The decentralized finance (DeFi) platform Aave has announced that it will launch a significant protocol upgrade, V4, in the fourth quarter of 2025, introducing a modular lending market and enhanced risk control features.
According to Aave's latest update, this upgrade adopts a "central-radiation" modular design, which not only allows the cryptocurrency lending market to set more customizable parameters but also prevents liquidity from being locked in various independent pools.
The liquidity center serves as the main capital pool for the modular radiation, with each radiation corresponding to a market with a specific risk configuration and employing different lending rates, replacing Aave's current unified rate. The team stated:
The team will introduce a brand new user interface that presents all modular radiations in a "unified wallet-level view." Users can view detailed information on a unified interface and choose trading paths through different market modules.
Aave V4 will adopt dynamic risk configuration to prevent positions from being unexpectedly liquidated due to changes such as lowering collateral thresholds.
In Aave V3, when modifying these global parameters, users holding multiple positions faced a high risk of liquidation.
The liquidation engine will switch to a "health factor-driven mode," only liquidating the necessary amount to restore loans to the target collateral parameters, ensuring the safety of lenders' funds while preserving borrowers' positions.
Users can choose a "position management tool" to automatically execute withdrawals, loans, repayments, and other transaction management functions.
Additionally, the upgrade will support batch operation features, allowing users to bundle multiple operations into a single transaction, simplifying the operational process.
The Aave V4 upgrade is expected to be released in the last three months of 2025. A white paper will be published subsequently, along with the public V4 codebase and the launch of a new version of the DeFi protocol testnet.
This upgrade has garnered significant attention, with DefiLlama data showing that the total value locked in DeFi has surpassed $156 billion, approaching the peak levels of the last bull market in December 2021.
Related: Cloudflare plans to launch the "NET Dollar" stablecoin to empower AI-driven payments.
Original: “Aave V4 Protocol Upgrade is Coming: Key Highlights Overview”
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