Ease of Use
Platform & Account Security
Have you heard of the cryptocurrency service BlockFi? BlockFi allows its users to use cryptocurrency as collateral for loans, allowing users to earn interest on their deposits. Does BlockFi sound right for you? Read our thorough review of BlockFi first and learn more.
Earning money is something that everyone enjoys. Earning cryptocurrency, especially without really having to do anything is, some would say, a delightful joy. While trading can be too risky for some people to stomach, other methods of earning crypto have come about in recent years. In today’s day in age, savvy individuals can put their money to work by using lending services to loan their holdings out in exchange for an interest payment. BlockFi is one of these services. BlockFi also allows users to borrow, using their cryptocurrency holdings as collateral. These services are changing the landscape of the cryptocurrency industry, but does BlockFi live up to the hype?
A History Of BlockFi
BlockFi was initially founded in 2017, with their address located in Jersey City, New Jersey. The company was launched with the intention of providing bank-like services to the cryptocurrency industry. The platform began lending, using cryptocurrency as collateral, in January 2018. The company received funding from companies such as Galaxy Digital Ventures, and ConsenSys Ventures, in several rounds of funding in 2018, helping the company launch their platform.
The main team is comprised of a group of six people including: Zac Prince (CEO, and Founder); Flori Marquez (Co-Founder, VP of Growth); Rene van Kesteren (Chief Risk Officer); Mahesh Paolini-Subramanya (CTO); Amit Cheela (VP of Finance); and David Spack (Chief Compliance Officer).
BlockFi Product Offerings
BlockFi offers a few different cryptocurrency-related services to help meet the needs of any customer. For starters, BlockFi offers customers an Interest Account, allowing users to lock up cryptocurrency in exchange for compounding interest. Customers can earn interest on Bitcoin (up to 6.2% APY); Litecoin (up to 3.8% APY); Ethereum (up to 4.1% APY); USDC (up to 8.6% APY); and GUSD (up to 8.6% APY). The interest (which can be paid out in cryptocurrency) is paid out every month, and customers can withdraw their funds at any time.
Another service that BlockFi offers is their lending service, allowing customers to open a loan, using their cryptocurrency as collateral. This effectively allows an individual to have access to fiat currency without having to sell their cryptocurrency. A customer can use BlockFi’s Loan Calculator (found here) to get a rate estimate on the the size of loan they wish to open. BlockFi does not perform credit checks on their clients, ensuring that the customer’s credit score will remain unchanged during the application phase. To open a loan, clients simply need to apply on BlockFi’s website, provide proper Anti-Money Laundering/Know-Your-Customer information, and their wallet/bank account will be funded in as little time as 90 minutes. This is a far cry different from opening a loan at a traditional bank.
BlockFi also has a live trading platform, allowing customers to trade cryptocurrencies and lend/open loans all in one place. Users only need to add funds to their account to trade in different cryptocurrency pairs, including: Bitcoin; Litecoin; Ethereum; GUSD; and USDC. This allows users to keep their funds in one place without having to send funds to a different exchange to perform cryptocurrency trades. Rather than a spot-trading style of market, this trading platform is much more of a conversion platform, converting one cryptocurrency for another at the current prices.
BlockFi also provides cryptocurrency lending services on an institutional scale. The company provides these services tailored to fit each client’s institutional needs. BlockFI can also act as a great resource for investment strategies, offering insights, and leading practices to help institutions wherever they may need assistance.
BlockFi Platform Security
While the idea of lending and borrowing of cryptocurrency is certainly exciting, is the platform safe to use? To answer that, one must first understand that giving a 3rd party access to their cryptocurrencies is inherently risky no matter how reputable the company/3rd party may be. If considering this option, one should only utilize the amount of funds they are willing to lose (in the unlikely event that anything bad or malicious may happen).
Disclaimers aside, many people have been using BlockFi successfully, receiving their monthly interest payments and having no issues with regards to the borrowing of funds. When a user opens an account, their funds are put into a custodial account operated by the Gemini cryptocurrency exchange, which puts most of their holdings into cold storage wallets. Depending on the type of account the user has opened, the funds will be lent out to institutions and users, thus accumulating the interest that is paid out to the interest-account users. This function is very similar to the fractional-reserve type of methodology currently employed by central banks around the world.
For an added measure of security, BlockFi allows 2-Factor Authentication (2FA) on accounts. This is a method of security that helps the platform verify the customer’s identity at login by using an application (such as Google Authenticator) to broadcast a unique numerical code every 30 seconds, corresponding with the customer’s account. This is a function that must be turned on and set up by the user, but should be considered as the absolute minimum requirement an account needs for security.
Getting Started On BlockFi
The new user will then have to check the email they provided, as BlockFi will have sent a 6-digit code that will need to be entered in order to verify the email address.
From here, the new user will be taken to the account dashboard, which will provide areas of information that the user will need to fill out. These areas of information include: date of birth, Social Security Number (for U.S. Residents only), phone number, and the user’s address or location of residence. Users will also need to upload a form of government identification (such as an ID or passport). Security measures such as 2FA and the user’s wallet addresses can also be set up once the user completes their personal information. Accounts will go under review to make sure that all the information is correct once the form of ID is uploaded; accounts can receive the full functionality of BlockFi’s services in as little as one hour.
BlockFi Interest Accounts are available worldwide, with the exception of sanctioned countries, and countries placed on watch lists. The Interest Accounts are also offered in 48 states of the U.S., with New York and Connecticut being the exceptions.
The rates one will pay will greatly depend on the type of account one has and what they are doing with their account (borrowing or lending). For the lending side of things, to withdraw funds from the account, BlockFi will allow one (1) free withdrawal per month, after which a 0.0025 BTC, 0.0015 ETH, 0.0025 LTC, or 0.25 USD fee will be charged via Gemini (as they are the custodian of user funds held on BlockFi). There are also limits to how much can be withdrawn over a 30-day period. It should be noted that Gemini does have a minimum withdrawal amount, so any amount being withdrawn that is less than 0.003 BTC or 0.56 ETH may take up to 30 days to process.
For loans, the rates one will pay are greatly dependent upon the value of the loan being borrowed, as well as the LTV (loan to value ratio), which is the amount of cryptocurrency one will need to place as collateral in order to borrow a loan. Loans through BlockFi have LTV’s up to 50%, with the first margin call taking place at 70% (which will then require more collateral to balance the LTV to a more conservative level). Users should refer back to BlockFi’s Loan Calculator for further information.
BlockFi has several resources in place to help and serve customers. One such resource is BlockFi’s Blog, which offers press releases regarding new partnerships and developments within the company. This is a handy resource as it allows customers to keep current with what is happening within BlockFi.
Similar to their Blog, BlockFi has a News page, which offers articles (written about BlockFi) found on other media outlets such as websites, magazines, and podcasts.
BlockFi also has an in-depth FAQ section, with answers given to commonly asked questions regarding all of the services provided by BlockFi.
To help incentivize use and promote the adoption of the platform across a wider market, BlockFi has a referral program that allows users to get paid for referring other users to the platform. Users can earn 10% of the interest earned by those referred (in addition to their own interest payments) for as long as the deposit is held in their account. There are no limits to the amount of people that can be referred or the amount one can earn from referrals.
BlockFi also has a newsletter delivered by email. This is a handy newsletter as it features all of the latest developments within BlockFi. The newsletter also provides unique access to certain things, such as videos and webinars.
BlockFi Customer Support
For any issues that require assistance from BlockFi, users are free to contact their support team via email. The team should respond in a timely manner to assist the user as needed. BlockFi also openly lists their address and phone number on their website.
To report issues with BlockFi’s website, the user is free to submit feedback. This is not related to customer account issues (which should be handled through the Support team), but rather to help BlockFi with any problems that users may face when using the website (such as bugs, errors, etc.).
Is BlockFi Trustworthy?
As of the writing of this article, BlockFi has maintained a trustworthy reputation. Many industry-leading individuals have reported success with using the platform, with confirmed monthly interest payments being paid out. Potential customers should always remember that allowing 3rd parties to be the custodian of funds is always risky, and should always be prepared in the event that something should happen to their funds. Gemini (the custodian of BlockFi customer funds) has also maintained a great reputation as an exchange, and continues to push the industry and set new standards.
Conclusions For BlockFi
BlockFi can be a really great tool for any user that either wishes to earn some passive income, or needs to borrow cash but doesn’t wish to sell their cryptocurrency. The interest payments can compound over time, allowing the customers to make more in interest payments every month. With that being said, the services provided by BlockFi are very similar to those offered by banks in the traditional sector of finance. This reinventing of the wheel can be debated on whether it is a good and sustainable practice for the industry, as it is often argued that the fractional reserve methodology of banking today is partly to blame for the global economic struggles seen today.
- No hard or soft checks on credit score
- Users can earn interest on cryptocurrency, paid out in monthly payments
- Interest payments can be paid in crypto
- One free withdrawal per month
- Funds can be withdrawn at any time
- Interest Accounts allow for compounding interest
- Crypto Loans allow users to borrow, using cryptocurrency as collateral
- Users have to trust that their funds will not be misplaced or stolen
- Users have to trust they will receive their interest payments
- Lending/Borrowing may not necessarily be sustainable for the cryptocurrency industry
- Inherently risky