What to know:
- Aave proposes Avalanche deployment with $15M in incentives to accelerate V4 ecosystem growth and adoption.
- Dedicated RWA Hub aims to expand institutional lending through Aave V4 on the Avalanche network.
- Governance approval could position Avalanche among the first major networks adopting Aave V4 architecture.
Aave is preparing to expand its next-generation lending protocol by deploying Aave V4 on Avalanche, supported by up to $15 million in milestone-based incentives from the Avalanche Foundation.
The proposal, currently undergoing a governance temperature check, would make Avalanche one of the first major blockchain ecosystems outside Ethereum to adopt Aave V4’s new hub and spoke architecture while introducing a dedicated Real-World Asset (RWA) hub.
Unlike previous network launches, Aave would be entering an ecosystem where it already has an established presence.
The protocol has operated on Avalanche since 2021, giving the proposed deployment an existing user base, deep liquidity, and mature integrations that could accelerate adoption of Aave V4.
Source: Aave
Also Read: AAVE Price Gains Attention As Aave v4 Deposits Cross $50 Million
Aave V4 Eyes Avalanche With a $15M Incentive Plan
One of the main aspects of the proposition is that the Avalanche Foundation will provide incentives worth up to $15 million associated with growth KPIs such as TVL, borrowings, and protocol revenues.
The use of a KPI-based incentive model will be aimed at incentivizing the ecosystem expansion in general and not just liquidity increases.
Going beyond just paying the fees, the foundation wants to assist with marketing, business development, treasury management, developer management, and user acquisition initiatives for centralized exchanges, fintech companies, and wallets. The foundation will also help introduce novel crypto assets into the protocol.
However, the RWA Hub included in the proposal has been the subject of concentrated attention. Avalanche seems to be on its way to becoming an emerging hub for tokenized real-world assets and institutional use cases of blockchain technology, whereas the modularity of Aave V4 allows the creation of independent markets with their own risk parameters.
Building on an Established Ecosystem
The connection between Aave and Avalanche dates back to 2021, when Aave V2 was introduced during the Avalanche Rush incentivization program. Aave managed to exceed $2 billion worth of TVL through more than $8 million in incentives.
Meanwhile, Aave V3 came out in 2022, supported by more than $7 million worth of ecosystem incentives, while the Avalanche Boost program helped Aave’s TVL increase from $200 million to more than $1 billion.
What’s Next for Aave?
The community has been mostly supportive, although a lot of delegates have been calling for more specific criteria when it comes to measuring incentives, milestones, and governance of payments and the risk management system that the RWA Hub is based upon.
If the governance decides to approve the temperature test, the proposal will advance to the ARFC stage, whereby the details of the deployment, including supported tokens, oracle configurations, borrowing limits, and incentivization, among others, will be sorted out.
This proposal is in line with Aave’s general strategy of expanding the adoption of Aave V4 into ecosystems that have established demand.
If this proposal is approved, this deployment on Avalanche can be used as a model for other deployments of Aave V4 through combining liquidity, robust institutional structures, and performance-driven incentives.
Also Read: Aave V4 Could Introduce BTC Collateral via Babylon Labs Proposal
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