Aave Labs has submitted a formal governance proposal to deploy the Aave V4 upgrade on the Ethereum mainnet. The proposal, filed on March 13, 2026, outlines a "Hub-and-Spoke" or "Liquidity Hubs and Spokes" architecture designed to pool liquidity centrally while isolating risk at the individual market (spoke) level. This model aims to compartmentalize collateral and liquidation behavior, limiting spillover from higher-risk assets to protect the broader protocol.
The activation plan is now under review by the Aave decentralized autonomous organization (DAO). The proposal covers mainnet activation mechanics, risk framework design, and the rollout path, with final decisions resting with AAVE token holders. According to Aave Labs, the V4 upgrade has undergone approximately 345 days of cumulative security review, following a "security-by-design" approach that integrated risk input from contributors like Chaos Labs, LlamaRisk, and TokenLogic alongside formal audits.
The governance process occurs against a backdrop of significant internal tension. The proposal follows a contentious Snapshot vote in February that narrowly passed (with ~52.6% in favor) the "Aave Will Win" initiative, championed by the Aave Chan Initiative (ACI). This initiative requested about $51 million in stablecoins and 75,000 AAVE tokens to fund product development and marketing, heavily focused on V4. ACI founder Marc Zeller has been critical of past Aave Labs funding, questioning the measurable returns to the DAO from roughly $86 million in previous expenditures.
The dispute extends to protocol philosophy. A recent incident on March 12, where a $50 million swap via the Aave interface on CoW Protocol resulted in a user receiving only ~$36,000 due to extreme slippage, sparked public criticism. Zeller contrasted the event with previous frontend safeguards, while Aave founder Stani Kulechov stated warnings were presented and acknowledged the suboptimal outcome. Aave has committed to returning approximately $600,000 in fees from the transaction.
Further fracturing the ecosystem, BGD Labs, Aave's principal technical contributor for four years, announced it will not renew its contract after April 1, 2026, citing centralization concerns with Aave Labs and disagreements over the portrayal of Aave V3's track record to build the case for V4. This follows a delegate announcement that it won't be renewing engagement with the DAO.
Despite the governance friction, Aave's commercial fundamentals show strength. Monthly active users on its lending markets reached roughly 155,000 in February 2026, nearly double the level from six months prior and an all-time high. As of late 2025, 86% of Aave's revenue was generated on Ethereum Mainnet, the primary target for the V4 launch.
The proposal is currently in the Aave Request for Comment (ARC) stage. It must clear a Snapshot vote before proceeding to a formal on-chain governance vote (AIP), which would include finalized risk parameters. Public testnets are live, and a mainnet rollout is anticipated in 2026, contingent on successful governance approvals.
