Aave V4 is about to launch: a major upgrade to the underlying architecture of the Decentralized Finance lending protocol.

This month, a major piece of news has quietly fermented in the DeFi circle — Aave V4 will launch in Q4 2025. This is not just a simple functional iteration, but a reconstruction from the ground up.

Core Changes: From “Unified” to “Modular”

Aave V3 uses a single structure (all markets share risk parameters), while V4 will change to a “hub-and-spoke” modular design—the central hub (Hub) carries the base liquidity, and each branch market (Spoke) operates independently with its own risk settings.

What does this mean? Different risk preference markets can operate simultaneously within the same protocol without dragging each other down. Want aggressive high-yield markets and conservative stable markets to run in parallel? Now it's possible.

The two improvements most concerning users

1. Partial liquidation replaces full liquidation

The tragedy of the V3 era: your collateral price dropped, and the system directly liquidated all your positions. V4 introduced a “health-oriented liquidation”—only liquidating to the minimum amount needed to restore the safe ratio, with the remaining positions retained.

Imagine you staked 10 ETH and borrowed 1000 U. If ETH drops by 10%, the system no longer sells everything at once, but only sells the minimum amount needed to restore the collateral ratio. It's not a small optimization, it's a change in mindset.

2. 头寸管理器(Position Manager)

The V4 built-in automation tool can bundle multiple operations into a single transaction: automatic loan repayment, automatic margin replenishment, and automatic rebalancing. Competitors benchmarking Aave have already done this, and now Aave needs to catch up.

Data Background

Aave currently has locked assets exceeding $4 billion (August data). This upgrade targets the entire DeFi $156B market. If the upgrade encounters problems, the impact will be significant—this is why the team must complete the entire process of whitepaper → code audit → testnet before the mainnet.

The Details That Were Not Understood

Q: Why do such a big operation?

A: The global risk parameters of V3 limit flexibility. If a certain market becomes too aggressive, the administrator has to either change the global parameters (affecting all markets) or cannot make adjustments. V4 addresses this nightmare of “a problem in one market affects all.”

Q: When is the testnet?

A: The official hasn't provided a specific date yet, but the roadmap is to first release the whitepaper → open-source code → testnet → then launch on the mainnet. According to the target for Q4, we might see the testnet in mid to late November.

Wait and see what

• Whitepaper: Detailed explanation of the specific mechanism
• Audit Report: Safety Factor
• Testnet Feedback: How was the user experience?
• Mainnet Time: Final Confirmation Date

The trend in DeFi over the past two years has been “Safety > Returns > Innovation.” Aave's recent upgrade aligns perfectly with this rhythm—reducing systemic risks through modularization, protecting users through partial liquidation, and enhancing the experience through automation. Compared to the industry, this solution is no longer novel, but the degree of integration and execution will determine whether V4 can become an industry benchmark.