The brief

Analyst view

• Aave is the largest lending protocol by TVL, with $12B locked across all instances as of October 2026.
• V4 launched March 2026 with hub-and-spoke architecture, enabling multiple borrowing environments and real-world assets.
• The protocol is governed by AAVE token holders who vote on parameter changes, new collateral types, and fee structures.

Technical approach

As reported

Lending Pools

User deposits and borrowing

Users deposit crypto to earn interest; borrowers take loans by over-collateralizing. Aave maintains pools for each asset.

Risk Management

Isolation and e-mode

Risk-based parameters prevent borrowers from taking excessive leverage or using risky collateral combinations.

Liquidity Hubs (V4)

Hub-and-spoke markets

Three liquidity hubs (Core, Prime, Plus) with spokes offering distinct risk parameters and credit lines between them.

Governance

AAVE token voting

AAVE holders vote on protocol changes, parameter updates, and treasury allocation via Aave Governance.

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