Getting started with Compound Finance in Exodus Desktop

” If you don’t find a way to make money while you sleep, you will work until you die.” – Warren Buffett

In this article, we go into detail on what Compound Finance is as well as some other frequently asked questions such as whether or not Compound Finance is safe and how to start using it.

What is Compound Finance?

Compound Finance is a protocol built on the Ethereum blockchain that allows a user to lend their Ethereum assets to a pool of assets, instead of lending assets directly to other users. Exodus only allows you to supply and lend your DAI coin.

Once you have lent your assets to the Compound Finance protocol, you accrue interest every time an Ethereum block is mined. You are also free to withdraw your assets whenever you choose, giving you the freedom to lend and withdraw earnings as you wish.

How does Compound Finance work?

Compound Finance works on the basic premise that some users “deposit” their ERC20 token for a special “interest-earning” version of that token.

The exchange rate between the ERC20 token and the interest-earning token slowly changes over time, always leaning in the advantage of the interest-earning token. This is the interest you accrue.

Since you have lent your ERC20 token to a market, other users of the Compound Finance protocol are then allowed to “borrow” from the market. Whoever borrows must pay interest, this is how the lenders generate their interest.

When you want to withdraw, you exchange the interest-earning tokens back for the original ERC20 tokens you lent. Because the exchange rate changed slowly in your advantage, you get back more of the ERC20 token than you started with.

How does Compound Finance work in Exodus?

Exodus only allows users to lend (deposit) DAI into Compound Finance. This will mean that you lend your DAI to the Compound Finance protocol and you will receive the interest-earning version of DAI, which is called cDAI.

The exchange rate between your DAI and cDAI will slowly change over time and lean in the advantage of cDAI. This is the ‘interest’ you will accrue after every Ethereum block that is mined.

You will be able to withdraw at any time. When this happens your cDAI tokens will be swapped back to DAI tokens, and because the exchange rate slowly changed in your advantage, you will receive more DAI tokens than you originally deposited.

The Compound Finance app is only available on the Desktop version of Exodus, which you can get here.

Is Compound Finance safe?

Compound Finance is a protocol that runs on the Ethereum network by the use of smart contracts, and since it is a relatively new bit of technology, there are potential risks and bugs that come with this.

The biggest risk with Compound Finance is the loss of funds caused by unforeseen bugs or vulnerabilities in the contract code. In an effort to combat this risk, the code for Compound Finance smart contracts have all been audited. The two groups who have audited the Compound Finance smart contracts are: Trail of Bits and Open Zeppelin.

This does not guarantee security, but it is the best thing that can be done right now to try to prevent any potential risk.

How much Ethereum do I need to use Compound Finance?

To start using Compound Finance inside of Exodus, you will need some Ethereum to pay the network fees. This is because DAI is an ERC20 token. The minimum ETH balance for Compound Finance is not a fixed amount, and it will dynamically change according to Ethereum network conditions.

If you ever need to check how much Ethereum you will need in order to use Compound Finance, there are a couple of different ways to see. If you have any DAI already deposited into Compound Finance, the minimum Ethereum balance is shown to you after you click either Deposit or Withdraw. Otherwise, if you don’t have any DAI in Compound Finance, open up the Compound Finance app and click on Start Earning to see the minimum ETH balance required.

Please note: This image is only an example and is not a fixed amount of Ethereum needed, the minimum balance required will constantly be changing over time.

How do I start using Compound Finance?

The Compound Finance app is only available on the Desktop version of Exodus, which you can get here.

Deposit into Compound Finance

In order to start using Compound Finance inside of your Exodus wallet, you will need to have some DAI and Ethereum inside of your Exodus wallet. Please ensure you have enough Ethereum in your Exodus wallet to start using Compound Finance.

Once you have some DAI and ETH you can follow these steps to start using Compound Finance:

Open your Exodus wallet.

You will also need at least the minimum balance of ETH in your wallet, as well as some DAI to deposit. This is because DAI is an ERC20 token.

Click on the Compound Finance symbol at the top of the application.

You will see this screen, just click Start Earning.

Please note: The current percentage of the Variable APY is not a fixed rate and will constantly be changing over time. If you would like to read more please click here.

Now you can choose an amount of DAI to deposit. If you want to deposit all of your DAI then just click All.

Once you have chosen how much DAI to deposit, click Deposit.

The wallet will now automatically lend your DAI to the Compound Finance protocol and you will receive cDAI in return.

Now you have successfully lent your DAI to Compound Finance so you can watch your balance rise!

Withdraw from Compound Finance

To Withdraw your DAI, all you need to do is:

Open your Exodus wallet and click on the Compound Finance symbol in the top right.

You will now see the Overview window.

Now click Withdraw.

Choose the amount of DAI you wish to withdraw.

Again click Withdraw.