🔹 What are Auto-Compounding Vaults?

Auto-compounding vaults are **smart contracts that automatically reinvest yield farming rewards** to maximize returns over time. This allows users to benefit from **compound interest without manual intervention**.

🔹 How Do Auto-Compounding Vaults Work?

Instead of manually claiming and reinvesting rewards, vaults automatically **harvest yield, convert rewards into the original deposit asset, and reinvest them into the farm.**

📌 Example of Auto-Compounding on Beefy Finance:

Imagine a whale deposits **$100,000 worth of CAKE tokens** into a PancakeSwap farm.

1. 💰 **The farm generates CAKE rewards.**
2. 🔄 **Beefy Finance vault harvests the CAKE rewards.**
3. 📈 **The rewards are swapped back to CAKE and reinvested.**
4. 💵 **The whale benefits from auto-compounding without any manual effort.**

✅ Best Platforms for Auto-Compounding

These DeFi protocols offer reliable auto-compounding vaults:

• 🔹 **Beefy Finance** – Multi-chain auto-compounding vaults.
• 🔹 **Yearn Finance** – Pioneered yield optimization vaults.
• 🔹 **Autofarm** – Automated yield farming across DeFi.
• 🔹 **Reaper Farm** – High-yield auto-compounding on Fantom.
• 🔹 **GMX (GLP & GM Pools)** – Earn compounding rewards via GMX’s staking ecosystem.

These DeFi protocols offer reliable auto-compounding vaults:

• 🔹 **Beefy Finance** – Multi-chain auto-compounding vaults.
• 🔹 **Yearn Finance** – Pioneered yield optimization vaults.
• 🔹 **Autofarm** – Automated yield farming across DeFi.
• 🔹 **Reaper Farm** – High-yield auto-compounding on Fantom.

⚠️ Risks of Auto-Compounding Vaults

While auto-compounding boosts returns, it comes with risks:

• ⚠️ **Smart Contract Risks** – Vault exploits can lead to fund losses.
• ⚠️ **High Gas Fees** – Frequent auto-compounding may incur transaction costs.
• ⚠️ **Impermanent Loss** – Liquidity pool fluctuations can impact profits.

🚀 How to Get Started with Auto-Compounding

For a deeper dive into earning with GMX, check out our guide: How to Earn with GMX.

Follow these steps to start earning with auto-compounding vaults:

1. 📥 **Choose a Vault Platform** – Beefy Finance and Yearn are top options.
2. 🔗 **Deposit Funds into a Vault** – Select a farm with high APY.
3. 💰 **Let the Vault Auto-Compound** – Sit back and let the vault maximize yields.
4. 📈 **Monitor Performance & Risks** – Withdraw profits when needed.

🔗 Learn More About Whale Strategies

Auto-compounding is just one of many whale strategies. Explore more DeFi tactics here:

Back to Whale Strategies ➜