4 markets have run on Ethereum since March 30, 2026, Avalanche since July 15, 2026 and Arc since September 16, 2026 (source: Aave Docs, Changelog). The fourth is on Base, where V4 supports tokenized stocks as collateral (source: Aave Labs, Coinbase Tokenized Stocks Now Live on Aave V4). A separate V4 instance operated by ether.fi runs on OP Mainnet, where anyone can supply stablecoins and borrowing is limited to ether.fi's verified cardholders (source: Optimism, ether.fi outgrew its own lending engine, so it upgraded to Aave V4 on OP Mainnet). On Ethereum, Avalanche and Base both versions are open side by side, while Arc has V4 only. On any of them, choose the Spoke or market that matches your collateral and your tolerance for liquidation.
Looking to trade AAVE tokens on BloFin? To get started, you'll need to first create a BloFin account, fund your account with cryptocurrency, then open the AAVE/USDT Spot trading page or the AAVEUSDT Perpetual page.
Frequently asked questions
Do Aave V4 parameter changes apply to positions already open?
Changes usually apply to new positions only, because when governance changes a collateral factor, a maximum liquidation bonus or a liquidation fee on V4, the protocol stores a new risk configuration beside the old one. Positions opened under the earlier configuration keep those terms, and the updated values govern positions opened afterward. Your position also moves to the latest settings when you borrow, withdraw or disable collateral, while supplying and repaying keep its current terms. Governance can push existing positions onto the latest settings where the old terms could harm the protocol (source: Aave, V4 protocol overview).
When does the Aave V4 risk premium on a loan update?
Your User Risk Premium refreshes only on actions that can change how well your loan is collateralized: borrowing more, withdrawing collateral, disabling an asset as collateral, or a liquidation. Repaying and supplying lower risk on average, so they do not trigger a refresh. An inactive position keeps its premium unchanged until you refresh it yourself by calling the update function, and governance can force an update when a position has built up extra risk between actions (source: Aave, V4 protocol overview).
What is the dust rule in Aave V4 liquidations?
Dust is a balance too small to be worth liquidating on its own, and on V4 the threshold is a fixed $1,000 in value. If a normal liquidation would leave less than that amount of debt behind, the liquidator can repay the whole debt, provided they choose to cover it fully, and without that choice the liquidation reverts. Some dust can still remain when the collateral or debt reserve involved is completely used up (source: Aave, V4 protocol overview).
Who covers bad debt on an Aave V4 Hub?
Bad debt is recorded as a deficit when a liquidation leaves a borrower owing money with no collateral left anywhere in the position. The protocol then clears that borrower's debt and resets their risk premium to zero. Any authorized, active Spoke can cover the deficit with its own supplied shares on the Hub, which shifts liquidity across to restore the Hub's accounting. One Spoke's bad debt can therefore be absorbed by another Spoke's supplied balance, and the Hub recovers without outside capital (source: Aave, V4 protocol overview).
Does buying AAVE on BloFin give you an Aave V3 or V4 position?
Buying AAVE on BloFin gives you exposure to the governance token, and no lending position on either version. AAVE is an ERC-20 token on Ethereum that trades on both centralized and decentralized exchanges. AAVE can itself be supplied to Aave markets as collateral, so a token you move from the exchange to your own wallet can later back a borrow, while a token held on the exchange earns no protocol interest (source: Aave, AAVE Token). On V3, positions start when you supply or borrow from a self-custodial wallet (source: Aave, Introduction To Aave V3).
Why can an Aave V4 borrow be blocked when the Hub still has liquidity?
The Spoke you use has its own borrowing limit, so available liquidity in the Hub does not guarantee that your Spoke can draw more. Each Spoke receives a credit line from the Hub, while each reserve has its own risk settings (source: Aave, Aave v4 Overview). A proposed borrow can exceed that credit line even when other Spokes still have room. Check the selected Spoke's limits alongside the Hub balance before treating idle liquidity as borrowing capacity for your position.
Researched and written by the BloFin Academy editorial team with AI-assisted drafting. Primary sources include the Aave v4 documentation, Aave Labs notes on the V4 launches on Ethereum, Avalanche and Base, the Aave Labs V4 architecture note, the Aave V3 introduction, the Aave v3.7 governance proposal and design notes, the Aave Docs changelog, the Optimism note on the ether.fi V4 instance, the Aave V4 protocol overview on GitHub, the Aave documentation on the AAVE token, and ethereum.org on decentralized finance. All facts independently verified against cited documentation current as of October 2026.
This article is for informational and educational purposes only. It is not financial, investment, trading, or legal advice. Cryptocurrency can lose value. Borrowing on Aave can lead to liquidation if the health factor drops below 1. Spot AAVE/USDT buys the token. An AAVEUSDT Perpetual is a contract on the price. Do your own research. Consider your circumstances before using any protocol or trading any asset.