Aave V4 Avalanche Activation

Simple Summary

This payload proposes activating Aave Protocol V4 on Avalanche Network.

Motivation

Aave V4’s next growth phase involves expanding into networks with existing DeFi demand, active Aave usage, and a credible path to protocol revenue. The initial deployment on Ethereum Mainnet validated the Hub and Spoke model in a production environment, making this expansion the logical next step for V4.

Aave Labs proposes deploying Aave V4 on Avalanche, beginning with one Liquidity Hub and three Spokes. A dedicated real-world asset (RWA) hub will be launched in a later phase.

Avalanche has been a supported Aave V3 deployment since 2022, accumulating over five years of production operation. Its track record across liquidations, oracle performance, and market stress events within the Aave ecosystem establishes Avalanche as a proven network for Aave deployments. The existing market brings established distribution, active liquidity, and a mature user base, materially reducing execution risk for the activation of Aave V4 on Avalanche.

Specification

Market Design

The deployed launch configuration consists of one hub and three spokes. The Core Hub serves as the sole borrowing environment, structured around three spokes targeting a distinct collateral type, user intent, and risk profile:

Main Spoke: The Main Spoke is the general-purpose lending venue and is expected to host the majority of liquidity within the deployment. It accepts the broadest collateral set and the broadest borrowable set in the deployment, where WAVAX, BTC.b, USDC, USDT, and WETH.e are collateral against which users can borrow stablecoins, WAVAX, BTC.b, and WETH.e. In the future, the Main Spoke can provide credit lines to specialized Hubs, such as an RWA Hub, allowing them to access its liquidity while preserving separate risk profiles. AVAX Correlated Spoke: This spoke is dedicated to the AVAX LST looping environment, with sAVAX as collateral and WAVAX as the only borrowable asset. This design isolates looping risk and allows spoke-specific add/draw caps. Forex Spoke: It supports trading and hedging across fiat-pegged stablecoins, with EURC, USDC, and USDT as collateral, which can be borrowed against each other. Due to limited secondary market liquidity for EURC, conservative caps have been set. In addition to above three spokes a tokenized spoke will also be created which is a supply-only integration layer that tokenizes deposits of the Hub’s borrowable assets (WAVAX, BTC.b, USDC, USDT, WETH.e, and EURC) into composable positions for external vaults, aggregators, and strategies, without enabling borrowing or introducing additional collateral risk to the Core Hub.

Dynamic Liquidation Bonus Configuration

V4 introduces a dynamic liquidation bonus that increases linearly as the health factor decreases, in contrast to V3’s static bonus. Two spoke-wide parameters shape the bonus curve. The targetHealthFactor is the HF to which a borrower is restored after liquidation; liquidators repay only enough debt to reach this value under normal circumstances. The healthFactorForMaxBonus is the HF at which the maximum liquidation bonus becomes active, with the bonus ramping linearly between HF of 1.0 and this value. The liquidationBonusFactor is a scaling parameter that controls both the steepness of the bonus ramp and, together with the target multiplier, the derived maxLiquidationBonus, ensuring that at an HF of 1.0, the liquidation bonus remains consistent with the corresponding V3 value.

For correlated-asset spokes (AVAX Correlated and Forex), liquidationBonusFactor is set to 1.0 because the health factor (HF) range between liquidation eligibility and bad debt is already narrow. Any reduction below this level would steepen the bonus curve and increase losses for leveraged correlated positions.

For volatile spokes (Main), healthFactorForMaxBonus is set to 0.9, ensuring that maximum liquidator incentives are active well before positions approach bad-debt levels. To maintain incentive continuity with V3, maxLiquidationBonus on the Main Spoke is set to 1.11 times its V3 value. This keeps the liquidation bonus at HF = 1.0 aligned with V3 while allowing higher incentives as positions deteriorate further.

Chain	Hub	Spoke	Liquidation Bonus Factor	Target Health Factor	Health Factor For Max Bonus
Avalanche	Core Hub	Main Spoke	90.00%	1.2400	0.90
Avalanche	Core Hub	AVAX Correlated Spoke	100.00%	1.0350	0.99
Avalanche	Core Hub	Forex Spoke	100.00%	1.0442	0.99

V4 Spoke Parameters

The liquidation protocol fee is proposed to be set at 10% across all assets, aligning with the configuration used for the majority of assets on Aave V3.

Chain	Hub	Spoke	Reserve	Collateral Factor	Max Liquidation Bonus	Borrowable	Collateral Risk	Liquidation Fee
Avalanche	Core Hub	Main Spoke	WAVAX	73.00%	10.00%	TRUE	0	10.00%
Avalanche	Core Hub	Main Spoke	BTC.b	75.00%	7.22%	TRUE	0	10.00%
Avalanche	Core Hub	Main Spoke	USDC	78.00%	5.55%	TRUE	0	10.00%
Avalanche	Core Hub	Main Spoke	USDT	78.00%	5.55%	TRUE	0	10.00%
Avalanche	Core Hub	Main Spoke	WETH.e	83.00%	5.55%	TRUE	0	10.00%
Avalanche	Core Hub	Main Spoke	EURC	0.00%	-	TRUE	-	-
Avalanche	Core Hub	AVAX Correlated Spoke	sAVAX	95.00%	1.00%	FALSE	0	10.00%
Avalanche	Core Hub	AVAX Correlated Spoke	WAVAX	0.00%	-	TRUE	-	-
Avalanche	Core Hub	Forex Spoke	EURC	90.00%	2.00%	TRUE	0	10.00%
Avalanche	Core Hub	Forex Spoke	USDC	90.00%	2.00%	TRUE	0	10.00%
Avalanche	Core Hub	Forex Spoke	USDT	90.00%	2.00%	TRUE	0	10.00%

Add and Draw Caps

Add and draw caps have been set, keeping in mind the limited liquidity available on Avalanche, with the specifications reflecting the hub-and-spoke structure of Aave V4 and the distinct risk profiles of each spoke.

Chain	Hub	Spoke	Reserve	Add Cap	Draw Cap
Avalanche	Core Hub	Main Spoke	WAVAX	500,000	50,000
Avalanche	Core Hub	Main Spoke	BTC.b	100	10
Avalanche	Core Hub	Main Spoke	USDC	5,000,000	5,000,000
Avalanche	Core Hub	Main Spoke	USDT	5,000,000	5,000,000
Avalanche	Core Hub	Main Spoke	WETH.e	3,000	300
Avalanche	Core Hub	Main Spoke	EURC	500,000	400,000
Avalanche	Core Hub	AVAX Correlated Spoke	sAVAX	200,000	0
Avalanche	Core Hub	AVAX Correlated Spoke	WAVAX	0	250,000
Avalanche	Core Hub	Forex Spoke	EURC	300,000	400,000
Avalanche	Core Hub	Forex Spoke	USDC	200,000	150,000
Avalanche	Core Hub	Forex Spoke	USDT	200,000	150,000
Avalanche	Core Hub	Core Tokenized WAVAX Spoke	WAVAX	150,000	0
Avalanche	Core Hub	Core Tokenized BTC.b Spoke	BTC.b	20	0
Avalanche	Core Hub	Core Tokenized USDC Spoke	USDC	1,500,000	0
Avalanche	Core Hub	Core Tokenized USDT Spoke	USDT	1,500,000	0
Avalanche	Core Hub	Core Tokenized WETH.e Spoke	WETH.e	600	0
Avalanche	Core Hub	Core Tokenized EURC Spoke	EURC	150,000	0

Tokenized Spokes serve as the standard entry point for integrators, vaults, aggregators, and other strategies routing liquidity into Aave V4 markets. They are supply-only and accept deposits exclusively in each hub’s primary borrowable assets, ensuring a simple, composable tokenized representation.

Interest Rate Curves

The IRM parameters apply to an asset across all spokes within that hub. The parameters follow the same two-slope utilization curve used in V3, defined by a base variable borrow rate, slope below the optimal usage ratio (Slope 1), slope above it (Slope 2), and the optimal usage ratio itself (Uoptimal). The Liquidity Fee is the fraction of borrower interest captured by the protocol treasury, equivalent to the reserve factor in V3. The goal of the initial configuration is to keep the setup as similar as possible to the one currently used in Aave V3.

Chain	Hub	Reserve	Base	Slope 1	Slope 2	Uoptimal	Liquidity Fee
Avalanche	Core Hub	WAVAX	1.00%	4.00%	144.28%	65.00%	20.00%
Avalanche	Core Hub	BTC.b	0.00%	4.00%	80.00%	80.00%	25.00%
Avalanche	Core Hub	USDC	0.00%	4.00%	10.00%	90.00%	10.00%
Avalanche	Core Hub	USDT	0.00%	4.00%	10.00%	90.00%	10.00%
Avalanche	Core Hub	WETH.e	0.00%	2.50%	8.00%	90.00%	15.00%
Avalanche	Core Hub	EURC	0.00%	5.50%	50.00%	90.00%	10.00%

Governance and Ownership

The contracts have been pre-deployed and configured, and this proposal performs the activation of the system. All assets are currently deactivated on the Core Hub, and this AIP enables them to start the market.

Governance of the contracts is managed by the DAO via Executor Level 1, with additional oversight from the Protocol Security Council during the initial hardening phase, to mitigate risks in potential emergency scenarios. Contracts that support only a single controller, such as the Position Managers and the Treasury Spoke, are temporarily owned by the Protocol Security Council for simplicity.

The permissions of the Protocol Security Council are expected to be eliminated following this phase, after which all updates will proceed through standard governance processes and approved stewards. The Protocol Security Council 0x187AAE17d4931310B3fc75743e7F16Bdc9eD77e9 is a Safe multisig shared across Aave V4 deployments.

The Treasury Spoke 0x2C4Aea1A5F000889c6DfFE8f52377aFc2CB113a6 has been deployed and configured as the fee receiver for all assets listed on the Core Hub. Initially, it is controlled by the Protocol Security Council and will be handed over to the DAO after the hardening phase.

Contract Addresses

Hub	Address
Core Hub	0xd07369fAE4A5BB13c9Ce446B052c7867B1AbDf6e

Spoke	Address
Main Spoke	0x435272CefF93a1E657E8ABfdf0A13e95900A3a56
AVAX Correlated Spoke	0x3b517594277c67307CF2d7CBE6FE1D4399B68c41
Forex Spoke	0x6a37776B5E026dBdF043b4F933c323C84DD1B514
Treasury Spoke	0x2C4Aea1A5F000889c6DfFE8f52377aFc2CB113a6

Tokenization Spoke	Address
Core WAVAX	0x1604D602f8A05CBA2d8Ff5d14DE4C3498f15B6B4
Core BTC.b	0x7cd3Ccc737f442050a861EC6b00768AE96B2F58E
Core USDC	0x01D7f7B7CE2123192fECC20bd1caF3e4d9e4C10D
Core USDT	0x2E4BA06fF97E10D09FA4F5a270e97301eae729A9
Core WETH.e	0xF5c849468318c8D5670020fdb96ae135FED37070
Core EURC	0x7b538a1840EAf2Ed92EEB67eE744AE627335e201
Core sAVAX	0x6c27A7435040B7cC512319d5690BeEF234dfE76e

Position Manager	Address
Giver Position Manager	0x50c4C40aB6BaE46B372a251BEacE388439aa96b4
Taker Position Manager	0x5A5A711560eb9293Ef6F4bc33CD8589b4A603D10
Config Position Manager	0x50BE00C5EbF6CC230B8970f4205Cd0B5A70EaEB1
Native Token Gateway	0xE4C7183A5f22c365140F41d733d8A8baD5A1a6bA
Signature Gateway	0x6E3B91A951DA9b515a5E98F0c7D210a697382e7F

References

• Implementation: AaveV4Avalanche
• Tests: AaveV4Avalanche
• Snapshot
• Discussion

Copyright

Copyright and related rights waived via CC0.