How to Earn Interest and Borrow Ethereum Assets

Access ETH, WBTC, USDC, DAI, USDT, BAT, ZRX, UNI, COMP , TUSD, and LINK on Compound

Calvin Liu
Sep 27, 2018 · 6 min read

The Compound protocol lives on the Ethereum blockchain — it’s open-source, immutable, and accessible by any Ethereum account, forever. But for most people, decentralized protocols are hard to use.

In this guide, we’ll walk through how to use the Compound Dashboard with a Web3-compatible Ethereum wallet — a visual, intuitive way to access Compound’s interest rate markets for the first time. If you’d like to try other interfaces and products built on Compound, you can find a selection of alternatives on the Compound home page.

For a more technical understanding of what’s happening under the hood, please see our protocol Documentation.

Connect your Wallet

  • When you first visit the Dashboard, a pop-up will ask you to connect your Ethereum wallet. These wallets secure the private keys to your crypto and enable you to authorize transactions, and view balances on the Ethereum blockchain.
  • Make sure your wallet contains at least 0.05 Ether. This is required to create Ethereum transactions.
  • If you don’t have an Ethereum wallet yet, MetaMask is a user-friendly browser extension that stores an Ethereum wallet.
  • Select the wallet that you use, and follow the instructions.

The Compound Dashboard

  • After connecting your wallet, your Ethereum address will appear in the top-right of the screen.
  • The top of the screen displays the value of your Supply Balance and Borrow Balance; at first, both of these will be $0.
  • On the left-hand side are Supply Markets; these are assets you can supply to Compound to earn interest. On the right-hand side are Borrow Markets; these are assets you can borrow from Compound.

Supply Assets to Earn Interest & COMP

  • First, click on the asset that you’d like to Supply.
  • A pop-up will appear, displaying the Supply APY (amount of token/year) and the Distribution APY (amount of COMP/year) you’ll earn by Supplying the asset.
  • Before you can Supply an asset, you must Enable it first. This allows the Compound protocol to interact with the asset in your wallet. Click Enable, and submit the transaction.
  • To Supply an asset, type the quantity you’d like to supply at the top of the pop-up. Your wallet balance is displayed at the bottom of the pop-up, and can be entered with the MAX button.
  • Click Supply, and submit the transaction.

Monitoring your Income

  • Assets are supplied directly from your Ethereum wallet into Compound, and immediately begin earning interest.
  • Interest accrues directly to your Supply balance; you won’t see Ethereum transactions, or distributions — but your balance and Earned column will slowly increase over time.

Claim COMP

  • In the top-right of the Dashboard, you can see your COMP balance. Click the number, and a pop-up will appear.
  • To collect your earned COMP, click Claim, and submit the transaction.

Withdraw Assets

  • At any time, you can Withdraw any portion of your balance back to your Ethereum wallet.

Borrowing Assets

The Compound protocol allows you to borrow any supported asset, using your Supply balance as Collateral.

Liquidation

Your Borrow Limit is the maximum value of assets you can owe the protocol; at the top of the Dashboard, a meter is displayed, tracking what portion of your Borrow Limit you’ve used.

If this meter reaches ≥100%, your account will be partially liquidated. This can occur when collateral declines in value, or borrowed assets increase in value.

If your account is in liquidation, a member of the community can repay up to 50% of your outstanding borrowed assets; the liquidating user receives a proportionate amount of your collateral, at a 8.0% discount, as a reward.

Carefully monitor your Borrow Limit, and what portion you’re using.

Increase your Borrow Limit

  • You can enable, or disable an asset to be used as collateral by pressing the toggle on the right side of the asset; you’ll be presented with a pop-up which displays how your Borrow Limit will change.

Borrow Assets

  • First, click on the asset that you’d like to Borrow.
  • A pop-up will appear, displaying the Borrow APY (amount of token/year) you’ll pay, and the Distribution APY (amount of COMP/year) you’ll earn by Borrowing the asset.
  • To Borrow an asset, type the quantity you’d like to borrow at the top of the pop-up. For convenience, the 80% LIMIT button will borrow up to 80% of your Borrow Limit. The impact on your Borrow Limit meter will be displayed.
  • Click Borrow, and submit the transaction.

Example Borrowing Use Cases

  • Alice wants increased long exposure to ZRX. She supplies 10,000 ZRX to Compound, and uses it as collateral to borrow 30 ETH. Alice sends the ETH to her favorite exchange to purchase 6,000 more ZRX. Alice now has long exposure to 16,000 ZRX, and owes Compound 30 ETH. She is long ZRX/ETH. If ZRX/ETH increases in value, Alice will be able to repurchase the 30 ETH she owes Compound for less than 6,000 ZRX. She can then repay her debt, and keep the excess ZRX as profit.
  • Bob wants short exposure to ZRX. He supplies 100 ETH to Compound, and uses it as collateral to borrow 12,000 ZRX. Bob sends the ZRX to his favorite exchange, and sells it for 60 ETH. Bob now has long exposure to 160 ETH, and owes Compound 12,000 ZRX. He is short ZRX/ETH. If ZRX/ETH decreases in value, Bob will be able to repurchase the 12,000 ZRX he owes Compound for less than 60 ETH. He can then repay his debt, and keep the excess ETH as profit.

Compound Markets

An overview of each Compound market is available in real-time at https://compound.finance/markets.

Still have questions?

Compound

Compound is an algorithmic, autonomous interest rate protocol built for developers.

Compound

Compound is an algorithmic, autonomous interest rate protocol built for developers, to unlock a universe of open financial applications.

Calvin Liu

Written by

Strategy Lead at Compound (https://compound.finance)

Compound

Compound is an algorithmic, autonomous interest rate protocol built for developers, to unlock a universe of open financial applications.