Maximizing Yield on Compound V3: Beyond Basic Lending

Hey folks,

Been diving deep into Compound V3 lately, and while basic lending is straightforward, I'm curious about how others are pushing the yield boundaries with this protocol. The move to single-collateral markets and the focus on EV efficiency is a big shift from V2.

Specifically, I'm exploring strategies around:

• Leveraged Yield Farming: Are people actively borrowing assets against their supplied collateral on V3 to amplify returns? What are the key risks to watch out for, especially with liquidation thresholds? I've seen some interesting arb opportunities arise when market conditions shift rapidly.
• Optimizing Asset Choice: With the current market conditions and the specific collateral factors on V3, which assets are you finding most efficient to supply for lending and most attractive to borrow for leveraged plays? I've been leaning towards ETH as collateral due to its stability, but the borrow rates for certain assets can be quite attractive.
• Monitoring and Risk Management: Given the potential for impermanent loss (if used in conjunction with LPing) and liquidation risk, what tools or methods are you using to monitor your positions on Compound V3? I'm looking for ways to get real-time alerts for borrow limits and liquidation prices without constantly checking a dashboard.

I'm not looking for specific financial advice, but rather to share insights and learn from the collective experience here. What are your go-to strategies for squeezing alpha out of Compound V3? Any hidden gems or advanced techniques I might be overlooking?

Let's discuss!

Interesting thread! Compound V3's single-collateral approach definitely changes the game. I've been experimenting with supplying stablecoins as collateral and borrowing WETH or other volatile assets to then farm on external protocols. The key is managing liquidation risk, obviously. I tend to keep my LTV (Loan-to-Value) quite conservative, maybe around 60-70% max, to give myself a buffer against sharp price swings.

Has anyone tried using the borrowed assets for more complex strategies, like delta-neutral farming or providing liquidity on other DEXs? I'm always on the lookout for ways to layer strategies while keeping an eye on gas fees, which V3 aims to improve.

One thing to add to the discussion on leveraged yield farming on Compound V3: it's crucial to remember the specific asset requirements for each market. For example, if you're supplying WBTC as collateral, you can only borrow specific assets, and vice versa. This can limit your options for external farming compared to V2's more flexible multi-collateral approach.

I've found that focusing on markets where the borrowed asset has strong utility and potential for growth, even if it means accepting slightly lower initial borrow rates, can be a more sustainable long-term strategy. Also, keeping a close eye on the protocol's COMP emissions and how they're distributed across different markets can significantly impact your overall yield.

I've been seeing the same pattern you're exploring! Leveraged yield farming on V3 is definitely a hot topic. The single-collateral design, while simpler, does mean you have to be more deliberate about your collateral and borrow choices. I've found success by supplying more stable, less volatile assets as collateral (like USDC or DAI) and then borrowing something like WETH or WBTC to deploy into higher-yield opportunities on other platforms.

My biggest concern is always liquidation. I tend to set alerts at a much higher LTV than I actually intend to borrow at, just to be safe. What kind of risk management tools or mental models are you using to keep your LTV in check?