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What Is Compound and Why Deposit Tokens?
Compound is a leading decentralized finance (DeFi) protocol built on Ethereum that allows users to earn interest by depositing cryptocurrencies. By depositing tokens on Compound, you become a liquidity provider, enabling others to borrow assets while you passively generate yield. This process, known as “supplying,” turns idle crypto holdings into productive assets. Unlike traditional banks, Compound operates via smart contracts, offering transparent, permissionless access to financial services globally.
Supported Tokens for Deposit on Compound
Compound supports major ERC-20 tokens, including:
- Stablecoins: USDC, DAI, USDT
- Ethereum: Wrapped ETH (WETH)
- Altcoins: UNI, COMP, BAT
- Note on TON: The Open Network (TON) token isn’t natively supported. Use bridges to convert TON to Ethereum-compatible tokens like WETH before depositing.
Step-by-Step: How to Deposit Tokens on Compound
Step 1: Set Up a Web3 Wallet
Install MetaMask or Coinbase Wallet and fund it with ETH for gas fees plus tokens to deposit.
Step 2: Connect to Compound
Visit app.compound.finance, connect your wallet, and authorize the connection.
Step 3: Select Asset to Supply
Navigate to the “Supply” section. Choose your token (e.g., USDC) and click “Enable.” Approve the transaction in your wallet.
Step 4: Deposit Tokens
Enter the deposit amount, review interest rates, and click “Supply.” Confirm the transaction. Your tokens are now earning yield!
Key Benefits of Using Compound
- Passive Income: Earn variable APY (e.g., 2-8% on stablecoins).
- Liquidity: Withdraw funds anytime without lock-up periods.
- Security: Audited smart contracts with $0 protocol hacks since launch.
- COMP Rewards: Some deposits earn COMP governance tokens.
Critical Risks to Consider
- Smart Contract Vulnerabilities: Though audited, exploits remain possible.
- Impermanent Loss: Applies if supplying LP tokens (not single assets).
- Interest Rate Volatility: APY fluctuates based on market demand.
- Gas Fees: Ethereum transactions can be costly during peak times.
Frequently Asked Questions (FAQ)
Can I deposit TON directly on Compound?
No. TON operates on its own blockchain. Convert it to Ethereum-compatible tokens (e.g., via bridge) first.
How often is interest paid?
Interest accrues every Ethereum block (~12 seconds) and compounds automatically.
Is there a minimum deposit?
No minimums, but ensure sufficient ETH for gas fees.
Can I lose my deposited tokens?
Only in extreme scenarios like protocol insolvency or critical bugs. Your assets aren’t lent out beyond collateralized limits.
How do I maximize yields?
Monitor rates across assets—stablecoins often offer stability, while volatile tokens may have higher APY.
Conclusion: Unlock Crypto Earning Potential
Depositing tokens on Compound transforms idle crypto into interest-generating assets with unparalleled flexibility. While TON requires conversion to Ethereum-based tokens first, popular assets like USDC or ETH offer seamless earning opportunities. Always DYOR, start small, and leverage Compound’s transparency to grow your portfolio securely. Ready to earn? Connect your wallet and supply today!
