How to Yield Farm Ethereum on Compound: Step-by-Step Beginner’s Guide

**Introduction to Ethereum Yield Farming on Compound**
Yield farming lets cryptocurrency holders earn passive income by lending assets through decentralized finance (DeFi) protocols. Compound Finance is a leading Ethereum-based lending platform where users can supply assets like ETH to earn variable interest rates. This guide provides a clear, step-by-step walkthrough for beginners to start yield farming Ethereum on Compound safely and efficiently.

**Prerequisites for Compound Yield Farming**
Before starting, ensure you have:
– An Ethereum wallet (MetaMask recommended)
– ETH for gas fees (minimum 0.05 ETH suggested)
– Ethereum (ETH) or Wrapped ETH (WETH) to deposit
– Basic understanding of DeFi risks

**Step 1: Set Up Your Ethereum Wallet**
1. Install MetaMask browser extension
2. Create a new wallet and securely store your seed phrase offline
3. Switch network to Ethereum Mainnet
4. Fund your wallet with ETH for gas fees

**Step 2: Convert ETH to WETH (If Necessary)**
Compound requires Wrapped ETH (WETH) for deposits:
1. Visit a decentralized exchange like Uniswap
2. Connect your MetaMask wallet
3. Swap ETH for WETH (1:1 ratio)
4. Confirm transaction and pay gas fee

**Step 3: Connect to Compound Finance**
1. Go to the official Compound website (app.compound.finance)
2. Click “Connect Wallet” and select MetaMask
3. Authorize the connection in your wallet

**Step 4: Supply WETH to Compound**
1. In the Compound dashboard, find WETH under “Supply Markets”
2. Click “Supply” and enter your WETH amount
3. Review transaction details including current supply APY
4. Confirm transaction in MetaMask (expect ~$5-15 gas fee)

**Step 5: Earn and Monitor Yield**
1. Your supplied WETH immediately starts earning interest
2. Interest compounds every Ethereum block (~12 seconds)
3. Track earnings in your dashboard’s “Supply Balance” section
4. Withdraw anytime by clicking “Withdraw” in the WETH market

**Step 6: Understanding COMP Token Rewards**
1. Compound distributes COMP governance tokens to suppliers
2. Claim COMP rewards manually via the “COMP” tab
3. Rewards can be reinvested or traded on exchanges

**Key Risks and Safety Measures**
– Smart Contract Risk: Compound is audited but vulnerabilities exist
– Impermanent Loss: Not applicable to single-asset ETH deposits
– Gas Fees: Ethereum network congestion increases costs
– Interest Rate Volatility: APY fluctuates based on market demand

Security Tips:
– Bookmark Compound’s official site to avoid phishing
– Never share seed phrases
– Start with small amounts
– Monitor for protocol updates

**Frequently Asked Questions (FAQ)**

**Q: What’s the minimum ETH needed to start?**
A: No strict minimum, but consider gas fees ($10-$50). $100+ recommended for cost efficiency.

**Q: How often is interest paid?**
A: Interest compounds every Ethereum block (every ~12 seconds), paid continuously.

**Q: Is my ETH locked when supplying?**
A: No, you can withdraw anytime, subject to Ethereum gas fees.

**Q: What’s the difference between ETH and WETH?**
A: WETH is ERC-20 wrapped ETH required by Compound. 1 ETH = 1 WETH.

**Q: Are there alternatives to MetaMask?**
A: Yes, WalletConnect-compatible wallets like Coinbase Wallet or Trust Wallet work.

**Q: How is APY calculated?**
A: Rates adjust algorithmically based on supply/demand. Current ETH APY: 0.5-3% (check live dashboard).

**Conclusion**
Yield farming Ethereum on Compound provides accessible DeFi earnings without complex strategies. By following these steps, you can safely put your ETH to work. Always prioritize security, stay updated on protocol changes, and never invest more than you can afford to lose. Start small, monitor your position, and compound your crypto assets effectively.