How to Stake Ethereum on Compound: Step-by-Step Guide for Earning Interest

What Is Staking Ethereum on Compound?

Staking Ethereum on Compound Finance lets you earn passive income by supplying your ETH to the decentralized lending protocol. Unlike traditional staking in proof-of-stake networks, Compound rewards you with interest (paid in ETH) for providing liquidity to borrowers. This guide breaks down the entire process into simple steps, helping you safely put your idle Ethereum to work.

Prerequisites Before Staking

Prepare these essentials:

• Ethereum Wallet: MetaMask (browser extension/mobile app) or WalletConnect-compatible wallets like Trust Wallet.
• ETH Balance: Enough Ethereum to cover gas fees + your desired staking amount.
• Understanding of Risks: Smart contract vulnerabilities and market fluctuations can affect returns.
• Web3 Knowledge: Basic familiarity with DeFi transactions and wallet security.

Step 1: Convert ETH to Wrapped Ethereum (WETH)

Compound requires ERC-20 tokens. Since ETH isn’t natively ERC-20, convert it:

1. Open your wallet (e.g., MetaMask) and ensure it’s connected to Ethereum Mainnet.
2. Visit a decentralized exchange like Uniswap or SushiSwap.
3. Select ETH as input and WETH as output.
4. Enter the ETH amount to wrap and confirm the transaction. Pay gas fees.
5. Wait for confirmation. WETH will appear in your wallet.

Step 2: Connect Your Wallet to Compound

1. Go to the official Compound App.
2. Click “Connect Wallet” at the top-right.
3. Choose your wallet provider (e.g., MetaMask).
4. Approve the connection request in your wallet pop-up.

Step 3: Deposit WETH into Compound

1. On Compound’s dashboard, find “WETH” under “Supply Markets”.
2. Click “Supply” and enter your WETH amount.
3. Review transaction details, including estimated APY (Annual Percentage Yield).
4. Confirm the transaction in your wallet. Pay gas fees.
5. Wait for blockchain confirmation. Your supplied WETH now earns interest!

Step 4: Track and Manage Your Stake

• Monitor Earnings: Interest accrues every Ethereum block (~12 seconds). Check “Your Dashboard” on Compound.
• Withdraw Funds: Click “Withdraw” under WETH, enter amount, and confirm. Gas fees apply.
• Reinvest: Compound automatically reinvests interest, but you can manually add more WETH anytime.

Key Risks and Tips

• Smart Contract Risk: Audited but not infallible. Never stake more than you can afford to lose.
• Gas Fees: High during network congestion. Use tools like Etherscan Gas Tracker for optimal timing.
• APY Fluctuations: Rates change based on market demand. Current WETH APY: ~0.5-2% (check live on Compound).
• Security: Bookmark Compound’s official site to avoid phishing scams.

Frequently Asked Questions (FAQ)

Is staking ETH on Compound safe?

Compound is audited and widely used, but DeFi carries inherent risks like smart contract exploits. Use reputable wallets and never share seed phrases.

Can I unstake anytime?

Yes! Withdrawals are instant (after transaction confirmation). No lock-up periods.

Why convert ETH to WETH?

Compound’s protocol uses ERC-20 standards. WETH is an ERC-20 version of ETH, enabling compatibility.

How often is interest paid?

Interest compounds every block (~12 seconds). Earnings update in real-time on your dashboard.

Are there minimum staking amounts?

No minimums, but ensure enough ETH remains for gas fees on future transactions.

Can I stake other cryptocurrencies?

Yes! Compound supports assets like USDC, DAI, and UNI. Each has its own APY.

Conclusion

Staking Ethereum on Compound transforms idle ETH into passive income with just four steps: convert to WETH, connect your wallet, deposit, and earn. While APYs are modest compared to riskier DeFi platforms, Compound offers reliability for beginners. Always prioritize security, monitor rates, and start small to test the process. Ready to begin? Connect your wallet and put your Ethereum to work today!