Compound Finance is a decentralized financial application that allows you to earn interest on seven different cryptocurrencies while still maintaining ownership of your coins and tokens. In my opinion, this is a win-win situation because you can earn interest in the short term while also retaining the ability to withdraw and sell your coins if the price goes up. This article is intended to help beginners learn how to set up a Compound account and start earning interest by lending crypto. There is also an accompanying video.

The most important question you may be asking is "Is it worth it to lend crypto?" Of course, this is an individual decision, but I have attached a screenshot of Compound's website to show the various interest rates that are being offered for different cryptos.

First off, it is important to point out that the interest you can on on each crypto depends on what specific coin/token you want to lend. For example, stablecoins such as DAI and USD coin (USDC) earn much more interest than BAT or Ether (Ethereum). One advantage of lending stablecoins is that the interest rate is significantly higher than what you could find at a bank account. For example, my current bank gives a 1.8% interest rate on a savings account. However, I can earn 7% lending DAI on compound Finance. As another example, I can lend USDC on compound for about 4.8% interest. USDC is exchangeable directly for $1, so it would be possible to take money out of my savings account that is earning 1.8% interest and purchase USDC to loan on Compound finance where I can earn over double the interest.

Let's suppose that you have decided you want to lend crypto and earn interest. There are a number of great sites where you can lend and receive interest on crypto, and I recommend checking out the site DeFI Pulse to get an idea of the different DeFi platforms and the interest rates that they offer. For the purposes of this article, I will focus on Compound because I have first hand experience with the site and it was the easiest for me to understand. You may find one of the other platforms better for your specific needs, and the "best" DeFi platform is largely a matter of user preference. If you decide to use Compound, the first step is to go to the official website at compound.finance. From there, you will see a green button with the word “APP” in the upper right hand corner. Click this button to login.

This will take you to the next screen where you have to connect Compound with your crypto wallet. In order to use Compound Finance, you must have one of three compatible wallets. These include Ledger, MetaMask, and the Coinbase wallet.

Once you connect your wallet, you can view the different assets that compound has available for loaning. Simply click on the asset that you wish to loan to move to that coin's specific workspace.

After you decide which cryptocurrency you want to loan, you have to enable the specific crypto. This requires a very small one time ETH gas fee. Think of this as doing the paperwork required to open a traditional bank account. As you can see from this example, the fee is usually only a few cents. Once you enable a specific cryptocurrency, you will not have to pay to enable it again. You will simply be able to put more money into the account. I recommend checking ETH Gas Station for the safe low gas fee to make sure that you are not overpaying on gas fees.

Once you have enabled the specific crypto that you want to loan, you can proceed to the next step and deposit your funds. For this step of the tutorial, I am using DAI. Because I have already previously enabled this asset, I can simply deposit more DAI into my existing account. To deposit more money into the account that you already have, simply go back to the main screen, and you will be able to see assets that you are currently supplying as well as the other potential assets that you can supply if you wanted to.

Since we want to supply more DAI, we will simply click on the icon for DAI. Once we are in the DAI workspace, we simply click on supply to add more DAI to our existing account.

We can supply any amount of DAI that we wish up to the maximum that is in our current wallet. In order to minimize transaction fees, I am sending all of my DAI to Compound at once instead of sending small amount.

Once again, MetaMask will ask us to confirm the transaction. When supplying crypto to an existing account, we can also adjust the gas fee in MetaMask to ensure that we are not needlessly spending too much ETH.

Once we have confirmed the fees that we are willing to pay, the transaction will start to process. We can see the pending transaction in MetaMask.

We can also view the transaction on Etherscan. Depending on the gas that you pay and the network congestion, the transaction will complete in anywhere from a few seconds to a few minutes.

At the end of all this, we will be able to see that our funds have safely arrived in the compound account and that we are now earning interest on the total balance within our account. To withdraw the funds, we simply follow the same steps but in reverse order by clicking the withdraw button in grey.

Keep in mind that there are always risks involved with loaning crypto, and it is important to do your own research. This is not financial advice, and is simply an overview of an application that I have found useful.