Lending protocols must balance deep liquidity against market risk. Aave v4 introduces a Hub-and-Spoke architecture that pools liquidity centrally while delegating collateral settings, price feeds, and risk parameters to independent Spokes. Under Aave DAO governance, external curators can operate dedicated markets on this infrastructure.
Sentora is the first curator to launch a governance-approved Hub and Spoke instance on Ethereum, managing active borrowing markets for RLUSD, PYUSD and OUSD along with their collateral rules, risk parameters, interest rate curves, and oracles.
This article outlines Aave v4’s core mechanics and explains how Sentora Risk Radar provides continuous market risk monitoring.
How It Works: Hubs, Spokes, and Reserves
Aave v4 organizes capital through three components that work together. The Liquidity Hub holds the assets, the Spokes serve users, and the Reserves define how each asset behaves inside each Spoke.
The Liquidity Hub is the central source of liquidity and the place where protocol-wide accounting happens. It grants each Spoke a credit line for borrowing and a debit line for supplying, and it caps how much liquidity each Spoke can draw or add. The Hub also holds emergency controls that can stop activity if conditions require it.
Spokes are the modules that users interact with directly. Each Spoke serves a specific use case, asset type or risk profile, and sets its own risk parameters, price oracles and liquidation conditions. A Spoke keeps independent accounting, so governance can add or remove one without affecting the others. Unlike omni-lending architectures where a single risky asset can threaten the entire protocol, Spokes isolate risk locally to mitigate risk across the whole system.
Reserves sit inside each Spoke and track one asset's deposits, borrows, repayments and interest. Each Reserve carries its own risk settings, while the Hub controls how much liquidity can flow into and out of it.
Each asset held in a Hub has its own interest rate model, which sets borrow and supply rates according to utilization (the share of that asset's supplied liquidity currently on loan). As utilisation rises, borrowing becomes more expensive and supplying becomes more rewarding, which encourages repayment and new deposits when liquidity runs short. Suppliers receive the interest that borrowers pay, minus a liquidity fee set for each Hub asset. Additionally, risk premiums can be applied to credit lines across different Spokes and collateral types to properly compensate suppliers for their exposure to varying collateral risk profiles.
Liquidity Models: Structuring Capital Across Hubs and Spokes
The Hub and Spoke structure gives curators and governance several ways to arrange liquidity, depending on how much separation a set of markets needs. Hubs can be configured for specific purposes, ranging from conservative stablecoin pools to higher-risk setups, with each one operating under its own governance framework.
The table below summarizes the key configuration options, how each model operates, and the specific use cases it is best suited for.
Model | How it works | What it is suited to |
|---|---|---|
One Hub, several Spokes | A single pool of liquidity funds multiple Spokes, each with its own collateral and risk settings | Serving different borrower profiles from one deep source of liquidity |
Several Hubs with distinct risk profiles | Each Hub holds its own assets under its own governance | Keeping liquidity with different risk tolerances fully separate |
Spoke connected to several Hubs | One Spoke draws from more than one Hub through separate credit lines | Reaching different liquidity sources or rate conditions through one market |
One Hub, one Spoke | A single hub funds a single dedicated spoke | Isolated, dedicated liquidity arrangements for a specific use case or asset pair |
Across all three models, governance decides how much of a Hub's assets each Spoke can use. These credit lines can be adjusted as demand and risk conditions change, which lets capital move toward the markets that need it within limits set in advance.
User Positions, Health Factors, and Borrowing Mechanics
A user position is the complete record of what one wallet has supplied and borrowed within a single Spoke.
Aave v3 tracked positions per market, while Aave v4 tracks them per Spoke, so a user can hold a conservative position in one Spoke and a more aggressive one in another without the two affecting each other.
Position type | What it means | Key behaviour |
|---|---|---|
Supply | Assets deposited into a Spoke's Reserve | Accrues interest and adds to the Hub's available liquidity |
Supply enabled as collateral | Supplied assets that back a loan | Provides borrowing power according to the asset's collateral factor and can be withdrawn only while the position stays healthy |
Borrow | Assets drawn from a Spoke's Reserve | Creates a debt balance that accrues interest until it is repaid |
Cross-Spoke strategy | Separate positions held across several Spokes | Each position keeps its own health factor and liquidation logic |
The health factor measures a borrowing position's safety. It is calculated by dividing the collateral's value (adjusted by its collateral factor) by the total debt.
For instance, a user depositing $10,000 in ETH with an 80% collateral factor to borrow $6,000 has a health factor of 1.33. If collateral prices drop or interest accrues and causes the health factor to fall below 1.0, the position becomes eligible for liquidation.
Aave v4 also introduces a User Risk Premium, which adds a surcharge to the base borrow rate according to the quality of a user's collateral. A position backed by higher-quality collateral pays close to the base rate, while one backed by riskier collateral pays more. For example, a 50% premium on a 5% base rate results in a 7.5% borrow rate.
When liquidation does occur, Aave v4 repays only enough debt to bring the position back to a target health factor set by the Spoke. The bonus paid to liquidators grows as a position's health deteriorates, so the most at-risk positions are addressed first.
Monitoring Aave v4 With Sentora Risk Radar
The Hub and Spoke design moves many risk decisions to the level of the individual Spoke, which means the safety of a market depends on how its collateral, parameters and oracles are chosen and how closely they are watched afterwards.
Capital allocators need a way to observe those markets continuously, using the same data the curator relies on. Sentora Risk Radar provides block-level economic risk analytics across more than 40 DeFi protocols on over 12 chains, and its coverage now includes Aave v4, starting with the Sentora-curated Hub and Spokes.
For a detailed breakdown of the risk framework for the Sentora-curated Hub and Spokes, read our dedicated article on how to track and monitor risk on Aave v4 using Sentora Risk Radar. It explores the key data points and metrics that Risk Radar surfaces for Aave v4 markets, including health factor distributions, high-risk loans nearing liquidation, liquidation activity, supply and borrow concentration among large holders, and withdrawal liquidity available to suppliers.
