Compound has gone live on Unichain, adding a new lending and borrowing venue that accepts wstETH, weETH, ezETH, BTC, and UNI as collateral against ETH borrowing. Compound Labs confirmed the deployment on May 13, 2025, marking the lending protocol's first market on the Uniswap-native layer 2.

First Compound Market on Unichain

Compound Labs announced the Unichain deployment through its official X account, directing users to the new WETH market. The rollout brings Compound III's familiar supply-and-borrow mechanics to Unichain for the first time, with ETH serving as the market's single borrowable asset.

The official dashboard confirms the market at app.compound.finance/?market=weth-unichain. Users supplying any of the five supported collateral assets can borrow ETH against those positions, subject to the collateral factors and liquidation parameters set by Compound governance. The single-asset borrow design means the initial market is focused on providing ETH liquidity to users holding supported assets on Unichain, rather than offering a broad range of borrowing options.

What the Deployment Enables

Unichain is Uniswap Labs' purpose-built layer 2, designed to minimize cross-chain liquidity fragmentation for Uniswap-native assets. With Compound lending available directly on the network, borrowers no longer need to bridge collateral to Ethereum mainnet or Arbitrum to access Compound's ETH market, reducing friction for DeFi users already active on Unichain.

Collateral Assets: LSTs, LRTs, BTC and UNI

The five supported collateral types span liquid staking tokens (LSTs), liquid restaking tokens (LRTs), wrapped Bitcoin, and the UNI governance token. Each asset class carries distinct smart contract, liquidity, and oracle risk profiles that Compound governance must price into the market's collateral parameters.

ETH-Linked Collateral: wstETH, weETH and ezETH

wstETH is Lido's wrapped staked ETH, the largest LST by market share. weETH is ether.fi's wrapped restaking token, while ezETH is Renzo Protocol's restaking receipt token. All three accrue ETH-denominated yield through staking or restaking, making them natural collateral choices in an ETH-borrow market: because collateral and debt are positively correlated, liquidation risk is reduced relative to more volatile assets.

BTC and UNI Collateral

Wrapped Bitcoin introduces non-correlated collateral to the market, serving holders of BTC exposure who want ETH leverage or liquidity without selling. UNI, the Uniswap governance token, was trading at $9.12 with a 4.72% 24-hour gain at the time of the market data snapshot, according to CoinGecko data, giving the token a market capitalization above $5.66 billion. Its inclusion is notable given Unichain's Uniswap affiliation: UNI holders can now put their governance tokens to work as productive collateral on the same network that Uniswap built.

Risk Considerations for the New Market

The Unichain deployment extends Compound's collateral surface into the LRT category, which has been one of the faster-growing segments in ETH-denominated DeFi. Protocols such as Nostra Finance have demonstrated that new money markets accepting LRTs face oracle and liquidity risks that standard LST deployments do not — a consideration Compound governance will need to price into weETH and ezETH collateral parameters over time.

Collateral support alone does not define borrowing capacity. Each asset's collateral factor, liquidation threshold, and price oracle source are set separately by Compound governance and may differ from their mainnet equivalents. Users should confirm current parameters directly on the Unichain WETH market dashboard before supplying collateral or opening borrow positions.

At the time of the launch snapshot, the crypto Fear & Greed Index stood at 71, in Greed territory — a backdrop that tends to increase leverage demand and raise the risk of position concentration in newer, less-liquid markets. LRT collateral in particular can experience depeg events during periods of volatility, which tightens liquidation buffers for weETH and ezETH positions.

The addition of manual borrow controls seen in other DeFi protocols reflects a broader trend toward more granular risk management in lending markets, an approach Compound governance may apply to the Unichain deployment in future proposals.

Source: DefiLiban