Auto-Compounding
A feature that automatically reinvests earned yield back into a position, rather than requiring a user to manually claim and restake it.
Auto-compounding is a feature, commonly offered by a yield aggregator (see Kaavon's "Yield Aggregator" glossary definition) or staking product, that automatically reinvests earned yield back into the original position, rather than requiring a user to manually claim rewards and restake them themselves.
Automating this process generally produces a meaningfully higher effective return than manual, infrequent compounding over the same period, and also saves the user the transaction fees and effort of manually claiming and restaking repeatedly — though it typically comes with its own fee, charged by whatever service performs the automation.
Examples
- Auto-compounding can produce a meaningfully higher effective return than manual, infrequent compounding over the same period, purely from more frequent reinvestment.
- A service offering auto-compounding typically charges its own fee for the automation, which should be weighed against the added return it provides.