COMP is the governance token of Compound, a leading DeFi project on the Ethereum blockchain. With a total supply of 10 million tokens, 4.23 million COMP are distributed through a "lending and borrowing mining" model. This system rewards users who supply assets to or borrow from the Compound protocol. Based on the current mining rate, it will take approximately four years to distribute all available COMP tokens.
Users can earn COMP by either supplying supported cryptocurrencies to the protocol or by borrowing assets. Generally, borrowing tends to offer a higher yield compared to supplying.
This guide will walk you through the process of supplying, borrowing, and claiming COMP tokens using a compatible Web3 wallet. Note that you must be using an Ethereum wallet to interact with the Compound protocol.
How to Supply Assets and Earn COMP
To begin earning COMP by supplying assets, you first need to access the Compound protocol interface through your Web3 wallet's integrated dApp browser.
Currently, Compound supports the following eight assets for supply: BAT, DAI, ETH, REP, USDC, USDT, WBTC, and ZRX. This means you can deposit any of these cryptocurrencies to the protocol to start earning COMP rewards.
Let's use ETH as an example.
- Navigate to the Compound dApp and locate the ETH market.
- Click the toggle switch next to ETH to enable it as collateral. A confirmation pop-up will appear—click "Use ETH as collateral" and then "Confirm" to authorize the transaction.
- Once the transaction is confirmed, the toggle switch will show as enabled, indicating your ETH is now approved as collateral.
- Now, click on the "ETH" market to open the supply interface.
- Enter the amount of ETH you wish to supply and click the "Supply" button.
- Confirm the transaction in your wallet, entering your password or biometric authentication as required.
After your transaction is confirmed, you have successfully supplied assets to Compound and will begin accruing COMP rewards.
How to Borrow Assets and Earn COMP
You can also earn COMP tokens by borrowing assets from the Compound protocol. Your borrowing capacity is determined by the value of the collateral you have supplied. For example, if you supply $10,000 worth of ETH, you may borrow up to $7,500 worth of other assets (this is subject to change based on the asset's collateral factor).
Here’s how to borrow and earn COMP:
- Within the Compound interface, navigate to the borrow markets and select the asset you wish to borrow, such as USDT.
- Click on the Tether (USDT) icon to enter the borrow interface.
- Enter the amount of USDT you want to borrow and click the "Borrow" button.
- Confirm the transaction in your wallet.
Once the borrowing transaction is confirmed, you will start earning COMP rewards based on the borrowed amount.
How to Claim Your COMP Rewards
There are two primary methods for claiming your accrued COMP tokens.
1. Manual Claiming via the Collect Function
You can manually claim your COMP rewards at any time:
- Click on the "Voting" or "Governance" tab typically located in the top right corner of the Compound interface.
Here, you will see two key metrics:
- COMP Balance: This shows the amount of COMP tokens already in your wallet and under your direct control.
- COMP Accrued: This shows the amount of COMP you have earned but not yet claimed. This value updates in real-time.
- If you have accrued COMP, a "Collect" button will be available. Clicking it will initiate a blockchain transaction to transfer your accrued COMP to your wallet.
- Confirm the transaction and pay the associated gas (network) fee. Once confirmed, the COMP tokens will appear in your wallet.
2. Automatic Claiming During Transactions
A more gas-efficient method is to trigger a claim by performing another operation on Compound. Your accrued COMP will be automatically claimed and sent to your wallet when you execute actions like supplying more assets, borrowing, or repaying a loan—provided your accrued reward is above a certain threshold.
For instance, withdrawing USDT could automatically trigger the claiming of all your accrued COMP tokens. This method bundles the claim with another operation, often saving a significant amount on gas fees.
Note: The automatic claim typically triggers when your accrued COMP balance is greater than 0.001 COMP. Any subsequent supply, borrow, or repay operation will automatically claim your rewards without needing a separate transaction.
Frequently Asked Questions
What is COMP used for?
COMP is the governance token of the Compound protocol. Holding COMP allows you to create and vote on proposals that dictate the future development and parameters of the protocol, such as which assets to support or how to adjust interest rate models.
Do I need to lock my assets to earn COMP?
No, your supplied assets are not locked. You can withdraw them at any time. However, if you are borrowing, you must maintain sufficient collateral to cover your loan; otherwise, it may be liquidated.
Is there a risk to supplying or borrowing on Compound?
Yes, like all DeFi protocols, there are risks. These include smart contract risk (the potential for bugs), collateral liquidation risk if your loan's value gets too close to your collateral's value, and market volatility. Always do your own research before supplying assets.
Why would I borrow if I have to pay interest?
Users borrow for various reasons, including trading on margin or accessing liquidity without selling their crypto holdings. The COMP rewards earned from borrowing can sometimes offset or even exceed the interest paid, depending on market conditions.
Can I use any wallet to interact with Compound?
You need a Web3-compatible wallet like MetaMask, WalletConnect, or a mobile wallet with a dApp browser. Always ensure you are interacting with the official Compound website to avoid phishing scams.
Where can I learn more about advanced DeFi strategies?
For those looking to delve deeper into yield farming and governance, numerous resources are available online. 👉 Explore advanced DeFi strategies to enhance your understanding and find new opportunities.