Aave V4 launched on the Arc Layer-1 network on September 16 and drew approximately $76 million in USDC by September 17. Despite the rapid deposit inflow, borrowing activity remained negligible at less than $100,000, leaving utilization near 0.1%.
The market's structure separates supply and borrowing capacity through distinct mechanisms. Arc's Main Spoke launched with a 56 million USDC add cap—limiting how much could be supplied through the spoke—and a 51 million USDC draw cap constraining maximum borrowing. The add cap was exceeded within hours, prompting governance discussions about expansion.
LlamaRisk proposed increasing the Arc Main Spoke's USDC add cap from 56 million to 150 million tokens. This adjustment would nearly triple the supply-side ceiling while leaving the 51 million USDC draw cap unchanged, allowing more deposits without expanding borrowing capacity.
Interest Rates Reflect Low Utilization
Aave's interest-rate framework prices liquidity according to utilization levels. With minimal capital being borrowed, the protocol displayed 0.00% supply and borrow APRs during the September 17 monitoring period.
Adoption Remains Unproven
The accumulation of deposits without corresponding borrowing activity raises questions about market adoption. Sustained increases in borrowed USDC, utilization rates, and interest rates would indicate Arc is developing into an active credit market. Without such movement, Arc would remain a large pool of mostly idle liquidity. The next phase of evaluation depends on demand-side metrics—whether users actually draw on the available capital or simply park USDC in the market.
