Aave V4 launched on the Arc Layer-1 network on Sept. 16 and quickly accumulated USDC liquidity. By Sept. 17, Aavescan recorded approximately $76 million supplied and less than $100,000 borrowed, yielding a utilization rate near 0.1%. Suppliers filled the market's initial capacity, but borrowers left most of that liquidity untouched.

LlamaRisk responded to the deposit surge by suggesting an increase in the Arc Main Spoke's USDC add cap from 56 million to 150 million tokens. The balance later exceeded the original 56 million threshold, indicating the cap was no longer binding. Governance documentation and the live market page did not specify the exact new setting.

Arc's architecture separates liquidity into hubs and spokes. A hub holds assets, while spokes govern user interactions. An add cap restricts how much of an asset a spoke can supply to its hub. Aave's technical documentation refers to these as V4 equivalents of supply and borrow caps. The Main Spoke initially operated with a 56 million USDC add cap and a 51 million USDC draw cap. LlamaRisk noted the add cap reached 100% within hours, corresponding to 56 million USDC valued at roughly $55.99 million in its Sept. 16 snapshot.

The figures illustrate a distinction between supply-side capacity and credit utilization. Aave's interest-rate model ties hub liquidity to utilization. When borrowing is minimal, liquidity remains abundant and base rates stay low. The Arc snapshot reflected this pattern: Aavescan displayed 0.00% supply and borrow APRs on Sept. 17. These rates captured the protocol's state at that moment, though the public launch data did not clarify whether reward mechanisms or a few large addresses drove the USDC inflows.

Borrowing serves as the primary adoption indicator. Expanding the add cap to 150 million USDC would nearly triple the supply-side ceiling while keeping the 51 million USDC draw cap unchanged. This would allow more USDC to enter the Main Spoke without increasing the maximum amount that could be borrowed. The next milestone will be sustained growth in borrowed USDC, utilization, and resulting rates. If these metrics rise alongside capacity, Arc may evolve into an active credit market. If they remain stagnant, the network could be viewed primarily as a repository for idle liquidity rather than a functional lending venue.

Additional capacity could enhance the market's ability to serve future borrowers, but actual draws are required to demonstrate demand for credit. At present, Arc has not yet demonstrated that borrowers will utilize the USDC liquidity it attracted.