Use Compound v3 to Lend

Compound III — codenamed Comet — abandoned the pooled design of Compound v2 for a one-base-asset-per-market architecture. Understanding that single design decision explains almost everything about how the interface behaves.

In a Comet market there is exactly one borrowable asset, called the base asset. In the USDC market you can borrow USDC and nothing else. Everything else you deposit is collateral: it raises your borrowing capacity, it can be seized if you are liquidated, and — this trips up almost every new user — it earns no interest at all.

That trade is deliberate. Isolating one borrowable asset per market means the protocol can hold more conservative, better-understood risk on the borrow side and charge less gas per interaction. As of 2026, USDC Comets are deployed across Ethereum, Base, Arbitrum, Polygon, Optimism and Scroll, with additional base assets on some chains.

What you'll need (prerequisites)

• Self-custodial wallet (MetaMask, Rabby, etc.)
• ETH or native gas token
• Tokens to lend with
• Familiarity with transaction approvals

Comet's model in one pass

Two balances matter. Supplying the base asset earns the market's supply rate. Supplying collateral earns nothing but increases how much base asset you may withdraw beyond your balance — which is how borrowing is expressed in Comet: a borrow is simply a withdraw that takes your base balance negative.

Each collateral asset carries a borrow collateral factor: the fraction of its USD value that counts towards borrowing capacity. If WBTC's borrow collateral factor is 85%, then $10,000 of supplied WBTC lets you borrow up to $8,500 of the base asset. A second, higher liquidate collateral factor defines the point at which the account becomes liquidatable. The gap between the two is your working buffer, and it is the number you should actually manage.

Each collateral asset also has a supply cap. When a cap is full, further deposits of that asset revert — which is the explanation for a surprising share of "my transaction failed for no reason" reports. Governance raises and lowers caps as risk appetite changes.

COMP rewards are streamed to suppliers and borrowers in participating markets and are claimed separately from your principal. They are a governance-set incentive, not a guaranteed yield; a market that is generously incentivised this quarter may not be next quarter.

Step-by-step

1. Step 1: Pick the market, not just the protocol

   Open the official Compound app and choose the chain and the base asset. This is the most consequential click in the whole flow: your collateral, your borrowable asset, your rates and your risk parameters are all scoped to that one market. Positions do not move between markets, and a deposit on Base is invisible from the Ethereum view.

2. Step 2: Connect a wallet from a URL you typed yourself

   Navigate by bookmark. Connect the wallet and approve the connection signature, which moves nothing. If you intend to run a leveraged or long-lived position, connect a hardware wallet rather than a hot wallet — the difference in effort is one cable and it removes an entire class of loss.

3. Step 3: Read the borrow and liquidate collateral factors before depositing

   Open the market's asset table and note, for each collateral you plan to use, the borrow collateral factor, the liquidate collateral factor, the liquidation penalty and the supply cap. These are the four numbers that determine whether your position survives a bad week. Write them down; they are governance parameters and they do change.

4. Step 4: Approve and supply collateral

   Approve the ERC-20, preferring an exact amount over unlimited, then supply. Remember that collateral in Comet earns nothing — if you have no intention of borrowing, supplying collateral is strictly worse than supplying the base asset or holding the token elsewhere. Collateral is a tool for unlocking a borrow, not a yield product.

5. Step 5: Borrow the base asset by withdrawing against your collateral

   Enter the amount of base asset you want. The interface expresses this as a withdrawal that takes your base balance negative, and it will show your resulting borrowing capacity utilisation. Confirm well below the borrow collateral factor limit — the distance between where you sit and the liquidate collateral factor is the only thing standing between you and a forced sale.

6. Step 6: Watch utilisation, not just price

   Two things erode your buffer: collateral price falling and borrow interest accruing. Comet's borrow rate floats with utilisation, so a market that gets heavily borrowed becomes more expensive to sit in. Check the position at least as often as your collateral is volatile, and keep base asset available in the same wallet so a repay is one transaction away.

7. Step 7: Claim COMP rewards separately

   If the market streams COMP, accrued rewards sit in a separate claimable balance and do not compound into your position. Claim on a schedule that makes sense against gas — claiming a few dollars of COMP on Ethereum mainnet can cost more than the claim is worth. Each claim is a taxable receipt in most jurisdictions; record the date, amount and USD value.

8. Step 8: Repay, withdraw and verify

   Repay by supplying the base asset back until the balance is non-negative, then withdraw collateral. Confirm both on the chain's explorer and keep the transaction hashes. If you are done with the market entirely, revoke the token approvals you granted.

What it actually costs

Compound III does not charge an origination or withdrawal fee. Your costs are the borrow interest rate on the base asset, network gas, the opportunity cost of collateral that earns nothing, and the liquidation penalty if you get that far. The published documentation for collateral and borrowing describes no protocol charge beyond interest.

Gas is materially lower per interaction than in the older pooled design, and lower again on the Base, Arbitrum, Optimism, Polygon and Scroll deployments than on Ethereum mainnet. For any position under a few thousand dollars, use an L2 market; on mainnet the round-trip transaction cost can swamp the rate you are chasing.

For current TVL, per-market rates and reward emissions, read them live in the app or on a data aggregator such as DefiLlama rather than trusting any static figure — all three move week to week.

Security pitfalls

• Do not treat collateral as a yield position. Collateral in Comet earns zero. If you are not borrowing, you are paying an opportunity cost for a liquidation risk you are getting nothing for.
• Manage against the liquidate collateral factor, not the borrow one. The borrow factor is where the interface stops you; the liquidate factor is where the protocol takes your collateral. Position yourself with a wide gap to the second.
• Exact-amount approvals. Approve what you are depositing. Revoke leftovers when you exit — a stale unlimited allowance is a standing risk with no upside.
• Verify the market address. Each Comet is its own contract per chain and base asset. Confirm the contract from the official documentation before interacting with a link someone sent you.
• Watch supply caps before sizing. A cap that fills after you plan but before you execute will revert your transaction and cost you gas for nothing.
• Correlated risk. Borrowing a stablecoin against volatile collateral is one directional bet. Borrowing a volatile asset against volatile collateral is two, and they can move against you at once.
• Reward tokens are not principal. Do not let unclaimed COMP show up in your mental accounting of the position's safety margin — it is not collateral.

Troubleshooting

• Supply transaction reverts. Check the asset's supply cap in the market and your allowance. A filled cap and a missing approval account for most reverts.
• Borrow reverts or is capped lower than expected. Your borrowing capacity is the sum over collaterals of value times borrow collateral factor. An asset you deposited may not be a listed collateral in that specific market.
• You cannot find your position. Comet positions are per chain and per base asset. Switch the network and the market selector before concluding anything is wrong.
• Rate jumped overnight. Comet's borrow rate is utilisation-driven. Heavy borrowing raises it for everyone; it will fall again as utilisation normalises or as suppliers arrive.
• Repay leaves a small negative balance. Interest accrued in the block you repaid in. Repay the dust in a follow-up transaction using the max button.
• Stuck pending transaction. Replace it at the same nonce with a higher fee, or cancel with a zero-value self-transfer at that nonce. Nothing behind it in the queue will execute until it clears.
• COMP not showing up. Rewards accrue to a separate claimable balance and require an explicit claim transaction; they do not appear in your supplied or borrowed balances.

FAQ

Sources

• Compound III documentation
• Compound III docs — Collateral & Borrowing
• Nansen — What is Compound V3? Markets, collateral & upgrades
• RareSkills — The architecture of the Compound V3 smart contract