BlockFi Review : The Best Platform to Earn on your crypto in 2021?

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Table of Contents

Introduction

So you’ve bought some crypto and plan to hold it for the long term. While it’s a great strategy to simply hold your coin until its price goes up, why not earn interest by depositing your crypto in an interest-bearing account? Conventional methods of storing your cryptocurrencies, such as a hardware wallet or on a cryptocurrency exchange, do not give you interest rewards for storing your coins. Even if they do, like on certain crypto-to-fiat exchanges, you can expect a very minimal annual percentage yield (APY).

Here’s where BlockFi comes in. BlockFi is a crypto platform that enables users to deposit their cryptocurrencies into an interest-bearing account that can generate up to 7.5% APY, and that’s not all they do. We’ll explore the range of products and services that BlockFi offers in this extensive review.



What is BlockFi?

Founded in 2017 by Zac Prince and Flori Marquez, BlockFi started as a cryptocurrency platform that allows users to generate interest when they deposit their cryptocurrencies in the BlockFi Interest Account (BIA). It has since grown to become an exchange that enables users to borrow, buy or sell their cryptocurrencies, as well as a range of other products and services that makes it seem like an all-in-one cryptocurrency bank. The company is based in New Jersey, USA and is regulated at the federal and state level across 48 states while also having an international presence. 

BlockFi has become increasingly popular with new and seasoned crypto investors alike, thanks to its lucrative interest rates and perceived safety for users. With up to 7.5% APY at the time of writing, the rates on BlockFi certainly puts most traditional high-yield fiat savings accounts to shame. Many traditional fiat institutions are barely offering rates that would outpace the inflation rate on fiat currencies. 

Besides offering attractive interest yield rates for depositing cryptocurrencies, BlockFi users can also borrow cash using their cryptocurrency holdings as collateral. The company’s mission statement emphasizes that it has the goal of ‘providing credit services to markets with limited access to simple financial products’ with solid institutional backing from investors such as Valar Ventures, Galaxy Digital, Fidelity, Akuna Capital, SoFi and Coinbase Ventures.

Users can also trade cryptocurrencies without any hidden fees or minimum account balance to maintain. Another unique feature on BlockFi is the world’s first-ever bitcoin rewards credit card, where cardholders receive bitcoin back on purchases. Read on for a more in-depth breakdown of these products and services.

BlockFi Products & Services



BlockFi Interest Account (BIA)

Earning interest for keeping money in your savings account isn’t a novel idea. Traditional savings accounts offered by conventional banks, however, have been coughing up dismal interest rates, to say the least. With a BlockFi Interest Account, however, users can earn up to 7.5% APY on their deposited cryptocurrency. The mechanics behind this is simple, BlockFi generates the interest on the deposited crypto assets by lending them to trusted institutional and corporate borrowers. 

The interest is accrued daily and is paid out on the first business day of each month without incurring any fees or maintaining a minimum balance in the account. The following month’s interest payout is then paid based on the initial deposit combined with the prior interest payout, which means that BlockFi’s interest payout is compounded based on the user’s latest account balance. 

Through a feature called the Interest Payment Flex, BlockFi users will also have the option to choose the interest paid out in the cryptocurrency of their choosing at the interest rate of the cryptocurrency they hold, whether it’s bitcoin, ether or a stablecoin such as GUSD. This means that you can deposit BTC, ETH or USDC and opt for your interest to be paid in BTC if you want. It’s a plus point because it allows you to diversify your assets without having to buy additional crypto.

At the time of writing, BlockFi currently offers the following interest rates for the following cryptocurrencies; you can check out the full list here:

CryptocurrencyAmountAPY
BTC (Tier 1)0 – 0.254.0%
BTC (Tier 2)0.25 – 51.5%
BTC (Tier 3)> 50.25%
ETH (Tier 1)0 – 54.0%
ETH (Tier 2)5 – 501.5%
ETH (Tier 3)> 500.25%
USDC (Tier 1)0 – 50,0007.5%
USDC (Tier 2)> 50,0005.0%
UNI (Tier 1)0 – 7501.6%
UNI (Tier 2)> 7500.5%

As you can see, the BlockFi Interest Account payout is based on a tiered Interest Structure. To illustrate, let’s say you deposit 1 BTC into the BIA account. Out of that deposited figure, 0.25 BTC would earn you 4% APY, and the remaining 0.75 BTC would earn 1.5% APY. However, you should take note that these rates are subject to change based on current market conditions and the yields that BlockFi is able to generate.

To be eligible for interest payout, users will have to deposit one of the cryptocurrencies accepted by BlockFi into the BIA account. Interest will start accruing the following day. The great news is that there is no minimum or maximum deposit amount to start earning interest on supported cryptocurrency assets. Users are also allowed to make withdrawals from the interest account at any time, but there is a limit of only one free crypto withdrawal and one free stablecoin withdrawal per month. Each free withdrawal can only be applied to one cryptocurrency per month. Beyond that, all withdrawals are subject to a fee.



BlockFi Loan

Cryptocurrencies have opened up a whole new world of financing because you can now use them as collateral to take out a loan. BlockFi allows users to deposit crypto assets as collateral and receive US Dollars or stablecoins such as GUSD or USDC. It’s similar to how regular loans work with traditional financing institutions but with fewer credit checks. Loan approvals on BlockFi are near-instant; you can expect approval in the same business day. Of course, it’s not going to be as easy as walking away with free money and is subject to a few conditions.

First of all, the minimum loan amount is $10,000. Based on bitcoin’s current market price, the total collateral amount that you will need is about 0.42 BTC (approximately $20,000) in order to get a $10,000 loan. The BlockFi Loan accepts collaterals in the form of bitcoin, ether, or Litecoin.

Next, it’s important that you understand what the loan-to-value (LTV) ratio means. The LTV ratio is used to determine the maximum amount an individual or business can borrow. BlockFi allows its clients to borrow up to 50% of the value of their crypto holdings. The amount of USD you can borrow on BlockFi depends on the amount of collateral you post against the loan. BlockFi uses 3 LTV ratios, and which one you qualify for when applying for the BlockFi loan is determined by the amount of the loan divided by the value of the collateral that you post for that loan. The following table illustrates BlockFi’s LTV ratios and the respective interest payments on the loan:

LTV ratioInterest rateOrigination fee
50%9.75%2%
35%7.9%2%
20%4.5%2%

The nice thing about taking a loan from BlockFi is that you can repay a portion or the entirety of the loan without incurring any prepayment penalties, unlike traditional financial institutions that usually have some sort of penalty if you decide to repay the loan before the term ends. However, it’s worth mentioning that the BlockFi loan originates for a 12-month term.

Getting a crypto-backed loan is extremely easy and straightforward, but be aware of the risks involved. You will need to maintain the LTV ratio and be mindful of the crypto collateral’s market price. If the LTV ratio gets too high, you will have to supplement the collateral to bring the LTV ratio back to its safe level or risk losing your entire collateral once it passes the threshold. Crypto prices are notoriously volatile, so it’s certainly a big risk.



BlockFi Trading

BlockFi also supports a trading platform that enables you to sell and buy a limited range of cryptocurrencies and stablecoins. Trading on BlockFi certainly has some advantages as well as disadvantages. Since the trading platform is integrated with the BlockFi account, trades that you place will start earning you compound interest on the next business day. BlockFi Trading also emphasizes instant transactions on buying, selling, or trading. The best thing about it by far is that there are absolutely no transaction fees on each trade.

Unlike a crypto exchange, BlockFi acts as principal for all trade transactions for its clients. This means that BlockFi, not users nor any other market participants, takes on the primary risk of price fluctuations, generally for 60 seconds. BlockFi will display a price they are willing to buy or sell at.

On the downside, there are only a handful of cryptocurrencies and stablecoins that you can trade on BlockFi. At the time of writing, there are a total of 13 cryptocurrencies and stablecoins that are available for buying, selling, or trading. These are also the same coins that are supported for depositing into the BlockFi Interest Account. The full list of supported cryptocurrencies and stablecoins are as follows:

  • Bitcoin (BTC)
  • Ether (ETH)
  • Litecoin (LTC)
  • Basic Attention Token (BAT)
  • Chainlink (LINK)
  • Dai (DAI)
  • Uniswap (UNI)
  • USD Coin (USDC)
  • Tether (USDT)
  • Gemini Dollar (GUSD)
  • Binance USD (BUSD)
  • PayperEx (PAX)
  • PAX Gold (PAXG)

While BlockFi’s services are available globally, over in the U.S., regulations differ from state to state. This means that you won’t be able to trade certain pairs, or trading may be completely unavailable to you, depending on which state you’re in. Currently, the states of Arkansas, Iowa, Louisiana, Maine, Mississippi, and North Dakota can only trade between these 8 crypto assets: BTC, ETH, LTC, LINK, DAI, BAT, UNI and PAXG, with no stablecoin trading allowed. BlockFi doesn’t offer trading for any pairs if you are in New Mexico, Nevada, New York, Vermont, or West Virginia. You have full access to all trading pairs supported by BlockFi if you’re in any other U.S state or outside of the U.S.



Bitcoin Rewards Credit Card

BlockFi has teamed up with Visa to introduce the world’s first bitcoin rewards credit card. The BlockFi Rewards Visa® Signature Credit Card essentially allows you to earn back bitcoin on every purchase that you make with the card. Cardholders can earn an unlimited 1.5% back in bitcoin on every purchase. The rate increases to 2% bitcoin back after $50,000 of spend has been achieved and resets on the card anniversary date every year.

There are also various other incentives from using the card, such as 3.5% Bitcoin rewards on all purchases in the first 90 days of card ownership after activation, up to $100 in bitcoin. Note that you’ll need to spend $5,000 in the first 3 months to hit the $100 bitcoin reward. The credit card also works well when you trade on BlockFi, giving users 0.25% back in bitcoin on all eligible trades, up to a maximum of $500 in bitcoin each month. Finally, cardholders will also receive $30 in bitcoin for every client referral they make.

As of this writing, the credit card is only available to U.S. residents in qualified states. You will need a BlockFi account to apply for the card, and BlockFi claims that you don’t necessarily need an excellent or good credit score to apply. There are no annual fees and no foreign transaction fees associated with the credit card.


Mobile App

Another BlockFi feature worth mentioning is its intuitive mobile app. BlockFi has a sleek and user-friendly app that is safe to use. You can use the mobile app to manage the BlockFi Interest Account, take out crypto-backed loans, trade, or transfer funds directly from a crypto wallet. The BlockFi mobile app is supported on Android and iOS devices.



Is BlockFi safe?

There’s no guarantee that anything can be 100% safe, but you can infer based on a calculated assessment of whether it’s safe to put your funds in BlockFi or not. While it’s certainly no traditional bank, BlockFi does strive to maintain institutional-like levels of security and compliance with regulators. Being regulated at the federal and state level in 48 states within the U.S. essentially means that the company is subject to tight rules that were designed to protect users and ensure that the company and its operations are, in fact legit. 

Funds deposited into BlockFi’s accounts come under the care of their primary custodian Gemini. Gemini is a licensed New York trust company that is subject to the cyber security regulations promulgated by the New York Department of Financial Services.  In addition to being regulated by U.S. authorities, Gemini also stores most of its client funds offline, making it less vulnerable to hackers. Only a small portion of client funds are kept for withdrawal purposes with third parties such as Gemini, BitGo, and Coinbase, while the rest are stored in cold storage wallets. There’s also the standard security measures such as 2FA authentication and stringent identity verification of its users upon setting up an account. Users are required to provide actual identity photos and identity documents in order to create and verify an account.

If you’re wondering about BlockFi’s security track record, the company experienced an attempted hack back in May 2020. The hacker got hold of users’ data by compromising an employee’s phone and taking control of the person’s phone number through a SIM swap attack. No funds were stolen from BlockFi, but data pertaining to client accounts were exposed. It was undoubtedly a near miss and spoke volumes about BlockFi’s ability to safeguard deposited funds.

There is one big downside regarding the security of funds deposited into BlockFi: it has no FDIC (Federal Deposit Insurance Corporation) or SIPC (Securities Investor Protection Corporation) insurance. FDIC and SIPC are insurance mechanisms that are present in traditional financial institutions as an added layer of protection for client funds in the event that the institution or company goes bankrupt. With no such protection, this means that your funds are at risk of being lost in the event that BlockFi goes under. To date, however, the world has yet to see any sort of insurance coverage on cryptocurrency investments.




Advantages and downsides of using BlockFi

So is BlockFi worth your time and investment? There are a fair amount of advantages as well as disadvantages of using the platform. We’ve summarized them for you below:

Advantages:

Attractive interest rates – BlockFi’s current APY of up to 7.5% interest payout on stablecoins puts it up there with other similar competitors in the market. And by competitors, we don’t mean traditional banking institutions; we’re talking about other crypto companies that offer interest-bearing accounts, such as Celsius.

Great for beginners and intermediate crypto investors – BlockFi’s user-friendly interface on both its mobile and desktop apps make it really easy to navigate and understand each feature and service that they offer. It’s a great place to start if you’re a beginner, and it’s also a great place to deposit your crypto holdings if you’re looking to earn lucrative interest in them.

Interest Payment Flex – the option to choose what currency your interest is paid out in is an excellent feature from BlockFi. This lets you accumulate more of the cryptocurrency of your choice without having to make additional purchases.

Security and credibility – being regulated by the U.S government add to the company’s security credentials and legitimacy. BlockFi also teams up with proven and trusted partners, which increases trust in the company by the general public.

No hidden fees or minimum account balances – it’s true, there really are no hidden fees for using BlockFi’s range of products and services, with just a few exceptions. Without a minimum account balance to maintain, you don’t have to be rich to start investing.

Disadvantages:

Limited withdrawals – although there are no hidden fees on BlockFi and using most of the services incur no fees, the limited free withdrawals might irk some users. Being able to withdraw your money for free only once a month can sometimes be troublesome and might eat into your funds.

Limited number of supported cryptocurrencies – a total of 13 supported crypto and stablecoins is quite a dismal range for users to choose from. Although among the 13 are some of the most popular cryptocurrencies and stablecoins in the world right now, it’s nothing compared to the several thousand other cryptos available in the market right now.

Lack of FDIC and SIPC insurance – while this is currently the norm in the crypto industry, security on invested funds will ultimately appeal to the wider or more conservative public when it comes to investing in cryptocurrencies. The lack of insurance on funds means that there will always be a risk of BlockFi going bankrupt, which could lead to loss of client funds.




Final thoughts

We hope that this review has been informative in helping you decide whether it’s worth depositing your crypto holdings into BlockFi. There are plenty of advantages to using this crypto platform, but it does come with its own set of risks, some of which can be unforeseeable. Ultimately, it’s up to individual investors to assess their own risk appetite when deciding to use a crypto platform such as BlockFi.

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