Compound v3 is an EVM compatible protocol within which lenders can supply the base asset to earn interest while borrowers can borrow the base asset and pay interest by supplying their assets as collateral. Interest is denominated in the base asset with a supply and borrow rate model and collateral assets do not earn or pay interest.
Lido’s wstETH has been integrated into its ETH Market on Ethereum where ETH is the base asset so Lido users are allowed to provide wstETH or stETH as collateral to borrow ETH. During the supply duration, the users still receive the staking rewards from Lido.
Borrowing ETH against wstETH or stETH
Supply
Head over to Compound ETH Market (Ethereum).
Select the token to supply. The default option is wstETH but supplying stETH is supported, which would be automatically wrapped.
Select the amount to supply.
Approve and Submit. You have to confirm the supply transaction after the token approval.
Borrow
Head over to Compound ETH Market (Ethereum).
Click on the ‘Borrow ETH’ button. After depositing wstETH or stETH as collateral, the ‘Borrow ETH’ button is enabled
Select the amount to borrow. Make sure to check liquidation risk and keep a healthy borrowing position in case of liquidation. The minimum borrowing amount is 0.01 ETH.
Submit the transaction. After the transaction is confirmed, you can see the borrowed ETH in your wallet.
FAQs
Would I earn the staking rewards when supplying stETH or wstETH?
Yes. When you supply stETH, your stETH would be automatically wrapped into wstETH first.Then, your wstETH position still accrues values as usual.
Does my collateralised position earn interest from Compound?
No, collateral assets do not earn interest from Compound.