BlockFi Review

James HeadshotAuthor: James Page
Last Updated: October 2020

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A lot of you probably keep savings stored safely in your bank’s savings account. Unfortunately, the COVID pandemic and its financial aftermath have resulted in drastic cuts on interest rates around the world.

On the other hand, if you don’t keep your funds in a savings account, you might witness your coins losing value due to inflation.

The best alternative at the moment might be investing in cryptocurrency, holding onto them, and earning passive income from crypto interest rates.

Are you curious to find out more? Look no further from this article as it will give you an insight into BlockFi, one of the most promising lending platforms. Thanks to BlockFi, you can enjoy some of the highest interest rates on the crypto market.

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About BlockFi

BlockFi is a popular wealth management and lending platform founded in 2017 with headquarters in New York City. Apart from New York, the company has offices in New Jersey, Poland, and Argentina too.

The platform quickly grabbed the public’s attention with its ambitious approach, transparency, and clear-cut goal – to bring the financial sector and the tech world closer together, promoting crypto trading in the meantime.

That’s right! BlockFi aims to bring traditional banking features to the crypto market. For example, users can create a BlockFi crypto interest account and earn passive income via interest rates.

BlockFi was also the first company in the United States to offer loans to individuals who own cryptocurrency. This is very similar to what you’re allowed to do when borrowing against a portfolio of stocks, only this way you’re using crypto as collateral.

Recently, the platform added the option to buy and sell crypto for no additional fee than the market price. In this, BlockFi is confidently transforming the crypto market to resemble the traditional equities market.

In the words of BlockFi’s CEO, Zac Prince, “by bringing institutional quality technology infrastructure, data science, risk management and operations to the crypto asset market, [they] aim to be the leading lender in the crypto asset market and a leading provider of low cost credit globally.”

The BlockFi Team

The whole BlockFi Team is well-versed in the crypto industry and has a background in finance.

Zac Prince is one of the co-founders and CEO of the platform. Prior to BlockFi, he has held executive positions at numerous tech companies. He worked for both the broker and online lending RIA, Orchard Platform, and the online lease-to-own lender Zibby as a business development team leader.

Flori Marquez is the other co-founder and SVP of Operations at BlockFi. She is an expert in the marketplace lending industry, having worked on alternative lending products in the past. This is where the ideas for BlockFi services came from. Marquez worked on a $125MM portfolio for Bond Street as the Head of Portfolio Management, in charge of all operations. She also worked for Oak Hill Advisors.

Rene Van Kesteren is BlockFi’s Chief Risk Officer who worked for over 15 years at the Bank of America Merrill Lynch as a Director of Professional Clearing / Prime Brokerage where he built the equity structured lending platform.

BlockFi Funding

Right from the start, the company got support and financial backing from leading institutional investors including Winklevoss Capital, Valar Ventures, Morgan Creek, ConsenSys Ventures, Galaxy Digital, Fidelity, Akuna Capital, SoFi, and Coinbase Ventures.

BlockFi has raised a couple of fundings led by these investors. In 2018, one such funding round earned the company $1.55 million. Later that year, BlockFi got another $52.5 million in a round led by Mike Novogratz’s Galaxy Digital.

In 2019, Valar Ventures backed by Peter Thiel led another $18.3 million funding round. Such fundings reassure customers that the platform works on continual growth and development, helped by other industry giants.

On top of that, the NYC-based Gemini Trust Company, LLC, founded by the Winklevoss Twins and regulated by the New York State Department of Financial Services, is BlockFi’s primary custodian.

The BlockFi Interest Account

BlockFi launched its Crypto Interest Account in 2019, allowing customers to earn interest on their crypto holdings. This option proved to attract a lot of crypto investors as it’s far more profitable than simply holding onto cryptocurrency in an interest-free digital wallet.

Once you register for an account, you simply need to deposit your crypto and let the assets accumulate cumulative interest every month. BlockFi supports the following cryptocurrencies: Bitcoin (BTC), Ether (ETH), Litecoin (LTC), Paxos (PAX), PAX Gold, USD Coin (USDC), Gemini Dollar (GUSD), and Tether (USDT), although Tether is only available to non-US users.

There’s no minimum deposit limit for your balance. The interest is paid out at the beginning of each month, with an additional compound interest that accumulates over time, yielding higher annual returns for customers.

Let’s see the compound interest in action.

Imagine that you deposit 1 BTC to your Crypto Interest Account in October. If the interest rate is 6%, at the start of November, your balance will be 1.005 BTC. If the interest rate and crypto price remain the same, and you don’t add more assets to your account, after one year, your balance will climb to 1.062 BTC, i.e. you’ll have an annual yield of 6.2%.

If you add more coins, the interest will compound on the new balance. This process continues until you decide to withdraw your funds.

BlockFi also offers a service called Interest Payment Flex that lets customers choose the currency in which they want their interest to be paid out. This is a great way to work on your portfolio diversification.

BlockFi Interest Rates

BlockFi has some of the highest and most competitive interest rates on the market from the very start.

Even in the wake of the COVID-19 pandemic and Bitcoin’s price downswing, BlockFi managed to stay on top of the game and has even raised its crypto interest rates in an attempt to support its customers and address the new market changes. The changes don’t apply to stablecoins whose rates have remained the same.

Therefore, since April 2020, users can enjoy the following interest rates on their crypto holdings:

Cryptocurrency Amount Interest APY
BTC (Tier 1) 0 – 2.5 6%
BTC (Tier 2) > 2.5 3.2%
ETH > 0 4.5%
LTC > 0 5.0%
USDC > 0 8.6%
GUSD > 0 8.6%
PAX > 0 8.6%
PAXG > 0 4%
USDT > 0 7%

BlockFi Withdrawal Fees

Another advantage of using BlockFi is that you can withdraw your funds anytime you want and get one free withdrawal per month. Actually, you get one free crypto withdrawal and one free stablecoin withdrawal. Additional withdrawals are charged as follows:

  • 0.0025 BTC for Bitcoin withdrawals with a maximum limit of 100 BTC per week.
  • 0.0015 ETH for Ethereum withdrawals with a limit of 5,000 ETH per week.
  • 0.0025 LTC for Litecoin withdrawals with a limit of 10,000 LTC per week.
  • $0.25 USD for stablecoin withdrawals with a limit of 1,000,000 stablecoins per week.
  • 0.0025 PAXG for Paxos Gold withdrawals with a limit of 500 PAXG per week.

Typically, your withdrawals are pushed-through the day you make your request but it might take up to seven days to process them. The BlockFi team has said that this improves over time with mutual client-team rapport.

Lend Bitcoin to Earn Interest

Earlier we mentioned that BlockFi aims to make some traditional banking features available for cryptocurrency too. Using the BlockFi Interest Account, you can lend your Bitcoin to others and receive interest payments in return because the borrowers get the money at a higher rate of interest.

This is very similar to lending traditional fiat currencies or earning interest from savings accounts. As Bitcoin’s popularity continues to grow, more and more institutional investors and entrepreneurs are looking for Bitcoin lending platforms so they can have more capital at their disposal.

The advantage of using BlockFi as a lending platform is the sophisticated security level that involves cold storage for your deposited funds and trusted custodians.

Crypto Loans

Instead of selling your crypto to meet an urgent financial goal, BlockFi allows users to borrow an amount of USD against their digital assets without losing their coins. Not only that but with these loans you don’t have to pay the cryptocurrency capital gains tax.

The crypto-backed loan depends on the amount of crypto collateral and the applicable loan-to-value (LTV) ratio. The LTV ratio is calculated by dividing the amount of the loan with the value of the collateral.

The accepted collateral digital currencies are BTC, ETH, LTC, and PAXG. On the Blockfi.com website, you can enter the USD loan amount you need and calculate the collateral. BlockFi offers LTV up to 50%.

On the other hand, you need to keep in mind the crypto assets’ volatility. If the price of the collateral assets goes down up to 50% from the time you made the loan, you’ll be asked to pay down the loan amount or increase the collateral.

Trading Bitcoin and Other Cryptocurrencies

Since recently, BlockFi users can trade crypto against crypto on the platform without additional expenses. Right now, fiat to crypto trades aren’t supported but this should be a possibility in the future. At the moment, you can exchange your crypto for the Gemini Token (GUSD), a stablecoin pegged at a 1:1 ratio to the US Dollar.

BlockFi assess your account size, trading volume, and activity to determine your daily trading limit. You can access this at all times from the trading dashboard.

The platform’s team wakefully observes market movement, liquidity, and price rates to offer their clients the best crypto price rates.

You might be asking what happens if you have an Interest Account and then decide to trade your asset for another. In this case, the interest gets adjusted automatically based on the new rate and account balance.

For example, if you deposit 1 BTC on the 1st of October, then convert the BTC to LTC on the 12th, you’ll earn 12 days worth of BTC interest and 19 days worth of LTC interest.

Is BlockFi Safe?

BlockFi is definitely as safe as an online crypto platform could get. As you know by now, BlockFi’s primary custodian is Gemini, a crypto giant known for its sophisticated and impenetrable security technology.

Gemini stores the private keys and assets on the part of BlockFi and keeps up to 95% of them safe in cold storage.  Even though BlockFi isn’t FDIC-insured, the company has even secured insurance for customers’ assets through a consortium of global insurers managed by Aon Plc.

Moreover, Gemini is a licensed custodian and regulated by the NYDFS. In 2019, Gemini became the first crypto exchange to successfully complete the SOC 2 Type 1 examination and demonstrated that their security compliance is up to the challenges posed by the cybersphere.

BlockFi asks new users to complete a KYC test and have their identity verified before they gain access to the platform.

In case a user’s account gets compromised, BlockFi freezes the account for one week. They arrange a video call with the individual in question and verify their identity. Finally, they change the email address and password so the user can access their account without the fear of someone stealing their data.

In 2020, BlockFi fell victim to an attack where the hacker used a SIM swapping technique to gain access to the company’s internal systems through an employee’s mobile phone. However, BlockFi confirmed that no funds, passwords, social security numbers, or bank account information have been exposed in the incident.

FAQ

What Countries Are Supported by BlockFi?

BlockFi offers loan services in 46 states in the US, excluding New York, Wyoming, Connecticut, and Washington. The interest accounts are available worldwide except for the above-mentioned countries and countries on the sanctioned or watchlist in the US, UK, and EU. Since regulations differ from one place to another, BlockFi has promised to make the necessary steps to attain licenses in states where their services are currently unavailable.

Does BlockFi Have a Mobile App?

Yes, BlockFi has just recently launched its mobile app available for download on App Store and Google Play. The app lets users create and manage a crypto interest account, borrow money with crypto collateral. It’s synced with their wallet address so they can easily transfer crypto too. In the future, you’ll be able to optimize your portfolio, make bank deposits and withdrawals, and exchange cryptocurrency.

Can I Earn Interest on Fiat Currency with BlockFi?

As of now, BlockFi doesn’t pay interest on fiat currencies. The closest you can get to traditional currencies is purchasing GUSD, the Gemini Dollar, a stablecoin created by the global crypto exchange Gemini that’s pegged at a 1:1 ratio to the US Dollar. It’s the first regulated stablecoin in the world because it was authorized by the New York Department of Financial Services (NYDFS). For every GUSD issued, there’s a corresponding USD held in the State Street Bank and Trust Company. If you feel like stablecoins are better than cryptos because they’re less volatile, you can store GUSD on BlockFi with an 8.6% APR.

What Are BlockFi’s Future Plans?

BlockFi’s growth and development as a platform will go through a number of phases. The first one was aimed at people who already have crypto assets and want to take crypto-backed loans. The second phase will promote crypto to people who still don’t own any digital assets. BlockFi will also add the feature to buy and sell on the platform and introduce products such as a Bitcoin rewards credit card. A third phase will focus on the use of stablecoins and their role in providing traditional banking products to the crypto market.

Conclusion: Is BlockFi Legit?

Judging from our in-depth research, BlockFi is a completely legit and safe platform for any crypto investor. It doesn’t matter whether you’re a beginner with just a couple of cryptos in your wallet or an institutional investor with a lot of capital – BlockFi caters to the needs of everyone.

The fact that the platform has gained support and funding from some of the leading US investors makes BlockFi all the more credible and attractive.

The platform gives you the option to make crypto to crypto trades, open a Crypto Interest Account to store your digital assets and earn compound interest, lend your crypto, or borrow money by using your crypto as collateral.

Our estimations have shown that BlockFi proves more lucrative than regular high-interest savings accounts.

We can therefore conclude that BlockFi is nothing like a scam platform. Using state-of-the-art blockchain technology, the team aims to bring crypto closer to the mainstream audience and bring common banking services to this evolving market.

About The Author

James Page

James Headshot

James is the main editor. With a passion for finance and anything blockchain, cryptocurrency is right up his alley. He's responsible for most of the content on the site, trying his best to keep everything up to date and as informative as possible.

Disclaimer: Digital currencies and cryptocurrencies are volatile and can involve a lot of risk. Their prices and performance is very unpredictable and past performance is no guarantee of future performance. Consult a financial advisor or obtain your own advice independent of this site before relying and acting on the information provided.