On September 2nd, Aave Labs advanced the proposal of "deploying Aave V4 on Arc" to the Snapshot stage, and indicated that voting would begin within 24 hours. The plan is to deploy one Core Liquidity Hub and two Spoke around the time of the launch of the Arc mainnet, which was created on Circle. The initial assets include USDC, EURC, WETH, and cirBTC. It has already passed the earlier temperature checks, but still requires final confirmation from Snapshot and subsequent AIP. It cannot be stated that Aave V4 has already been put into operation on Arc.
The proposal also includes an income arrangement for the startup period: Aave DAO is expected to generate at least $2 million in contractual income per year. If the actual income after deployment is insufficient, some Arc ecosystem participants will make up for the difference over the first five years. This mechanism reduces the uncertainty of revenue for DAO during the cold start of a new market, but it does not guarantee growth in on-chain income, nor does it promise any user benefits. The specific contract terms, mainnet launch time, and final parameters are still subject to governance and risk assessment.
Arc has not yet officially launched on the mainnet, and the support for LlamaRisk is also temporary and conditional. Risk institutions have clearly stated that the network and asset evaluations are not yet complete. The initial limits were set in advance without seeing real-chain liquidity, and these may be adjusted after the mainnet goes live. The most important news is not that a new market 'has already been established', but rather how Aave will delineate boundaries for liquidity and risk before the new chain officially starts operating.
A Hub connects two types of markets, with stablecoins and foreign exchange having separate pricing for lending and borrowing.
Aave V4 adopts the structure of Hub and Spoke. Core Hub centrally holds the shared liquidity of USDC, EURC, WETH, and cirBTC. Main Spoke serves as a general lending market, allowing USDC, cirBTC, and WETH to be used as collateral, and four types of assets can be lent out. Forex Spoke is designed solely around USDC and EURC; the two stablecoins can be used as collateral for each other and borrowed, supporting foreign exchange-style demands within a relatively narrow range of risks.
The purpose of separating Spoke is to isolate parameters for different uses when sharing liquidity. The general market has to deal with price fluctuations of crypto assets, while the Forex market mainly faces issues such as stablecoins decoupling from their pegs and the depth of the secondary market. The proposal sets a collateral factor of 78% for cirBTC and USDC of Main Spoke, and 83% for WETH; for USDC and EURC in Forex Spoke, it is set at 90%. These are proposed initial values and not current on-chain realities.
V4 still uses a dynamic liquidation reward system, which is adjusted according to changes in the health factor, rather than adopting the fixed bonus system of V3. Main Spoke and Forex Spoke have different target health factors and maximum bonus ranges to accommodate the differences between volatile assets and related assets. The dynamic mechanism may reduce excessive liquidations in certain situations, but the actual performance of the code and parameters on the new network still requires verification through trading depth tests.
There is also a Tokenized Spoke that only stores funds and does not lend them out; it provides combinable deposit certificates for vaults, aggregators, and strategies. It accepts Hub loanable assets but does not create additional mortgage lending pathways, with the intention of reducing additional credit risks when external applications access liquidity. This more modular structure also means that users need to distinguish which Spoke their funds are entering and which set of rules they are subject to, rather than simply seeing the “Aave V4” brand.
A conservative upper limit can help limit early exposure, but a minimum income of $2 million can also affect governance decisions.
It is recommended to set the initial values of Add Cap and Draw Cap according to assets, as suggested by LlamaRisk. For example, Main Spoke is intended to allow a maximum of 56 million USDC in new liquidity, with 51 million USDC that can be withdrawn; EURC corresponds to 20 million and 18 million respectively; Forex Spoke also has additional limits of 13 million USDC and 10 million EURC. The limits for cirBTC and WETH are also set significantly lower than the unlimited capacity.
These numbers are not the target TVL; moreover, the capacity will not be filled up as soon as the service goes live. The purpose of setting an upper limit is to limit the worst-case exposure when the new chain’s price discovery mechanism, oracles, and bridging paths have not yet faced real-world pressures. Once the mainnet goes live, governance can raise or lower this limit based on liquidity, utilization rates, and clearing performance. Describing the upper limit as “the amount of capital expected to be attracted” would blur the lines between risk control and business forecasts.
The revenue floor adds an economic incentive to the proposal. If the actual agreement revenue does not reach $2 million per year in the first five years, the agreed-upon ecosystem participants are required to make up for the shortfall, which may make DAO more willing to bear the deployment and maintenance costs. However, it is worth for governance participants to verify who the guarantor is, the method of execution, the procedures for breach of contract, and the definition of revenue. Financial commitments should not overshadow the risks associated with network security, the concentration of stablecoins, and cirBTC's first entry into the Aave instance.
The next steps still include community feedback, risk analysis, Snapshot voting, and finally AIP. If any of these steps are not approved, the deployment may be postponed or modified; even if the voting is passed, we still need to wait for the Arc mainnet, contract deployment, oracle preparation, and front-end setup. The proposal specifies "around the time of mainnet launch" rather than a fixed date, therefore reports cannot provide an unconfirmed activation time.
The combination logic between Aave and Arc is quite clear: Circle hopes to focus on the liquidity of stablecoins and tokenized assets, while Aave aims to become the core lending layer in the early stages of the new chain. What truly determines success or failure is not the list of four initial assets, but whether the depth, settlement, and cross-chain infrastructure can withstand the pressure after the mainnet goes live. Currently, this is a deployment plan with more complete parameters that has entered the voting phase; accurately referring to it as "proposed deployment" is responsible governance and for the risks of users.
