Layer One: Stani Kulechov on Aave V4 and why RWAs hit $100B this year

Welcome to Layer One: the newsletter and podcast on the intersection of crypto and the real world. Hosted by The Block's Kelvin Sparks and John Wu, President of Ava Labs, Layer One brings you inside the institutional conversations driving blockchain forward.

In our latest episode, we were joined by Stani Kulechov, Founder of Aave Labs, to discuss institutional DeFi, tokenized real-world assets, and Aave's vision for the future of onchain lending.

In this week's newsletter, we're taking a look at the rollout of Aave V4 on Avalanche, and how the protocol is positioning itself to become the central hub for RWA credit markets.

Standard Chartered places a 37x growth target on AAVE, as the protocol targets tokenized RWAs

Aave completed its V4 rollout on Avalanche this week, the first deployment of its newest upgrade outside of Ethereum. This latest iteration of DeFi's leading lending protocol went live on Ethereum in March after a two-year development period, and has already topped $250 million in net deposits.

Aave V4 relies on a "Hub and Spoke" architecture, with central liquidity hubs that various independent markets can tap into while maintaining control over their own risk parameters. Alongside increased efficiency for crypto-native markets, V4 is also geared toward expanding credit markets for the growing tokenized asset space. Kulechov described plans to unlock increased liquidity and utility for the $60 billion of RWAs already onchain — a figure which he predicted could hit $100 billion by the end of the year.

The Avalanche ecosystem itself is poised to capture a significant share of that growth. Although still short of market leader Ethereum's $16 billion in tokenized value, Avalanche is currently among the fastest-growing RWA ecosystems, with $893 million in net inflows over the past 30 days. Institutions including BlackRock and VanEck have made major deployments onto the chain, pushing its distributed asset value to more than double over the past three months. Kulechov cited this surge of institutional capital as one of the deciding factors for choosing Avalanche as the second V4 rollout venue.

This latest deployment comes as DeFi's top lending protocol seeks to capitalize on a period of rapid growth. According to Aave Labs, net deposits on the platform peaked at almost $76 billion in 2025, a figure that would rank it among the top 40 banks in the United States.

Still, the protocol hasn't been without its challenges. The April 18 KelpDAO exploit saw attackers post illegitimately minted tokens as collateral on the platform, borrowing millions in legitimate assets in return. Although the exploit was due to the failure of a third party rather than Aave's own code, the protocol nonetheless saw a drop-off in TVL as a result. Aave Labs has since raised funds to restore the affected markets, and last month unveiled an updated risk framework to guide future listings.

These updates are part of a new multi-year development roadmap launched earlier this year. Among its terms was a $25 million stablecoin grant to Aave Labs, which plans to build out its lineup of consumer products, third-party fintech integrations, and global regulatory licenses. Due in part to these developments, several major financial institutions remain vocally bullish on the future of the protocol.

Both Grayscale and Bitwise have filed with the SEC to launch exchange-traded funds for the AAVE token, potentially opening it up to a broader base of institutional investors. Last month, Standard Chartered initiated coverage of Aave, making it the third DeFi protocol on its watchlist alongside Uniswap and Morpho. The investment bank placed a $3,500 target on the AAVE token, predicting a roughly 37x growth from its current price of $95. This would place the protocol's fully-diluted valuation in the region of $55 billion.

Their thesis is that as the total value of the RWA sector continues to swell — growing towards their target of $4 trillion by the end of 2028 — Aave is positioned to become the primary credit network for lending and borrowing institutional assets onchain.

Podcast Recap: Stani Kulechov on Aave V4, Avalanche, and why RWAs hit $100B this year

In the Headlines: The stories driving the conversation this week

• Aave Labs launched its Stable Vaults product, allowing fintech platforms to offer plug-and-play stablecoin yield to clients. The new infrastructure solution automatically deploys user funds into Aave V3 and V4 markets, alongside other strategies, to generate yield without the need to engage with DeFi directly. This abstracted approach to decentralized finance is part of Aave's broader plans to expand its appeal beyond crypto natives, which began with the Aave App launch last year.
• Japan's largest domestic tokenization platform has migrated billions in value to the Avalanche blockchain. Progmat, the issuer for around 65% of the country's total security token market, migrated its entire platform onto a public Avalanche Layer 1. This included over ¥452 billion ($2.78 billion) in tokenized assets, representing the majority of Japan's tokenized real estate and corporate bonds, among other assets.
• BlackRock CFO Martin Small doubled down on the firm's commitment to digital assets. The world's largest asset manager is also one of the most significant RWA issuers, with almost $2.6 billion of its BUIDL U.S. treasuries token already onchain. During an earnings call this week, Small told analysts the firm plans to expand its offerings in the future, exploring native onchain issuance of ETFs, treasury funds, and other assets. BlackRock plans to generate $500 million in yearly revenue from these products by 2030.

Top of the Charts: Aave's peak deposits for 2025 would place it among the top 40 banks in the United States

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