Introduction

Let’s start by getting one thing out of the way. Not your keys. Not your bitcoin. I’m going to get bombarded by people telling me this. It’s great advice. For the rest of you who don’t keep all your money in the form of mattress stuffed cash, let’s move on.

Here’s the second thing. I wrote this article not as a way to spam people about referrals. I really hate the amount of ass kissing articles on medium about this sort of thing which are nothing more than long winded referral links when viewed with a critical eye. I am writing this as an honest review of all these places and I hope that will show in this work. This will be a long one. I’m hoping to answer all the questions that I myself had earlier this year for everyone else.

I did a significant amount of research before I put some bitcoin into these places. Despite feeling them out as much as I could, I still felt like I was plunging in. Most reviews and articles made no mention of how much money was put in. Or they were small amounts. It’s quite okay to show a platform works when you deposit $100. But it’s another thing for someone who wants to deposit $1,000,000 and test the limits.

I put a significant amount of bitcoin in whilst exploring various institutions.

Lending

BlockFi offered the Bitcoin Interest Account in March 2019.

Let’s assume you’re willing to trust BlockFi. They do lend out cash for crypto collateral. And that gives them profit. Don’t listen to their pitch about low 4.5% low interest rates on crypto backed loans. I submitted an application for $250,000 and when it came time to sign the loan, it was 11.25%. This was shitty enough for me to walk away but good for BlockFi if they’re making money on this. I don’t have enough space in this article to speculate on how profitable they are and whether to believe that they make their money how they say they make their money. But they make no qualms in their T&C that they’re essentially gambling with your money if you deposit it with them. There’s no such thing as risk-free free money. Let’s get that out of the way. Before the word defi flies out of your mouth, while they have much better transparency, they are also administratively controlled and can shut down accounts. Also their current rates for BTC and ETH make them a non-starter for me.

I signed up in March but did not deposit anything during the original glory days. They offered 6.2% yearly, compounded monthly. Whilst I considered depositing 1000 BTC and earning 5+ BTC a month, I did not do that. BlockFi was the first place in 2019 I did research on for bitcoin lending and I did not trust them enough at the time. They also did not offer 2fa. They assured me they would protect withdrawals by verifying things like identity, phone number, address, SSNs. Things that are easy to attain or even social engineer.

Let me take a moment to mention something about the the %. I will be talking about interest per year and I will mention whether or not it’s compounded and how often the payouts happen. This is especially important for tax purposes, for which I will show you my solution later. But I would suggest to everyone not to get caught up on the compound bit. Honestly, it really makes so little difference, don’t get hung up on making interest on all your bits and pieces.

By the time I did enough research and felt comfortable enough to deposit into BlockFi, they changed the rates. 6.2% on BTC up to 25, and then 2.2% afterwards. So I deposited 24 into my account. I figure it would take 8 months time to reach the 25 BTC limit and I could decide what to do then.

My wife and I share our finances, so I asked them if it would be okay for her to open a separate account and also deposit 24. They said yes. And that I could refer her as well. So I did and so we had 48 BTC held by BlockFi. At the end of the first month, we got emails sent to us with our earned interest.

I earned 0.1223, which works out less than the 6.2%/12, which should have been 0.124. I think if they offered 6%/12 montly, which is 0.5%. Over a year, compounded monthly, this comes out to 6.168%. Close enough to 6.2%.

After this month, we received an email from BlockFi telling us that the bitcoin cap for the 6.2% was being changed from 25 to 10. Everything over 10 would earn 2.2%. By this time, I was exploring other places anyways, so we decided to withdraw 15 BTC each from our accounts. Here’s a thing about 2fa for BlockFi, which they did eventually add. They do have it for logging in. Supports Google Authenticator. Check. If you select “Remember me on this device”, it really does. I’ve opened the BlockFi page months later and I’m still signed in. This is not an issue for me as I use dedicated system with dedicated user running dedicated browser through a docker sandbox per site. Still, something to think about as the withdraw itself does NOT require the 2fa. What they did was send me and my wife an email the next day asking us to send them 2 selfies. One of us holding up the ID that we used to sign up. A second email requesting something specific. We replied with our selfies, and they processed the withdrawals. I think the process took a day to complete but it moved as expected. It costs 0.0025 BTC, roughly $25 each. Supposedly they store their bitcoins with Gemini and that withdrawal fee is from them.

We still hold our ~18 BTC at BlockFi, and it’s still there, quietly earning interest. They offer 3.3% for ETH so I decided to hold out.

I did earn some kind of referral bonus for inviting my wife, but it’s unclear how it was calculated as she joined 3 days later into the first month which I didn’t see a bonus for. But I did receive it at the end of the second month and it was more than just the 10% extra I expected. Once I understand the math a bit better, I may come back and update this. My interest for the second month was 0.06 BTC while the referral bonus was 0.017 BTC.

Celsius Network, started by Alex Mashinsky. He has a long history in disruptive technologies.

After having watched enough of the Celsius Network videos, I checked it out. You can watch Alex look more and more tired every time he pitches the Celsius Network. But I don’t believe he’s lying about his intentions. Alex himself is legit. But at the core of the business, they are also just a business, just like BlockFi. So keep that in mind and don’t get sucked up too much by it. I tried to get a loan from them but could not as I live in California and they do not allow loans to California. Too bad.

Celsius Network is an app on your phone. They don’t offer services on their webpage. It’s a possibility in the future but at the moment, they have no resources dedicated to making this happen. I use a dedicated android phone that is online via wifi, firewalled through a pretty restrictive iptables ruleset running through an openvpn. Buy an unlocked phone that you purchase without a plan so you don’t get carrier bloatware constantly installing bullshit apps. You don’t need a good phone. I find moto is the best brand that has sensible android builds and updates that don’t include anything but the bare minimum. They have reasonably priced mid level phones. I have a handful, one offline dedicated for Google Authenticator.

I deposited ~175 BTC into Celsius and started earning. At the time, they offered 6% yearly, paid once a week, Monday morning. It’s pretty nice being able to check your emails at the beginning of the work week and see how much you made. I got my first email telling me I earned 0.142. Odd, then I found out that they their week goes from Friday — Thursday. I deposited on Saturday, losing out 2 days of the week. My interest should have been ~0.2 BTC for 7 days but I only got 5/7 of that. Fair enough. Next week, my interest was the correct 0.207 BTC.

Here’s a thing with Celsius. They have their own CEL token, which I don’t really care to dive into. They have all kinds of reward programs. You can earn 30% extra interest if 10% of your account balance is in CEL and you also take your interest in CEL. This is not really feasible for me. I appreciate that they might have a functional company that’s profitable, but I’m not about to sink $200,000 into CEL tokens to earn a bit more interest. I am only interested in depositing BTC, and earning BTC. Maybe some others coins as well but again, they offered 3.0% on ETH so another pass.

The interest you earn with them is tracked and at by the current rules, will never earn interest. So this is not compounded. Tons of people have all kinds of angst about this, so if you do too, go join them and shout at the wind in their subreddit. Celsius claims their business calculations on how to make their business profitable currently will not budge on this one point, so you can either deal with this or not. Supposedly CEL tokens can compound but again, that’s not for me so I don’t know. With BTC, let’s say I earned 1 BTC with them. From now on, 1 BTC of my account value is subtracted from the weekly interest calculations. If I withdraw everything but 1 BTC from my account, I get 0 interest.

Over time, as more and more people deposited more BTC into Celsius, these rates dropped. Every week, Celsius negotiates with financial institutions that borrow the BTC for their bookmaking and as the supply grows, the demand and rates drop a bit. As of this writing, the rates offered are now 3% yearly for BTC. Still, they sport a healthy growth in users and deposits every week and are now offering great rates on stablecoins. As BTC goes upward during the next halvening, demand to short might jump up and so might rates.

Several times I tested my withdrawal. At one point, I tested withdrawing 125 BTC and it was the exact same process as when I withdraw 25. After passing 2fa, I got an email confirming the withdrawal. The next morning, I get an email telling me the withdrawal is completed. Celsius suggests you test a withdrawal for $1 when you first create the account and it locks that as your withdrawal address. Changing the address requires you to send in a selfie with a paper writing down your info, etc. Withdrawals are free with Celsius.

Crypto.com, formerly known as Monaco, IPO’d in 2017.

I was the most skeptical about this one. I read the “whitepaper” for this if you can call it that and did not see a way for them to make money. They supposedly don’t operate an exchange but just purchase on behalf of users, and they have a couple of gimmicks, like the branded visa card. But at the heart of it, it’s a simple debit card that you have to put fiat into. At the time, there was no mention of how they planned to pay for the 8% they supposedly offered.

But they did pass an audit by one of the big4 auditing companies before going live in Singapore and then later earning ISO/IEC 27001:2013 certification. They shared some more news about their intent to launch a Crypto line of credit. So I decided to give them a go. Crypto is another service that runs through an app. It doesn’t have an account with a password (at first), and it sends you an email with a login link. Again, I keep a dedicated android phone for this, which has the chrome app with stricter than default security settings. I needed to add exceptions for javascript and cookies for app.mona.co in order to use the email, which sends me to a webpage with an app link.

At the time, they offered 8% for 3 month lockup if you have 50 MCO staked, which I purchased for $200 at $4/MCO. This has now been changed to 500 MCO staked. Some people are crying foul because it’s a ripoff, how can anyone expect to spend $1,625 for a measly 2% especially because MCO keeps dropping, etc. Well, then don’t spend it. And then what happens? Do you then continue locking up your crypto and getting 6% free interest? Yeah.

I did multiple 3 month lockups. I deposited 100 BTC and 250 ETH. One of the nice things about Crypto.com is that you can see your daily earn, which happens around 5pm PST daily. But you don’t get paid until a week later. Once it’s been 7 days, you get paid out into your crypto wallet. So unless you earn more than the minimum to put into Earn, this sits idly by in your wallet not accruing interest. I earned 0.389 ETH per week on my 250 ETH and after three weeks, I put 1.167 ETH into another 3 month Earn lockup for 8%. My bitcoin paid out 0.1538 weekly so I was able to immediately put that into another Earn lockup. I think the minimum was 0.05 for BTC and 1 for ETH. So if you want (weekly) compounding interest, then you simply need to use this formula to find out how many coins you need to be able to compound weekly.

BTC: $MINIMUM*52/$RATE = .05*52/.08 = 32.5; ETH = 650

The earn feature has a limit of $1,000,000 total. So for me, once BTC went over $10,000, I was not able to enroll in any more Earn lockups. But if you’ve already got enough locked in, then what you have stays in there. Because of this, I was pleasantly surprised by a dip to $9,500, because it meant that I was able to fit in 100 BTC and 250 ETH when I did. Shortly after I did this, I got the SOF email from them, requesting to know my source of funds. They asked for documents for my BTC, my intended usage of my crypto.com account, and documents about my occupation. They provided me a link to securely upload these. For my specific case, I didn’t have much to upload, so instead, I sent them an email to their support email explaining my situation, and providing my proof. They got back to me within the next day with a thank you and that was that.

I sent in a separate support ticket asking about the limits and my wife. We share our finances and if I refer her and she has her own account, do the limits apply to us as a unit or separately? They responded that accounts have their own limits. So referring my wife, I made $50, 16 MCO. She got 16 MCO as well. She deposited 100 BTC into her account. We’re content with the limit for now. If this continues going well, I might open up accounts for my parents. They have some bitcoin in their Roth IRAs for which I am a custodian and I can see about moving them over for some tax free growth.

I have not tested their withdrawal yet. But if you look at the limits on the page, you can see that they have a 0.003 BTC minimum and 10 BTC maximum for withdrawal within 24 rolling hours. So to withdraw my money from them would take at least 12 days assuming I made the requests within a reasonable time from each other. Withdrawals cost 0.0005, a fair price. They just recently implemented 2fa, allowing you to fine-tune whether 2fa is required to send, withdraw, or whitelist wallet addresses.

Update: On 9/11 on their AMA, CEO Kris Marszalek answered a question from a user about when they will remove the 10 BTC limit for withdrawal. He mentions that if a user wants a withdrawal over 10, they can directly contact CS and get a manual review from the risk team. Assuming that you pass the review, there should be no issue with getting access to all of your funds at once. This is great news.

Cred is an odd company. Just look at their webpage. WTF? To stake, you have to use Uphold.

Uphold is an exchange, and they offer CredEarn as an app on their platform.

So Cred itself seems like a pretty private company. I’m okay with webpages from the 90s but their webpage really has a lack of information on it that suggests that they are not in the business of attracting new customers. They have no other presence that I’ve seen.

In comes Uphold. They’re an exchange I hadn’t heard of before, but if you go on their exchange, you do see they have a very interesting transparency page. Assuming it’s real, that would be enough to give me some confidence in depositing with them. Going to the subreddit just shows a bunch of exchange customers complaining about various things, so not really relevant for our purposes.

So I opened an account on Uphold. If you deposit BTC, buy and stake 10,000 LBA (which is roughly $200 currently), they offer 10% with a caveat. From what I understand, they lock in the price the day you confirm a six month contract. They pay you 2.5% of the price after three months and another 2.5% at the end of the six months. Perhaps this is worth it if your only alternative is 3% at Celsius. As the price would have to jump ~300% within six months to even out.

I had a few hiccups setting up my account on Uphold. Adding in a bank account worked and then undid itself a couple of times. I asked live chat about this and instead they referred me to a fraud specialist. Alright, I gave them bank statements and selfies on the spot. They said they’d get back to me. The next day I get an email from them saying I never added a bank account in the first place. A strike against their support, I tried again and got the same error, but this time I showed them screenshots. Not waiting for them to figure their shit out, I just went ahead and used one of the “big four” banks and it worked fine and told them to close their support ticket. So be aware, if you have a small bank or a credit union, not just any ACH routing and account will always work.

Then I funded my account with $225 to buy the 10,000 LBA. What I didn’t realize is that Uphold has a bunch of “cards”. And these cards are your balances in various currencies. So when signing up, I selected my default currency to be BTC. And by not specifying another card when I funded my account, my funding of $225 went into my BTC card, which instantly locked in the BTC rate while it was at a high peak. I immediately sent the support a request to change this. I didn’t want to buy BTC. I send in my USD to buy LBA. But they tell me there’s nothing that can be done. This ACH took the full five business days to come in. So I bought BTC that I could not touch, move, sell, or send for an entire week. By the time the money finally confirmed, I was down 7%. I had $210. I got charged an exchange fee of 1.05% (this is really high compared to a .16% fee for placing limit orders on real exchanges like Kraken) as well as being forced to buy the market rate. What a fucking mess. Luckily, LBA was down as well and I managed to buy 10,000 with $1 to spare. The purchase of LBA also incurred a fee of 1.95%. I didn’t have an option to place any kind of limit order, just another market order. As of this writing, that LBA is now worth $160.

This highlights a bigger problem, one that doesn’t affect me but might affect others. I make a decent amount of income, and I take a significant % of that in BTC. Because of this, I keep meticulous track of my income and basis for all of my bitcoin and I take the LIFO method of tax reporting for my bitcoin. Other people may not. The default is FIFO as some people prefer to pay long term capital gains rates on their bitcoin. And for those people, this mistake becomes a taxable event for them that they now have to track and pay taxes on. All and all, Uphold seems like a shit exchange.

I have not deposited any bitcoin into here yet. I’m still making sure I read all their bullshit T&C’s here to make sure I don’t get fucked some other kind of way. Because of the way the interest is locked in, it might be advantageous to wait until bitcoin hits a peak and you suspect an incoming drop to lock it in.

Nexo seems great. Waiting on their BTC integration.

I hope to have an update here sometime. Last I asked, it seems that their BTC accounts might be coming in by the end of 2019. We’ll see.

Ancient History: Exchanges

So there’s always been lending available where there’s gambling. And that takes place on exchanges. In 2017, there were good days to be had during the altcoin boom. Lending on poloniex and bitfinex gave interest based on 2–60 day loans that could be closed anytime by the customer. You got paid 85% of the rate on poloniex and I don’t recall the bitfinex model but I think it was the same. The rate was market book based. So if you lowered your rates, you got consistent loans and if you had high rates, you made a killing during high volume trading sessions. The average rate I earned during that year was between 30% to 40%, but the actual rate went anywhere between 8% and 500%. This is not counting the final days before UASF, when lending reached 5% per day for a couple of days. As far as I know, poloniex and bitfinex still offer their lending platforms, just no longer to US customers.

Bitmex, the exchange that profits off liquidating their own customers by playing the orderbook against them, also offers interest daily on their swaps. By not using any leverage at all, you should be able to earn interest this way without any risk. But I have not taken a good enough look at their interest calculations to see if there are other risks here. So I don’t know.

Industry

The lending industry is really taking off in 2019. There are lots of exciting defi projects on the horizon which may make for very interesting times to come. Thankfully, it has been pretty easy to avoid the bitconnects of the industry so far. If it looks too good to be true, it is. I think 8–12% per year from an institution is about the most people can hope for under normal market circumstances. If someone promises more, really consider why they would be sharing such a secret formula to success. But that’s about all I have to say on this. If you can’t vet this stuff on your own, then you’re bound to lose your money and I don’t want to be part of that conversation.

Here are some links to interesting reading I came across during my research if you’d like to read more on the subject:

Graychain: The Crypto Credit Report

Tony Cai: Centralized Crypto Backed Loans: A Ticking Time Bomb?

Tony Cai: Decentralized Crypto Lending — The Wolf in Sheep’s Clothing

Taxes

It’s time to talk about taxes. I pay my taxes. I pay my taxes because my neighbors pay their taxes. My neighbors across the road. The road that I didn’t build but I enjoy driving on everyday to go to work, in the Bay Area, in California. It’s a safe city, protected by law enforcement and it’s a dangerous city with crime and LaW eNFoRCeMeNT. It’s amazing, and it has problems, just like everywhere else in the world. You can tell me all about how the gubmint are robbing us at gunpoint, but I’m still going to pay my taxes no matter how many times you call me a sheep. Are you interested in my tax spreadsheets or not?

So, google spreadsheets has a very handy function called GOOGLEFINANCE.

Current price of bitcoin: GOOGLEFINANCE(“BTCUSD”)

Let’s say A8 says “ETHUSD” and B8 has a date, 2019/09/05, then:

(GOOGLEFINANCE(A8,”close”,B8) returns a 2x2 box with the date and price. We just want the price alone: INDEX(GOOGLEFINANCE(A8,”close”,B8),2,2)

Here’s a small snippet of a much larger spreadsheet I use to keep track of my bitcoin income and gains:

https://docs.google.com/spreadsheets/d/1SjL_NdZpw_lPYhmpjUUExCxy_Xp-jR-XC6m7VnXh2b4/

You can see that it has the basics. Numbers were fudged a bit. Once a month, I take part of my work salary and buy bitcoin with it. Because this is not a taxable event, I also put the same amount as that day’s price into the paid column (as that is already taxed income). For interest, it tracks income owed at the date that you receive it. If you have the crypto.com card and you get cashback in crypto, it’s not a taxable event in the US because cashback is counted as a discount but the gains on it are. You should track it in the spreadsheet in the same way I tracked the work income. It’s counted as you buying BTC and it already being paid for income wise but owe potential gains for. The sheet tracks untaxed gains with the current price. But if you sell it, it calculates your gains from the sell date and tells you how many gains you now owe that are taxable. As you pay your taxes, just note how much you paid so you can keep track of this through the years. I have 10 years on my sheet. The gains that are untaxed add up quite quickly and you should really keep track of every bit of it. And if you want the IRS to buy your bullshit that you can do LIFO because you have a good record of every bitcoin earned, then you better have a good record of every bitcoin earned.

Bye

I hope I was able to help someone by answering their questions. If you’d like to contact me for any other questions, send me a message on Reddit, u/7uringbtc. But no bro, I don’t want to earn 10% roi daily on your bitcoin cloud mining.

Updates and Questions

If people send me questions that are good FAQ material, I will post here, as well as add in anything else I can think of.

Someone pointed out it was bullshit of me to rant about other people’s referral spam but to post mine, so I’ve removed mentions of my referrals above. Fair enough. Here are my referral codes way at the bottom here, without links, so if you want to use me as a referral because you enjoyed the article, you’ll have to really work for it:

blockfi: d79954e0

celsius: 15226008b2

monaco: b2n5nhkntg

nexo: 5d38d77f53d2332a7a4ba44a

Thank you for those of you who went out of your way to use my referral codes. But more importantly, thank you for taking the time to read. :)