The cryptocurrency industry continues to grow larger despite opposition from skeptics and those more interested in traditional finance. As entities like Tesla add Bitcoin to their balance sheets and payment processing giants like Mastercard signal growing acceptance of the crypto world, many express greater confidence in the ability of virtual currency to serve as a wealth-building tool.
As a result, the rise of crypto-based lending, investing, and borrowing platforms continues to blossom. One example is BlockFi, a wealth management platform based on blockchain technology offering collateralized loans utilizing cryptocurrency.
Launched in August 2017, BlockFi is based in New York and remains the only Bitcoin lending platform offering a crypto deposit account featuring compound interest. BlockFi’s gained immense notoriety in and outside the crypto world due to its rapid growth, large amount of on-platform assets, and a loss rate currently standing at 0%.
Keep reading to learn more about BlockFi, understand the features and infrastructure the platform offers, and gain a greater understanding of how the lending protocol is perceived in the cryptocurrency world.
What Is BlockFi
Founded by Zac Prince and Flori Marquez in 2017, BlockFi was created to provide credit services to markets with limited access to basic financial products, like a savings account.
The platform commenced lending while utilizing digital currency as collateral in January 2018. Several funding rounds across the year with participation from entities like Galaxy Digital Ventures and ConsenSys Ventures helped the team officially launch the BlockFi platform.
Today, the BlockFi team maintains offices in New York, New Jersey, Poland and Argentina. The platform’s primary custodian, Gemini Trust Company. LLC, is regulated by the New York State Department of Financial Services. BlockFi lenders also benefit from the backing of financial giants like SoFi and Fidelity, meaning a vast majority of products and tools seen as a traditional bank are also accessible to BlockFi users.
BlockFi users can earn interest by lending out Bitcoin and other crypto, secure a cash loan while using crypto as collateral, or perform crypto-to-crypto transactions.
Aside from offering a compound interest-earning crypto deposit account, BlockFi users do not have to hold or stake a native token to use services on the platform, as BlockFi does not currently have a token. Additionally, BlockFi users do not need to carry a minimum balance to be eligible to earn monthly compound interest on funds.
BlockFi Interest Account (BIA) Details and Features
The BIA is one of the most unique BlockFi features, This account lets users deposit crypto and enjoy the benefits of earning interest on deposits and (hopefully) watch the crypto’s value grow at the same time.
BlockFi offers an interest rate on stablecoins of at least 8.6% and up to 6% with Bitcoin depending on the deposit amount. Users can also earn interest with other cryptos like Ethereum and Litecoin.
All a prospective account holder has to do is enter their information, fund an account with virtual currencies, and then simply wait to earn and collect monthly interest in the crypto of choice. BlockFi features an interest calculator so account holders can understand how much money they could earn based on the asset and investment duration.
Users are also eligible to receive one free withdrawal per month with the ability to remove funds at any time. The interest account is available worldwide, other than in nations who are sanctioned or on watchlists. Other account features include:
- Interest Payment Flex: This feature allows users to choose the cryptocurrency they’d like to receive interest in. This allows account holders to diversify their portfolio or choose coins they believe have strong market potential, depending on the time of year and other newsworthy moments related to the project that could drive up the price. Account holders should understand there is a limit to how many hours before the end of the month that they are able to change their preferred interest payment.
- Tiered Interest Structure: Bitcoin fans on BlockFi can take advantage of the platform’s tiered interest structure. For annual deposits under 2.5 BTC, the interest rate rests at anywhere up to 6%. Amounts above that limit lead to a 3% interest rate. This structure incentivizes users to be strategic with their deposits, especially since interest rates have and do change.
Interest Rates Breakdown by Cryptocurrency
As of March 2021, the below interest rates are available for all BIA holders:
|BTC (Tier 1)||2.5% – 6.0%|
|BTC (Tier 2)||2.5% – 3.0%|
You can also find BlockFi’s interest rate table here.
Speed, Security, Insurance
BlockFi users often ask if their funds are insured. While FDIC insurance does not pertain to crypto, BlockFi does use Gemini as its custodial service. Since Gemini does insure its own deposits, BlockFi users do have assurance their funds have some protection. All withdrawal requests take one business day to clear, which means actions on Friday will not process until Monday.
The platform also maintains a number of security standards and best practices to assuage users. BlockFi does not hold the private keys to funds, instead leaving asset management to Gemini (and its cold storage infrastructure). Gemini received a SOC2 Type 1 compliance audit from Deloitte for its custodial infrastructure, and Gemini itself is insured by Aon.
If an account is compromised, the BlockFi team indicates the account is frozen for a one-week period. Next, a videoconference with the individual is conducted to verify the account and its proper owner, allowing the BlockFi team to alter account information so the proper user can regain control.
BlockFi also offers users the ability to utilize two-factor authentication to secure accounts. Instead of relying on text messages and emails, platform users are asked to perform 2FA with the Google Authenticator app that regenerates a code every 30 seconds.
Additionally, BlockFi users can add crypto wallet addresses to a specialized address book – making it easier to transact with frequently used addresses. With the Allow listing feature, users will only be able to withdraw to addresses listed on the address book.
As a result, withdrawals are not possible if the book is empty. This practice lets users add additional security layers to their accounts to prevent hackers from gaining access and then siphoning off funds to external accounts.
According to BlockFi, users also can take advantage of Face ID to login. Facial recognition can take the place of a more traditional email and password login, but users who manually log out will have to input an email and password in order to log back into the platform.
Fees and Access to Funds
Withdrawal limits and settlement speeds depend on the crypto asset users are trying to transact with. For BTC, users can withdraw 100 coins in a 7-day period. The limit jumps to 5,000 for Ethereum, and 10,000 for Litecoin. Stablecoin holders can withdraw up to a million of the crypto asset each week.
Bitcoin withdrawal fees currently sit at 0.00075 BTC. Ethereum’s sit at 0.02 ETH, while Litecoins stand at 0.0025 LTC. Stablecoin withdrawal fees are $10.
Origination fees for crypto-backed loans are 2% regardless of the loan-to-value ratio and the interest rate. LTV is computed by taking the loan amount and dividing it by the value of the loan collateral.
BlockFi Withdrawal Fees per Cryptocurrency
|Currency||Withdrawal Limit (in crypto)||Fees|
Please note that all of the fees and withdrawal limits in the table above pertain to a 7-day period.
How to set up a BlockFi account
- Referrals:BlockFi is known for a referral program that often incentivizes new users and whoever originally brought them to the platform. Referral benefits have included $10 in BTC to both the new user and referrer once a new account is funded with a set amount of cryptocurrency. Special referral bonuses have let users collect more money. As a result, many prospective BlockFi users often ask friends or families, or do research to see if there are any referral bonuses before making an account. Of course, this step is not required.
If the information passes muster, prompts will ask if the user is creating a personal or business account. One can assume the business account will involve a much more detailed and thorough registration process. For individual users, BlockFi will then inquire about the user’s country and ZIP code, adding in a brief note about what the information is used for (if a user is interested in learning more).
Next, users are asked to input an array of information, including a phone number, birthday, and the source of funds connected to the account. Before inputting a Social Security Number, users should again check to make sure they are on the secure and official BlockFi website. The platform says they are required by the Bank Secrecy Act to verify the identity of eligible users by cross-checking with their Social Security number.
After a user successfully inputs the previous information, they will be asked to verify their phone number by inputting a confirmation code, along with performing a few other tasks. These steps are to satisfy the platform’s KTC ID verification system provided by Persona.
- Setting Up The Account: Once users see the BlockFi main page, they have the option to set up two-factor authentication. While some see this as unnecessary, 2FA is a smart way to add extra protection to an account, and is already standard practice at many financial institutions and brokerages. As discussed earlier, users can also set up whitelisting, which is of particular importance if a person intends to send money between a bank account and BlockFi or if they are interested in sending cryptos on and off BlockFi.
- Funding The New BlockFi Account: Processes of actually adding funds to a BlockFi account vary based on a number of federal and state regulations. In general, the three main ways to fund a BlockFi account are to connect it to ACH, wire money, or to move money in from an outside crypto account.
ACH is often the slowest method to fund an account, and BlockFi also places limits on the amount of money users can transfer in. There are no limits on wire transfers but fees (depending on the bank) can quickly add up. The speed and cost of transferring crypto will depend on the coin and where the virtual currency is coming from. Users simply must visit their profile settings and find the option to put in a bank account to start an ACH transfer.
Users interested in wiring money to their accounts need to find the code on their profile page and then visit their bank’s website to input the code (in the notes section) and BlockFi’s wire information.
Finally, users who desire to fund their accounts with crypto can do so on their BlockFi profile by finding the corresponding wallet address and then setting up a transfer from an outside exchange or wallet. Users should be careful to not send crypto into an account that’s for a different virtual currency, as this opens up the potential to lose the entire amount of assets. Depending on where the crypto is coming from, the transfer might be delayed a bit for further review.
After following the above steps, a user now has a fully functioning BlockFi account! It is prudent for users to also test out withdrawing funds from their BlockFi account. Be sure to start with a small amount when you are not in immediate need of the money.
BlockFi Bitcoins Reward Visa Card Features and Details
BlockFi announced details of its Bitcoins Reward Visa Card in December 2020. According to the project team, card holders who are approved can spend their approved limit each month and not be required to pay interest on the balance (if paid on time).
However, all transactions on the car lead to a 1.5% cash back bonus automatically converted to Bitcoin and deposited into BlockFi each month. This makes the sleek black metal card an alluring way to earn crypto rewards on everyday transactions.
According to BlockFi, the card is the first crypto-focused credit card and marks the first time Bitcoin’s logo is right on a physical card. As of now, the 1.5% stands as the highest Bitcoin rewards rate for any card. Users also can earn a $250 Bitcoin signup bonus if they spend at least $2,000 in the first three months.
Right now, the card is only available in the United States, but those in other parts of the world can add themselves on the waiting list to be the first to know when the card could be available in their area.
BlockFi says they hope the new Bitcoin Rewards Visa Card helps expose more people to Bitcoin and help consumers earn the cryptocurrency while making purchases on everyday items.
BlockFi Customer Sentiment
Unsurprisingly, the wide array of features on BlockFi and the platform’s unique opportunities for those interested in the nexus of traditional finance and crypto, lead to a lot of reviews and customer feedback.
As of early March 2020, BlockFi maintains a 3.5/5 rating on the Apple App Store. While many praise the robust features offered, they also write how BlockFi’s user interface could be updated. One user notes it can be hard to see how much an account has changed in value over time due to the platform’s interface – a feature they say should be a pretty straightforward update to implement.
Others say BlockFi lags behind platforms like Coinbase or Gemini when it comes to the design and user experience. More pessimistic reviews explain how BlockFi’s customer support is superb, but write how they run into issues with username/password resets, basic app crashes and glitches, and other issues with logging in.
On the Google Play story, BlockFi enjoys a 4.4/5 rating. Praise for the app largely focuses on efforts by the development and customer service team to keep things moving and running amid a massive influx of new users. However, the negative reviewers are not shy about documenting problems with fund transfers, a buggy signup process, and a range of fees that can become confusing (and quickly add up).
BlockFi is one of the most unique platforms in the crypto world. Allowing users the ability to earn crypto, grow wealth, and participate in an ecosystem where traditional finance merges with virtual currency represents a new economic frontier.
BlockFi’s adherence to security, range of supported cryptos, and innovative products like the Bitcoin Rewards Visa makes the platform enticing for those looking to ‘put their crypto to work’ making money. However, users should understand what they are getting into, especially when it comes to withdrawal times and fees.