Borrowing crypto with your osETH just became simpler and cheaper — all thanks to the latest integration into Compound Finance!
As one of the most active lending markets on Ethereum, Compound now allows borrowing ETH against your osETH.
You can borrow ETH for up to 80% of your osETH collateral, and do so at very attractive rates thanks to the COMP token subsidy.
In this post, we will cover everything you need to know about borrowing ETH using osETH on Compound. Without further ado, let’s dive in!
How to deposit osETH and borrow on Compound
📺 Go to the Compound Finance dapp — you should see the Ethereum market as defult: https://app.compound.finance/?market=weth-mainnet
🔢 On the left-hand side, find osETH on the list and hit the (+) button. In the Supply osETH section to the right, choose the amount of osETH to supply as collateral.
▶️ Press Approve & Add and then confirm the transaction to approve osETH. Once it is completed, press Submit Transaction to supply osETH as collateral. PS: you continue earning your staking rewards while the asset is supplied to Compound! 📈
🛒 Press the Borrow ETH button at the top of the page. In the Borrow section below, choose the amount of ETH to borrow and press Add Action.
🧐 Review the numbers: make sure you are happy with the Liquidation point, borrow rate, and liquidation risk level.
▶️ Proceed by pressing Submit Transaction and approve a proxy contract deployment transaction as asked by the UI.
✅ Once it is completed, press Confirm Transaction to borrow ETH against osETH.
If you followed these steps, you should have supplied osETH and borrowed ETH on Compound! Congratulations!
When you’re done, repay the loan by pressing Repay ETH at the top of the page, and enter the amount to repay in the Repay section below. Press Add Action and then Submit Transaction. From there, follow the UI instructions to approve and confirm transactions to repay ETH.
To fully withdraw osETH from Compound, press on the (-) button next to osETH in the list on the left. In the Withdraw osETH section on the right, enter the amount of osETH to withdraw. Press Add Action and then Submit Transaction, then follow the UI instructions to approve and confirm transactions to withdraw osETH. Once the transaction is confirmed, you will receive osETH back in your wallet.
PS. We recommend not exceeding 60% LTV if you were not familiar with lending protocols before. If you understand the logic of using Compound, we believe it is safe to borrow at 80% LTV. See the risk section for explanation.
What is Compound?
Compound Finance is one of the OG DeFi protocols on Ethereum, originally launched in 2018 and now on its third iteration (codenamed Comet). It is a money market protocol, allowing users to access lending and borrowing for their crypto assets, including osETH.
Compound currently has over $2BN in collateral provided on its platform and over $800M in loans, standing the test of both time and scale.
What sets Compound apart from other lending protocols is that it uses its governance token, COMP, to subsidize the cost of borrowing ETH and grant additional incentives to lend ETH on its protocol. This makes it attractive to use for any ETH-based lending and borrowing activity, such as leveraged staking against osETH. The protocol has multiple audits in place.
What can I do with ETH borrowed on Compound?
Borrowing ETH against osETH is a low-risk way of boosting your yield from staking, if done repeatedly. This means borrowing the maximum amount of ETH, staking it on StakeWise, minting osETH, and depositing it on Compound, only to borrow ETH again. On every loop you increase your income because yield from staking is higher than the interest on borrowed ETH. Repeating the loop as many times as possible results in the maximum amount of income, all based on the initial stake — leading to over 2x boost to your staking APR.
What are the risks of borrowing on Compound?
Like Aave, Compound uses the true osETH exchange rate (calculated by StakeWise) to price osETH collateral. This means that osETH price fluctuations in DEXs do not affect the value of your collateral in Compound; instead, its value is always tied to the true osETH rate. This approach allows users to borrow correlated assets (like ETH) with higher Loan-to-Value (LTV) and not be concerned about the liquidation risk related to price fluctuations.
However, it is important for osETH APY to exceed the ETH borrow rate when using Compound. If the borrow rate exceeds osETH APY for a long enough period, your LTV will increase (bad), which can lead to a liquidation of your position. This is the main risk of borrowing ETH on Compound, apart from taking its smart contract risk. Ensuring that you only borrow ETH when it’s borrow rate is below osETH APY is the best way to keep your LTV in check and mitigate the liquidation risk.
How do I claim by COMP subsidy when borrowing ETH?
Borrowing and supplying ETH to Compound earns you COMP tokens, the tokens used to govern the protocol. The COMP subsidy boosts your ETH supply rate and reduces the overall ETH borrow rate in order to make the protocol more attractive for both lenders and borrowers.
Once you’ve borrowed ETH on Compound, check your accrued COMP tokens by pressing on the icon on the top-right handside of your screen, next to your wallet address.
StakeWise makes staking ETH simple and secure! Pool ETH with others or go solo — no matter how you stake, you stay liquid with osETH, our liquid staking token.
Find the best way to stake ETH 👉 https://stakewise.io
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