When you lend stablecoins through a lending protocol, your deposit usually joins one market that only its borrowers can use. A new market with different collateral rules starts with an empty pool and must attract suppliers first. Lending designs that share one pool of liquidity across many markets fix that by separating where money sits from where risk rules live.
Aave V4 is the newest example of that design, and it went live on Ethereum on March 30, 2026. Supplied assets sit in a Liquidity Hub, where they form one shared pool of capital for the network. Each Spoke that connects to the Hub sets the collateral it accepts, its risk parameters and its liquidation rules, which lets that one pool serve several lending markets at the same time (source: Aave Labs, Aave V4 is Live on Ethereum).
If you already know how Aave works on V3, the supply, borrow and Health Factor steps will look familiar. What changes is where your deposit goes after you sign, which borrowers can use it, and which set of risk parameters your position follows.
What is Aave V4 Hub and Spoke?
Aave V4 Hub and Spoke is a lending architecture in which you use Spokes, modules with isolated risk that route liquidity to and from a central Liquidity Hub. That split lets governance open new markets on existing liquidity, unlike V3, where every market is its own pool (source: Aave Docs, Aave v4).
On V3, each market, such as Ethereum Core or Ethereum Prime, has its own isolated pool and asset mix. USDC supplied to Ethereum Core can be borrowed only by Ethereum Core users, so every new market with a different risk profile had to bootstrap its own liquidity. That requirement split capital across several markets on the same chain. V4 puts at least one Liquidity Hub on each network and allows more than one Hub per network (source: Aave Labs, Understanding Aave V4's Architecture).
Two more terms appear as soon as you open the V4 interface. A Hub asset is an ERC-20 token registered in the Liquidity Hub, and together those tokens make up the shared liquidity that connected Spokes supply to and borrow from. A reserve is the configuration that defines how one Hub asset is supplied and borrowed inside one Spoke, with that Spoke's risk settings. The Hub decides how much of the asset can move between the reserve and the Hub through credit and debit limits (source: Aave Docs, Aave v4).
| Component | What it does | What you do with it |
|---|---|---|
| Liquidity Hub | Holds supplied assets, runs accounting, sets each Spoke's caps | Nothing directly, because it works behind the Spoke |
| Spoke | Holds your position, prices collateral with its own oracles, runs liquidations | Supply, withdraw, borrow and repay |
| V3 market | Runs one isolated pool with its own asset list | Supply and borrow inside that pool only |
A useful way to remember the design is that the Hub answers how much liquidity exists and which Spoke may draw it. The Spoke answers whether your collateral is good enough and what happens when it stops being good enough. Both answers apply every time you sign a transaction on V4, which is why nearly every practical decision on V4 comes back to the Spoke you choose.
Where your deposit goes when you supply on V4
When you supply on Aave V4, you sign a transaction with a Spoke, and the Spoke moves the tokens into the Liquidity Hub. You never deposit into the Hub directly, because the Hub works behind the scenes while Spokes serve as the entry point for every supply and borrow (source: Aave Labs, Understanding Aave V4's Architecture).
Take 10,000 USDC that you want earning interest on V4. You open Aave Pro, the dedicated V4 interface, pick a Spoke that lists USDC, review the supply rate and the Spoke's collateral settings, and sign (source: Aave Labs, Aave V4 is Live on Ethereum). The Spoke records a 10,000 USDC supply in your position and transfers the tokens to the Hub. There they join the USDC liquidity that every Spoke connected to that Hub can draw on within its caps. Your balance, your collateral setting and your risk parameters all stay with the Spoke you used.
The same Spoke handles every later action on that position. Spokes route supply, withdraw, borrow and repay calls to the right Hub based on the reserve settings and the caps available at that moment (source: Aave GitHub, Aave V4 Overview). When you withdraw, the Spoke pulls USDC back out of the Hub, which depends on the Hub holding USDC that borrowers have not drawn. When a borrower repays, the repayment flows back into the Hub as available liquidity.
The clicks match supplying on Aave V3: connect a self-custodial wallet, choose the asset, enter the amount, approve the token if the wallet asks, and confirm. On V4 you make one extra decision before those clicks, which is choosing the Spoke. The Spoke you pick decides the collateral rules and liquidation settings your supply follows for as long as it stays there.
Sharing liquidity is different from sharing an account. Positions are tracked per Spoke, each Spoke keeps independent accounting, and a Spoke can be added or removed without affecting the others. That is why USDC you supplied through one Spoke can fund a borrower on another while your position and its Health Factor stay on the Spoke you chose (source: Aave Docs, Aave v4).
Credit lines and caps on each Spoke
Each Spoke reaches Hub liquidity through limits the Hub sets: a credit line for borrowing, a debit line for supplying, and caps on how much the Spoke can draw from or add to the Hub. Those limits keep one busy Spoke from draining liquidity that other Spokes also rely on (source: Aave Docs, Aave v4).
A borrow can fail even when your collateralization is comfortable. You open a Spoke, call it Spoke B, post collateral that easily clears its loan-to-value (LTV) limit, and ask to borrow 500,000 USDC. Spoke B's credit line for USDC has already been fully drawn by other borrowers, so your borrow fails, even though the Hub still holds USDC that Spoke C is allowed to draw. Your collateral was fine and the Hub had liquidity, but the limit that mattered was the one on Spoke B. That refusal is the cap doing exactly what it was built to do.
When a V4 borrow is refused, check three limits before you change your collateral: the Spoke's own risk limits for that asset, the Spoke's credit line at the Hub, and the amount of the asset the Hub has available. Adding collateral fixes only the first of those. If the Spoke's credit line is fully used, you can wait for repayments, borrow a smaller amount, or move to another Spoke whose collateral rules suit what you hold. The borrow itself follows the same sequence as borrowing on Aave V3, where you enable collateral, choose the asset, enter the amount and confirm.
The Hub provides emergency stop controls for the liquidity it holds. Each Spoke has local controls of its own, including its risk parameters, its oracle settings and its own emergency stops (source: Aave Docs, Aave v4). A Spoke that refuses new borrows can therefore be reacting to a pause as well as to a fully used credit line.
A Spoke can connect to more than one Hub, which means the asset you borrow may come from a Hub other than the one your Spoke is listed under (source: Aave GitHub, Aave V4 Overview). On Ethereum, borrowable tokens with a "core" prefix are credit lines drawn from the Core Hub, which acts as the default source of liquidity. Tokens borrowed from other Hubs carry a prefix that names their own Hub (source: Aave Labs, Aave V4 is Live on Ethereum). The prefix tells you which Hub supplied the credit, which helps when you compare borrow rates across Spokes.
Specialized Spokes for e-Mode, isolation and real-world assets
A specialized Spoke serves one use case, such as correlated assets, newer collateral or tokenized real-world assets (RWAs), with its own parameters and access rules (source: Aave Labs, Understanding Aave V4's Architecture). Drawing from the shared Hub, it keeps separate risk settings without splitting liquidity (source: Aave Labs, How Aave V4 Handles Risk Isolation).
Efficiency Mode (e-Mode) is the clearest example. On V3, Aave Efficiency Mode raises borrowing power through optimized asset categories, each carrying its own loan-to-value ratio, liquidation threshold and liquidation bonus. Once a category is active, you can borrow only the assets inside it (source: Aave Help, Efficiency Mode). On V4, e-Mode becomes a separate Spoke with settings for that correlated group. Each e-Mode Spoke can be configured and managed on its own, which keeps exposure to tightly correlated assets contained (source: Aave Labs, Understanding Aave V4's Architecture).
Aave V3 removed Isolation Mode in its v3.7 upgrade. Governance executed the second phase of that upgrade on May 28, 2026 (source: Aave Governance, Upgrade Aave instances to v3.7 Part 2). Before then, the feature held a borrower to one collateral asset, a debt ceiling and a short list of borrowable assets. V3 now limits riskier collateral through e-Mode categories, an LTV of 0 for riskier assets, plus supply and borrow caps on each asset (source: Aave DAO, Aave v3.7: Isolation Mode & Siloed Borrowing Removal).
On V4, Isolation Mode can be built as a dedicated Spoke, which sets its own parameters and access controls while the Hub limits how much shared liquidity it can draw (source: Aave Labs, How Aave V4 Handles Risk Isolation). A token that V3 once listed under Aave isolation mode could therefore get its own Spoke with a small cap on V4, where borrowing capacity can run out sooner than on a broad stablecoin Spoke. Real-world asset Spokes follow the same pattern. An RWA Spoke could accept tokenized Treasury bills as collateral under stricter access, custody or redemption rules (source: Aave Labs, Understanding Aave V4's Architecture).
In Aave Pro you will see Spokes grouped under each Hub, so choose the Spoke whose collateral rules match what you hold. Treat LTV, liquidation settings and Health Factor as properties of that Spoke. Oracles and liquidation parameters are configured per Spoke, which means two Spokes can list the same USDC from the same Hub while pricing your collateral differently (source: Aave GitHub, Aave V4 Overview).
How unified liquidity changes rates on V4
On V4, rates still come from utilization, but utilization is measured on a shared Hub asset instead of one isolated market. Because liquidity flows through the Hub, the design aims to raise utilization and give both suppliers and borrowers better rates than separate pools on the same chain (source: Aave Labs, Understanding Aave V4's Architecture).
Utilization is borrowed liquidity divided by total liquidity for one Hub asset. Below the optimal usage ratio the borrow rate rises gently, and above it the rate climbs much faster. The base rate, the two slopes and the optimal ratio are configured separately for each Hub asset. Suppliers earn the interest borrowers pay after protocol fees (source: Aave Docs, Aave v4).
Example sizes make the curve concrete. Suppose a Hub holds 100,000,000 USDC in total and borrowers across all its Spokes have drawn 80,000,000 USDC. Utilization is 80,000,000 / 100,000,000 = 0.80, or 80%, and the Hub's USDC curve turns that 80% into the shared base borrow rate. If the optimal usage ratio for USDC sits below 80%, the rate is already on the steeper part of the curve. Each extra USDC borrowed then raises it faster than it would at lower utilization.
On top of the shared base rate, V4 adds a user risk premium, an extra charge that rises as the quality of the collateral behind your debt falls (source: Aave Labs, Aave V4 Risk Premiums). The annual percentage yield (APY) and annual percentage rate (APR) you see in the interface are outputs of that curve, the fees and your premium. They follow the same logic as Aave interest rates on V3, with a premium layer that V3 does not have.
For suppliers, the shared Hub means your USDC can earn from borrowers on several Spokes, which helps keep utilization up when one market is quiet. For borrowers, a new Spoke can offer a collateral type that a general market would avoid, while still lending USDC that someone supplied through a general Spoke. The limit is still the credit line, because a Spoke with a small cap gives its borrowers only a small share of the Hub's USDC. When you compare Aave V3 versus V4 for your own use, those two effects are the ones that change your numbers.
How governance adds or changes a Spoke
Governance adds a Spoke by attaching a new module to an existing Hub, so new markets and features arrive while supplied liquidity stays where it is. The Governor, for example the Aave DAO, can add new borrowing capabilities and retire outdated Spokes without a costly liquidity migration (source: Aave GitHub, Aave V4 Overview).
The two halves of the system change at different speeds. The Hub is immutable once deployed and was designed to be as simple as possible. Spokes are upgradeable modules that handle supplying and borrowing for specific assets (source: Aave GitHub, Aave V4 Overview). In practice, the logic you rely on as a user, including oracles, LTV and liquidation parameters, sits in the part of the system that can change. Caps follow a different path, because they are Hub settings. V4's Hubs launched with conservative supply and borrow caps that the Aave DAO plans to raise as it watches live behavior in production (source: Aave Labs, Aave V4 is Live on Ethereum). Read the Spoke's settings each time you return to a position, rather than assuming last month's numbers still apply.
Positions you already hold on V3 stay in their V3 pools under V3 risk parameters until you choose to migrate them yourself.
V4 is the latest major version in Aave's history, and like V3 it runs as its own set of contracts. A supply on one version never turns into a supply on the other by itself. Governance decisions about new Spokes therefore change what you can choose next, while the positions you already hold keep running on the contracts you signed.
Health Factor and liquidation on a V4 Spoke
Health Factor on a V4 Spoke is your eligible collateral value divided by your debt value on that Spoke. It rises when you repay or your collateral gains value, and it falls as interest accrues or prices drop. Liquidation starts when it drops below 1 (source: Aave Docs, Aave v4).
Each Spoke computes Health Factor from the supplies and borrows you hold on that Spoke alone, because a V4 position is the combined view of your activity within one Spoke (source: Aave Docs, Aave v4). Collateral on a second Spoke, or in a V3 pool, does nothing for a position that is falling toward 1 on the first. You add collateral or repay on the Spoke where the debt sits.
What V4 changes is how a liquidation is sized. V3 used a default close factor of 50%, so liquidators typically repaid half of a borrower's debt. V4 lets a liquidator repay only enough to bring the position back to a Target Health Factor that governance sets for each Spoke. The liquidation bonus also varies, rising as Health Factor falls (source: Aave GitHub, Aave V4 Overview). That rising bonus works as a Dutch-auction style incentive that steers liquidators to the riskiest positions first (source: Aave Docs, Aave v4).
Small balances follow a separate rule. If the debt or collateral remaining after a liquidation would be worth less than $1,000, the liquidator has to clear that position completely, which stops tiny balances from piling up on the Spoke (source: Aave Docs, Aave v4).
Take a single USDC loan on one Spoke. If your eligible collateral is worth $12,000 and your debt is 10,000 USDC, Health Factor is 12,000 / 10,000 = 1.2. A drop in the collateral price that takes eligible value to $9,600 puts Health Factor at 0.96, below 1, and a liquidator can then repay part of your debt to restore the position toward the Spoke's target. The habit that protects you is the one you already use with Aave Health Factor on V3: add collateral or repay well before the number nears 1.
Aave V3 and V4 running side by side
Aave V3 is still the version of the protocol in production (source: Aave Help, Introduction to Aave V3). V4 runs beside it on Ethereum mainnet as a separate deployment that you use only when you open a position on a V4 Spoke (source: Aave Labs, Aave V4 is Live on Ethereum).
For everyday use the two feel alike. If you have used V3, supplying and borrowing on V4 will feel familiar because Aave Pro simplifies most of the architectural changes (source: Aave Labs, Aave V4 is Live on Ethereum). The collateral settings and caps you have to read now belong to the Spoke you choose. A wallet can hold a V3 position and a V4 position at the same time, each with its own Health Factor, so you manage them as two separate loans.
Hub and Spoke rearranges liquidity inside the Aave protocol. The AAVE token, the Aave DAO that votes on caps and new Spokes, and Aave Labs as a company all stay as they were. That distinction matters when you hear that Aave upgraded, because the upgrade concerns where supplied assets sit and how risk is set. The token you might trade is the same asset it was before March 30, 2026.
Reading about V4 often starts with an interest in the AAVE token itself, and another way to act on that interest is to trade AAVE on an exchange instead of lending on-chain. BloFin lists AAVE/USDT Spot for buying and selling the token and the AAVEUSDT Perpetual, a USDT-margined contract that tracks the AAVE price. Neither one is a V4 supply. When you buy AAVE on the spot market, the token sits in your exchange account, and you can withdraw it to a self-custodial wallet later if you want to supply it on a Spoke.
Before you size a trade on either market, check the maker and taker fees for your account tier on the BloFin fee schedule, because fees on a short-term trade can matter as much as the borrow rate does on a loan.
How to tell a V3 supply from a V4 supply before you sign
You tell a V3 supply from a V4 supply by the contract your wallet is about to call. A V3 supply goes to a market's pool contract, while a V4 supply goes to a Spoke contract that forwards the tokens to a Liquidity Hub, even when the chain, the wallet and the token are identical.
Picture one wallet making two deposits on the same chain. Last year you approved a V3 pool contract on Ethereum and supplied 2,000 USDC, which joined that market's isolated pool. Today you open Aave Pro, pick a V4 Spoke that lists USDC and supply another 2,000 USDC, which enters the Hub through the Spoke. Both are smart-contract calls from the same address, yet they create two positions with two Health Factors, two sets of parameters and two separate withdrawals.
Before you sign, read three things on the review screen: the protocol version, the Spoke name and the Hub that Spoke is attached to. Then compare the contract address your wallet shows with the address on the official interface, because a phishing site can put an Aave logo on any contract. The general checks behind that habit, such as confirming the network and the deployment address, are the same ones you use for any Ethereum smart contract.
A website is only an interface to the contracts. Each contract keeps its code and data at its own blockchain address (source: ethereum.org, Introduction to smart contracts). If one front-end interface goes offline, your supply and your debt remain in the contracts and can be reached through any other interface that calls them. Interest accrual and liquidation eligibility keep running on-chain during that time, which is why a Health Factor near 1 needs attention even when your usual app is down.
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
What happens to bad debt on an Aave V4 Spoke?
Bad debt becomes a deficit recorded at the Hub when a liquidation leaves a borrower with no collateral on any reserve and some debt still outstanding. Any authorized, active Spoke can then cover that deficit by spending its own supplied shares through the Hub, which restores the Hub's accounting without fresh outside capital. The recovery works even while the covering Spoke is halted, provided it stays active. A shortfall on one Spoke can therefore be absorbed using shares that another Spoke supplied to the Hub (source: Aave GitHub, Aave V4 Overview).
What is the Reinvestment Module in Aave V4?
The Reinvestment Module is an optional V4 tool that lets governance move idle Hub liquidity into external strategies, earning extra yield for suppliers on top of borrower interest. It is switched on per asset at the Hub. You decide whether to take part by supplying to a Spoke reserve linked to a reinvestment-enabled asset or to one without it. Swept funds still count in the usage ratio, which keeps the borrow rate unchanged, and the Governor absorbs strategy losses under a coverage method it defines (source: Aave GitHub, Aave V4 Overview).
Do Aave governance changes affect open V4 positions?
Most collateral parameter changes on V4 apply to new positions first. When the Governor adjusts the collateral factor, the maximum liquidation bonus or the liquidation fee, V4 adds a new configuration and keeps the earlier one in force for positions opened under it. Your position moves to the latest settings when you borrow, withdraw or disable collateral, and the action is blocked if those settings would make it under-collateralized. In particular cases the Governor can still update existing positions, while on V3 a change such as a lower liquidation threshold hit every open position at once (source: Aave GitHub, Aave V4 Overview).
When does the risk premium on a V4 loan change?
Your user risk premium is refreshed only when you take an action that can change how well your debt is collateralized, such as borrowing, withdrawing collateral, disabling an asset as collateral, or being liquidated. Repaying and supplying usually reduce risk, so they do not refresh it, and an inactive position keeps the same premium even as prices move. You can trigger a refresh yourself at any time. The Governor can also force one when a position has built up extra risk between your actions (source: Aave GitHub, Aave V4 Overview).
Which collateral gets the lowest borrow rate on Aave V4?
Collateral with the lowest Collateral Risk value pays the least. Each asset gets a Collateral Risk value on a scale where 0 means the highest quality and effectively no risk, and pristine assets such as ETH sit at the low end of that scale. Your premium is a weighted average of those scores across the collateral needed to cover your debt, counted from the lowest-risk asset up, so extra riskier collateral beyond that amount does not raise it. The same asset can also carry a different score on different Spokes (source: Aave GitHub, Aave V4 Overview).
How many assets can one V4 position use on a Spoke?
Each Spoke sets a configurable maximum on how many reserves one position can use, and it counts collateral reserves and borrow reserves separately (source: Aave GitHub, Aave V4 Overview). A position can therefore hit its collateral limit while it still has room to borrow another asset, or the reverse. Because the limit is a Spoke setting, two Spokes on the same Hub can allow different numbers. If you spread collateral across many small holdings, check the Spoke's limit before you plan to add one more asset to the position.
Researched and written by the BloFin Academy editorial team with AI-assisted drafting. Primary sources include Aave v4 documentation, Aave Labs posts on the Ethereum launch, the V4 architecture, risk isolation and risk premiums, the Aave V4 overview on GitHub, Aave Help (V3 introduction, Efficiency Mode), Aave governance and Aave DAO documentation on the v3.7 upgrade, and the ethereum.org developer docs on smart contracts. 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.