Compound Finance has announced its expansion onto Arbitrum, an Ethereum L2 scaling solution, with the aim of implementing its services in DeFi. This move will make lending and borrowing inactive cryptocurrencies cheaper.

Compound III is now live on Arbitrum, allowing users to use ARB, GMX, WETH, and WBTC as collateral to borrow USDC. Yield farming, pioneered by Compound, involves adding funds to a liquidity pool, which are smart contracts that contain funds, and being rewarded with fees generated by the underlying DeFi platform.

Those who provide liquidity are also rewarded based on the amount of liquidity provided.