How to Stake DOT on Compound: The Complete 2023 Guide

What Does It Mean to Stake DOT on Compound?

Staking DOT on Compound refers to supplying Polkadot’s native token (DOT) to the Compound decentralized finance protocol to earn interest. While Compound originally launched on Ethereum, it now supports multiple chains through its Compound V3 multi-chain deployment. This guide covers the entire process, benefits, risks, and alternatives for putting your DOT to work via Compound’s lending markets.

Prerequisites for Staking DOT on Compound

Before starting, ensure you have:

• DOT tokens in a non-custodial wallet (e.g., MetaMask, Talisman)
• Gas funds (ETH for Ethereum, GLMR for Moonbeam, etc.)
• A Web3 wallet connected to Compound’s interface
• Basic understanding of cross-chain bridges if staking from non-native networks

Step-by-Step Guide to Staking DOT on Compound

Step 1: Access Compound’s Interface

Navigate to app.compound.finance and connect your wallet. Switch to a supported network like Ethereum, Polygon, or Moonbeam.

Step 2: Bridge DOT to a Compatible Chain (If Needed)

• Use bridges like Wormhole or Multichain to convert native DOT to wrapped versions (e.g., wDOT on Ethereum)
• For Moonbeam: Transfer DOT directly via Polkadot’s XCM protocol

Step 3: Supply DOT to Compound

1. Select “Supply” in Compound’s dashboard
2. Choose DOT (or wDOT) from the asset list
3. Enter the amount to stake and confirm transaction
4. Approve gas fees in your wallet

Step 4: Manage & Monitor Your Stake

• Track accrued interest in real-time on the dashboard
• Withdraw anytime or use cTokens as collateral for loans
• Reinvest earnings automatically via Compound’s compounding mechanism

Key Benefits of Staking DOT on Compound

• Passive Income: Earn up to 3-8% APY (varies by market conditions)
• Liquidity: Withdraw funds anytime without lock-up periods
• Utility: Use staked DOT as collateral for borrowing other assets
• Security: Audited smart contracts with $0 historical hacks

Risks and Considerations

• Smart Contract Risk: Potential vulnerabilities in protocol code
• Bridge Risk: Wrapped assets depend on cross-chain security
• Impermanent Loss: Not applicable (lending ≠ liquidity pools)
• Interest Rate Volatility: APY fluctuates based on supply/demand
• Regulatory Uncertainty: Evolving DeFi regulations may impact operations

Top Alternatives to Compound for DOT Staking

1. Native Polkadot Staking: 12-15% APY via validators (requires 120+ DOT)
2. Aave: Similar lending protocol with DOT markets
3. Parallel Finance: Polkadot-native DeFi hub offering 18%+ APY
4. Centralized Exchanges: Binance, Kraken (lower yields but simpler UX)

Frequently Asked Questions (FAQ)

Can I stake native DOT on Compound?

No. You must use wrapped DOT (wDOT) on Ethereum or transfer native DOT to Moonbeam via XCM. Compound doesn’t directly support the Polkadot relay chain.

What’s the minimum DOT to stake on Compound?

No minimum! Unlike native staking, you can supply any amount. Just ensure you have enough for gas fees (≥0.01 ETH/GLMR).

How often is interest paid?

Interest compounds every Ethereum block (~12 seconds). Earnings accrue continuously and are reflected in your cToken balance.

Is staking DOT on Compound safe?

Compound has robust audits and $0 hacks since 2018. However, risks include smart contract bugs, bridge failures, and market volatility. Never stake more than you can afford to lose.

Can I unstake instantly?

Yes! Unlike native DOT staking with 28-day unbonding, Compound allows instant withdrawals (subject to liquidity).

Do I pay taxes on staking rewards?

In most jurisdictions, staking rewards are taxable income. Consult a tax professional for guidance in your region.

What’s the difference between staking and lending?

Staking DOT natively helps secure the network. Lending on Compound supplies DOT to borrowers. Both generate yield but have different risk profiles.