It's been a really big year in general. Obviously, not just this year, but the past couple of years as we've been trying to figure out what the next stage for DeFi is and where everything goes from here. We started building in 2017 as an experiment back then as ETHLend, short for Ethereum Lending. I don't know how many of you remember. A few people. Yeah, there are a few OGs here. And now, obviously, Aave has evolved into a big infrastructure in DeFi, the largest protocol on multiple networks with a lot of use cases. We see more integrations into FinTech, like we had with World Treasury, and probably this is something we will see more of in the future. We're looking to go directly to consumers and offer a non-custodial experience that is consumer-friendly with the Aave app. And we're going to review today a bit how we're thinking about scaling DeFi and what the market structure for that is.
Perfect. Yeah, so obviously we've gotten to a point where we have over three trillion in deposits cumulatively and over one trillion in loans. DeFi feels very small and experimental, but actually there's a lot of volume happening, and this is just lending. If you compare trading pairs and all the volume that is happening now in DeFi, it's actually substantial. But of course, it is still a drop in the ocean. I think what we've solved in DeFi really well is particularly the capital aggregation layer. Today, in DeFi, capital goes into where the best financial opportunities are programmatically in most cases. I think we no longer have an issue of liquidity in DeFi. In fact, there is a surplus of liquidity finding different opportunities. So we have an opportunity to actually build more on the consumption side. For lending protocols, obviously, it means more collateral, more borrowing demand for assets, tokenization, or new native assets. All of this needs a new market structure. We need to think beyond how lending protocols are designed today and design them for the future.
So the typical dilemma for DeFi lending is you want to concentrate capital to simply make capital more efficient in whatever opportunities you might have. At the same time, you want to segregate risk and isolate risk, which creates a challenge with fragmentation of liquidity. Obviously, going in these two different directions doesn't work. On one side of the spectrum, you have full isolation and fragmentation of liquidity. On the other side, you have concentration of liquidity and no isolation of risk.
So the solution for us in Aave v4, which we've been solving over the past couple of years, is to figure out the best middle ground. How do we actually ensure that we can tap into existing liquidity pools and take the benefits of the pooled model that DeFi has been very successful with and build upon? And how can we then create from that shared liquidity model a market structure that serves any sort of credit use case? We came up with a modular architecture between hubs and spokes where liquidity is stored in hubs. The spokes are where all the collateralization and borrowing logic happens, and the use cases are. These hubs then allocate credit lines to these spokes, which are individual use cases. This model taps into two important things: liquidity concentration and avoiding the fragmentation of liquidity while being able to isolate risk further.
And why we actually built this. Obviously, we want to have the ability to tap into use cases that are beyond what we know today in DeFi. Something I like about DeFi and what keeps me in the space is that I feel every year or cycle there are new on-chain primitives, but also interesting opportunities coming from tokenization and credit in general. When we started Aave, even back in the ETHLend days, our goal was to solve credit. Not just simply lend against, let's say, Bitcoin and Ethereum and native crypto assets, but actually think about how smart contracts and DeFi could be used to back all kinds of credit opportunities.
I think there are just different audiences in general. There's the DeFi audience, like me and some of you, if not most, that love the way DeFi works today. There are certain improvements that can be made. There are also institutions that are looking to understand how to use DeFi in their own existing products. They need, for example, isolation. Risk management is important. You also have RWAs, which is a whole big category with sub-asset categories and its own peculiar environments. Overall, everything that we build needs to be resilient at the same time.
So what we are actually planning with Aave v4 is to understand how value can be collateralized. The typical way that happens is through tokenization. That is one option. The other very popular option is yield-bearing stablecoins. We also believe that there might be no tokenization as well in the future. We want to tap into those credit use cases with Aave, and v4 is basically here to serve that. What we're looking to do is make a credit layer for all financial use cases in the future. Whether it's against native crypto assets, against tokenization, or simply against data that can be brought from consumer finance businesses, any sort of real-life use case. The idea is to actually use what DeFi does really well—aggregating capital, creating better cost structures for lending, trading, or any other use cases—and at the same time finance a lot of these opportunities. So v4 for us is something that will ambitiously try to achieve and back all the credit use cases in traditional finance. And what is most exciting for us today, and I'm really proud of, is that Aave v4 is live today. Thank you.
Yeah, I know no one likes US debt, right? But yeah, I think the scale comes from actually diversification of different assets. One thing that the new architecture will help is that because of the hub-and-spoke model, you can have multiple hubs. On the launch of Aave v4, we also launched Aave Pro, which is the new interface for Aave. I think there are a few developers there actually launching it and testing it out, so no sweat. It's going to be live in a few minutes. But I truly think that the initial configuration is that there is Prime, which is a lower-risk market, and then there is Core, which is risk-adjusted and plus for risk return. Over time, there can be more hubs for particular types of collaterals. Aave already has an RWA-based market, Horizon, which is also going to be ported to v4 with additional flexibility because you can add and move different asset classes to separate spokes. I think that's actually the future of scale: to have a diversified set of hubs and spokes and collaterals that create that scale for yield and scale for these borrowing opportunities. But I don't count any scale until we actually hit mainstream credit use cases and can produce credit to millions of people. That's the sort of scale we're going towards with Aave v4.
