Yield Farming on Compound via Solana: Step-by-Step Guide for 2023

What Is Yield Farming on Compound with Solana?

Yield farming on Compound using Solana assets involves leveraging cross-chain bridges to move SOL or SPL tokens to Ethereum, where you supply them to Compound’s lending protocol to earn interest and COMP rewards. While Compound operates natively on Ethereum, Solana users can participate by bridging assets. This guide breaks down the entire process with actionable steps.

Prerequisites for Yield Farming

Before starting:

• Solana Wallet: Phantom or Solflare with SOL for gas fees
• Ethereum Wallet: MetaMask configured for Ethereum Mainnet
• Bridged Assets: Convert SOL to wrapped tokens (e.g., wSOL via Wormhole)
• Gas Funds: ETH for Ethereum transactions and SOL for bridging
• Compound Account: Registered at app.compound.finance

Step-by-Step Guide to Yield Farming

Step 1: Bridge Assets to Ethereum

• Visit a cross-chain bridge like Wormhole or Allbridge
• Connect your Solana wallet and select SOL/SPL tokens
• Enter destination (Ethereum) and MetaMask address
• Confirm transaction and wait for wrapped tokens (e.g., wSOL) to appear in MetaMask

Step 2: Supply Assets to Compound

• Connect MetaMask to Compound Finance
• Navigate to ‘Supply Markets’ and select your bridged asset (e.g., wSOL)
• Approve token contract and specify deposit amount
• Confirm transaction: Assets now earn supply APY (e.g., 2-5% for wSOL)

Step 3: Maximize Earnings with COMP Rewards

• Enable COMP distribution in Compound’s ‘Rewards’ tab
• Use supplied assets as collateral to borrow stablecoins (optional)
• Re-supply borrowed assets to compound yields (requires risk calculation)
• Claim accrued COMP tokens weekly

Step 4: Monitor and Withdraw

• Track APY fluctuations via Compound’s dashboard
• Check collateralization ratio if borrowing
• To exit: Repay loans (if any), withdraw assets, and bridge back to Solana

Key Risks to Consider

• Bridge Vulnerabilities: Hacks or failures during cross-chain transfers
• Impermanent Loss: Price volatility between SOL and wrapped assets
• Liquidation Risk: If collateral value drops below borrowing threshold
• Gas Fees: High ETH costs during network congestion
• Smart Contract Bugs: Despite Compound’s audits

Optimization Strategies

• Use gas-tracking tools like ETH Gas Station for cheaper transactions
• Diversify across multiple yield protocols (Aave, MakerDAO)
• Compound rewards frequently to accelerate APY
• Monitor DeFi Llama for APY comparisons

Frequently Asked Questions (FAQ)

Can I use Compound directly on Solana?

No. Compound operates on Ethereum. Solana users must bridge assets to Ethereum-based wrappers (e.g., wSOL) to interact with Compound.

What’s the minimum amount needed?

No strict minimum, but consider gas costs: $50+ in assets is practical after accounting for ETH fees ($10-$100 per tx).

How often are rewards distributed?

COMP tokens accrue every Ethereum block (~13 seconds). Claim manually anytime or use automated tools like Instadapp.

Are there Solana-native alternatives?

Yes! Consider Solend, Port Finance, or Francium for similar yield farming without bridging.

Is wrapped SOL (wSOL) safe?

Wormhole and Allbridge are audited, but bridging adds counterparty risk. Always verify contract addresses.

Final Thoughts

Yield farming on Compound via Solana requires bridging assets but offers access to Ethereum’s mature DeFi ecosystem. While APYs may be modest compared to Solana-native platforms, Compound provides battle-tested security. Always start small, use trusted bridges, and never risk more than you can afford to lose. For pure Solana experiences, explore local lending protocols to avoid cross-chain complexities.