BlockFi Review (2020): Earn Interest on Crypto

BlockFi Review (2020)
  • Ease of Use
  • Interest Rates
  • Customer Support
4.3

Summary

BlockFi is a cryptocurrency lending platform that allows you to earn interest on Bitcoin (BTC), Ethereum (ETH), and six other cryptocurrencies. It also provides cash loans (backed by your crypto holdings) and allows you to trade cryptocurrency.

It gives you up to 8.6% APY on your cryptocurrency savings – with no minimum deposit, no lock-in period, and no hidden fees.

It’s quick and painless to get verified and super-easy to use too. Just deposit your cryptocurrency and you’ll automatically start earning interest on it.

Interest rates offered by high street banks in the UK are awful. You’d be lucky to get even 1% interest on your hard-earned savings. The same is true across Europe and the United States.

But with BlockFi, it’s possible to earn much better interest than this on your cryptocurrency balances. It also provides crypto-backed loans and allows you to trade cryptocurrencies.

But how does it work? Is it legit and safe to use? How does it compare to alternatives?

Check out this BlockFi review where I cover all this (and more).

Special Offer: Register with BlockFi and deposit $500 or more worth of cryptocurrency and you’ll get a $25 bonus (in USDC). Head here to learn more.

Advantages & Disadvantages

Advantages

  • Earn up to 8.6% APY on your cryptocurrency deposits.
  • No minimum deposit to start earning interest on your cryptocurrency
  • Flexible access to your cryptocurrency deposits (i.e. there’s no lock-in period).
  • You get one FREE cryptocurrency and one FREE stablecoin withdrawal per month.
  • BlockFi Interest Accounts available in most countries.
  • Takes less than 5 minutes to register and get verified.

Disadvantages

  • Requires ID verification (to comply with KYC/AML regulations).
  • Alternative platforms support more cryptocurrencies.
  • Higher interest on some cryptocurrencies available elsewhere.

What Is BlockFi?

BlockFi was established in 2017 by Zac Prince and Flori Marquez.

BlockFi’s vision is to “bridge the worlds of traditional finance and blockchain technology to bring financial empowerment to clients on a global scale”.

It’s based in New York, but they have offices in New Jersey, Poland, and Argentina too. They operate in most countries around the world – excluding New York (because of the tough regulations that exist there) and any country on sanction lists.

In a blog post on its website, BlockFi noted that they have more than $650 million in assets on its site and “a 0% loss rate across its entire loan portfolio since the company began lending”.

We also know that BlockFi has raised $18.3 million in Series A funding in August 2019, followed more recently by $30 million in Series B funding in February 2020, and another $50 million in Series C funding in August 2020. Investors include Valar Ventures, Galaxy, Winklevoss Capital, ConsenSys Ventures, and many more.

BlockFi have a 3.5 rating on Trustpilot, but there are only 25 reviews right now. Most of the recent negative reviews are about further identity verification that has been required when some people have attempted to withdraw funds.

BlockFi Products

BlockFi provides three products:

  • Cryptocurrency Interest Account: Deposit your cryptocurrency into BlockFi and get interest every month on your balance (up to 8.6% APY).
  • Cryptocurrency Loans: Borrow money from BlockFi by using your cryptocurrency as collateral (up to 50% LTV ratio).
  • Cryptocurrency Trading: Trade between cryptocurrencies including Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), USD Coin (USDC), Tether (USDT), Gemini Dollar (GUSD), Paxos Standard (PAX) and PAX Gold (PAXG).

How Does BlockFi Work?

BlockFi is a platform which allows you to earn interest on your cryptocurrency balances.

Just open a BlockFi Interest Account and deposit one of these supported cryptocurrencies:

  • Bitcoin (BTC)
  • Ethereum (ETH)
  • Litecoin (LTC)
  • USD Coin (USDC)
  • Tether (USDT)
  • Gemini Dollar (GUSD)
  • Paxos Standard (PAX)
  • PAX Gold (PAXG)

It’s simple, quick, and easy to open a BlockFi account to get started.

Earning Interest With BlockFi

  • Head over to BlockFi website.
  • Select ‘Get Started’ on the homepage.
  • Enter your email address and create a password.
  • Check your inbox for an email verification code.
  • Tell them a little about yourself and verify your identity. I passed through this automated process in just a few minutes.
  • Deposit a supported cryptocurrency and you’ll automatically start earning interest.
  • You’re free to withdraw your funds whenever you want.

How do I deposit Bitcoin (BTC) into BlockFi?

The following is for the desktop version of the website, but it’s the same process via mobile.

On the BlockFi dashboard, select Deposit in the navigation bar.

Select what cryptocurrency you want to deposit.

You’ll then be provided with an address to send these funds to. Send the cryptocurrency over to BlockFi.

Check back in a little and you should see the transaction appear at the bottom of the BlockFi dashboard. It’ll take a little for it to be credited.

Once it’s credited, you’ll automatically start earning interest on it!

For more detailed information about your BlockFi Interest Account, select the highlighted area on BlockFi’s desktop version.

How does BlockFi make money on my deposits?

BlockFi makes its money by borrowing cryptocurrencies at a lower interest rate and then lending that cryptocurrency to others at a higher interest rate.

Example: You deposit 1 BTC into a BlockFi Interest Account and receive 6% APY. BlockFi takes 1 BTC and lends it out to other people at an interest rate that covers its costs and secures them a profit.

BlockFi lends this cryptocurrency to “trusted institutional and corporate borrowers”. According to this blog post, this primarily consists of:

  • Traders and Investment Funds: This includes those that identify arbitrage opportunities between exchanges and borrow funds to exploit price differences across exchanges. It also includes traders who need additional cryptocurrency funds to execute trading strategies.
  • Over the Counter (OTC) Providers: OTC market makers help cryptocurrency buyers and sellers who don’t want to use public exchanges. They need cryptocurrency on-hand, but some might prefer to temporarily borrow it instead of buying it on an exchange.
  • Businesses That Require Cryptocurrency Liquidity: There are other companies, like cryptocurrency ATMs, that might prefer to temporarily borrow cryptocurrency to support their business models.

These loans are made on “over-collateralized terms”. In other words, they’re holding assets from the person that is borrowing the cryptocurrency that are worth more than the cryptocurrency they’re loaning out.

BlockFi Interest Rates

The rates offered on BlockFi interest accounts depend on what cryptocurrency you’re depositing. You’ll get the best rates (8.6% APY) for depositing stablecoins like USDC, UDST, and GUSD.

These rates are frequently updated, but this is what they currently are.

CryptocurrencyAmountAPY
Bitcoin (BTC)0 - 2.56.0%
Bitcoin (BTC)> 2.53.2%
Ethereum (ETH)> 05.25%
Litecoin (LTC)> 05.0%
USD Coin (USDC)> 08.6%
Tether (USDT)> 08.6%
Gemini Dollar (GUSD)> 08.6%
Paxos Standard (PAX)> 04.0%
PAX Gold (PAXG)> 07.0%

Interest is paid out in the cryptocurrency that you’re lending to BlockFi, not your local currency.

However, there is an option to change what cryptocurrency the interest is converted to. For example, you can deposit Bitcoin (BTC), but earn interest in Tether (USDT). You can change this by going to ‘Profile Settings’ and selecting ‘Interest’ in the left-sidebar.

You can find out more about BlockFi’s rates here.

How Does BlockFi Compare?

This is all great, but how does it compare to the BlockFi alternatives that are out there?

I took a look at what interest rates some of the most popular alternatives were offering for Bitcoin (BTC) deposits. Here’s how BlockFi compares:

Lending PlatformBitcoin (BTC) Interest Rates# of Cryptocurrencies
BlockFi6.00% APY8
Crypto.com6.50% APY34
Nexo5.00% APY15
Celsius Network4.51% APY33
Binance1.00% APY35

Crypto.com leads the pack, but there’s a catch. Unlike BlockFi, you’ll have to lock-up your Bitcoin (BTC) for 3 months to get these rates and stake 10,000 CRO (approx. $1500). If you want more flexible access to your cryptocurrency or don’t want to stake that much money, then you’ll get lower interest rates.

Even though it has lower Bitcoin (BTC) interest rates, Celsius Network looks good. You can earn interest on a wider range of cryptocurrencies, with higher interest rates than BlockFi for stablecoin deposits (e.g. they’re currently offering 11.55% APY on USDT deposits).

BlockFi Limits & Fees

Like most other places, BlockFi charges fees to withdraw cryptocurrency from its platform. However, you’re entitled to one FREE cryptocurrency withdrawal AND one FREE stablecoin withdrawal per month. You’ll only pay the below fees if you exceed this allowance.

CryptocurrencyWithdrawal Limit (Per 7-Day Period)Fees
Bitcoin (BTC)1000.0025 BTC
Ethereum (ETH)5,0000.0015 ETH
Litecoin (LTC)10,0000.0025 LTC
Stablecoins (USDC, USDT, GUSD, & PAX)1,000,0000.25 USD
PAX Gold (PAXG)5000.0025 PAXG

Although there’s no minimum deposit required to start earning interest on your cryptocurrency, withdrawals will be delayed (by up to 30 days) if you attempt to withdraw less than 0.003 BTC or 0.056 ETH.

Supported Countries

You can open a BlockFi Interest Account in most countries around the world.

You’re only restricted from using BlockFi if you’re in New York or a sanctioned/watchlist country. Access is restricted in New York because “BlockFi’s hands are tied” until the tough rules and regulations in this state are reviewed.

Despite being able to access BlockFi in the UK, I’m currently unable to access the crypto-loans that are available on BlockFi.

Is BlockFi Legit?

In short, everything points towards BlockFi being legitimate.

Here are the key things you should know:

  • BlockFi’s management team are well-qualified and have decades of combined experience in the financial world.
  • Zac Prince (CEO & Co-Founder) has previously had leadership roles in successful technology companies.
  • Flori Marquez (SVP of Operations & Co-Founder) has previously worked in the financial services industry (with alternative lending products).
  • They’re supported by numerous investors, including some of the most well-known investors in the crypto-space (e.g. Mike Novogratz and the Winklevoss brothers).
  • BlockFi’s social media accounts (e.g. Twitter) are active and they have a responsive/helpful customer service team.

Is BlockFi Safe?

Cryptocurrency is NOT considered to be legal tender, which means that your cryptocurrency deposits aren’t insured by any government. That doesn’t just apply to BlockFi, but to the whole cryptocurrency space.

But there is some good news.

BlockFi’s primary custodian is Gemini, which is the reputable and popular cryptocurrency exchange owned by the Winklevoss brothers.

Most of the funds stored on Gemini are kept in cold-storage wallets, with the keys to these wallets distributed across “secure, guarded, [and] geographically distributed facilities”. In other words, it sounds like Gemini are doing everything they can to keep safe the cryptocurrency they’ve been trusted with.

A small proportion of cryptocurrency deposits on Gemini are kept in hot wallets to satisfy immediate operational requirements. Gemini maintains insurance (from numerous underwriters) that is in excess of what is stored in these hot wallets.

Nothing like this is ever 100%, but BlockFi has definitely made moves to reduce the risks that you’re accepting when you use their lending platform.

Summary: Earn Crypto Interest

My experience with BlockFi (so far) has been nothing but positive.

They’ve only been around a few years, but they’ve quickly become a popular and trusted place to earn interest on your cryptocurrency.

But earning interest on your cryptocurrency isn’t without its risks. Using something like BlockFi is just like leaving your funds on any other cryptocurrency exchange. This means there’s always the chance that they could be compromised and lose some, or all, of your cryptocurrency.

Not your keys, not your coins.

BlockFi does seem to go above and beyond to reduce the risk that your funds are lost or stolen, though. And this risk hasn’t stopped me from putting some Bitcoin (BTC) into BlockFi and using alternatives like Crypto.com Earn.

Get $25 Bonus

Special Offer: Register with BlockFi and deposit $500 or more worth of cryptocurrency and you’ll get a $25 bonus (in USDC).
Learn More

What Do You Think?

Thanks for checking out this BlockFi review!

Have any questions I haven’t answered? Or want to share your thoughts?

Let me know in the comments below!

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