What Does It Mean to Stake DOT on Compound?
Staking DOT on Compound involves using wrapped Polkadot (wDOT) to participate in decentralized finance (DeFi) lending/borrowing activities. While Polkadot (DOT) isn’t natively supported on Ethereum-based platforms like Compound, cross-chain bridges enable users to convert DOT into ERC-20 compatible tokens. This guide explains how to stake DOT-derived assets on Compound to earn interest.
How to Stake DOT on Compound (4 Steps)
Step 1: Acquire DOT Tokens
– Buy DOT on exchanges like Binance, Kraken, or Coinbase
– Transfer DOT to a non-custodial wallet (MetaMask, Ledger)
Step 2: Bridge DOT to Ethereum
1. Use a cross-chain bridge (Multichain, cBridge, or Polkadot’s Snowfork)
2. Convert DOT to wDOT (wrapped DOT ERC-20)
3. Pay gas fees in ETH or DOT
Step 3: Supply wDOT to Compound
1. Connect Web3 wallet to Compound
2. Navigate to ‘Supply Markets’
3. Select wDOT from asset list
4. Approve transaction and confirm deposit
Step 4: Earn & Monitor Rewards
– Earn interest in wDOT or COMP tokens
– Track APY fluctuations via Compound’s dashboard
– Withdraw anytime (subject to market liquidity)
3 Key Benefits of Staking DOT via Compound
1. Dual Earnings: Earn interest from borrowers + potential COMP token rewards
2. Liquidity Access: Use supplied wDOT as collateral for loans
3. Cross-Chain Utility: Leverage DOT in Ethereum’s DeFi ecosystem
Risks to Consider
– Bridge Vulnerabilities: Cross-chain transfers carry hacking risks
– Smart Contract Bugs: Compound’s code could contain exploits
– Impermanent Loss: wDOT/ETH price fluctuations may impact returns
– Regulatory Uncertainty: Changing laws might affect DeFi operations
FAQ: Staking DOT on Compound
Q: Can I stake native DOT tokens directly on Compound?
A: No – you must convert DOT to ERC-20 wDOT via a bridge first.
Q: What’s the current APY for wDOT on Compound?
A: Rates vary (typically 2-8%). Check Compound’s official dashboard for real-time data.
Q: Is staking on Compound safer than Polkadot parachains?
A: Compound carries Ethereum risks, while Polkadot staking involves validator slashing. Diversify across platforms.
Q: How are taxes handled for staking rewards?
A: Most jurisdictions tax staking income. Consult a crypto tax professional.
Q: Can I borrow against my staked wDOT?
A: Yes – use your supplied wDOT as collateral for stablecoin/ETH loans.
Alternatives to Compound for DOT Staking
For native DOT staking:
1. Polkadot.js.org (official wallet)
2. Kraken/Kucoin exchange staking
3. Acala/Moonbeam DeFi hubs
For Ethereum-based options:
1. Aave’s wDOT market
2. Yearn Finance vaults
3. Curve wDOT pools
