Updated August 23rd, 2020

For the last couple of years, I’ve been searching for ways to increase my passive income — stacking sats with a hands off approach. That’s when I found out about Celsius and more recently BlockFi.

If you’re interested in creating a BlockFi Interest Account follow my Step-by-Step Guide HERE or simply create your own account using my link HERE and receive $10 BTC bonus (after a $100+ deposit, maintained for 30+ days).

Like many of you, I’ve traditionally held my cryptocurrencies secured in various wallets and on exchanges to execute trades (sometimes for longer than is recommended, I’ll admit). But the idea of taking my idling crypto and putting it to work has always been an attractive idea and what inspired me to do a deep dive into available platforms that might meet my needs.

All these platforms basically bring two traditional finance services to the crypto space — interest accounts and loans — disrupting the financial sector by enabling users to earn interest on their digital assets as well as borrow funds by using their cryptocurrency holdings as collateral.

Our main focus will be on lending in this article. Some people are curious about how BlockFi offers such attractive lending rates (currently at 6% for BTC, 4.5% for ETH, 5% for LTC & 8.6% for GUSD/USDC/PAX) — the short version is, they lend coins to hedge funds, exchanges, institutional traders, and by issuing asset-backed loans. Read more about how their business works HERE.

BlockFi has been making big improvements and adding new features in the past few months. They’ve also made big announcements. I’ll do my best to keep this article updated with new information as things progress, but feel free to reach out if you ever have questions or further inquiries. Also, if you prefer to double check any of the information in this article, feel free to visit BlockFi to see their most current offerings.

Wrapping up 2019, the founders of BlockFi put out a letter to address new up and coming products and features in 2020. There’s some exciting announcements including USDC & LTC support, Fiat On & Off Ramps, Mobile App (all currently available to users), and a Credit Card with BTC Rewards (still to come).

So without further adieu, let’s take a closer look at some of BlockFi’s Pros and Cons!

What I Like about BlockFi (Pros):

Zero-Fee Trading — BlockFi now offers a feature allowing users to seamlessly trade between BTC, ETH, LTC, USDC, PAX, and GUSD on the platform at zero cost. A great addition for those interested in converting their BlockFi interest into BTC to stack sats even more efficiently. (Read More)

— BlockFi now offers a feature allowing users to seamlessly trade between BTC, ETH, LTC, USDC, PAX, and GUSD on the platform at zero cost. A great addition for those interested in converting their BlockFi interest into BTC to stack sats even more efficiently. (Read More) Compounding Interest — BlockFi was one of the first lending platforms to provide monthly compounding interest before others caught on (What is Compound Interest?). That is, the interest you earn will also earn interest the following month. This means that if you earn interest in Month 1, your next interest payment will be calculated off of your new total balance (old balance + interest payment from Month 1). This is the best part of BlockFi’s Interest Accounts and a great way to build wealth exponentially over time.

No Early Withdrawal Penalty — They announced a while back users would no longer be subject to early withdrawal penalties which means you’ll be free to withdraw your funds at anytime of the month without taking a hit.

— They announced a while back users would no longer be subject to early withdrawal penalties which means you’ll be free to withdraw your funds at anytime of the month without taking a hit. Two Free Withdrawals per Month — Having the ability to withdraw funds without their excessive fees is a welcomed feature — even if that’s only two per month. This will at least give those who have been looking to test out BlockFi’s product the opportunity to deposit a small amount of BTC to test it out for themselves. I hope they soon offer completely free withdrawals (maybe wishful thinking on my part).

— Having the ability to withdraw funds without their excessive fees is a welcomed feature — even if that’s only two per month. This will at least give those who have been looking to test out BlockFi’s product the opportunity to deposit a small amount of BTC to test it out for themselves. I hope they soon offer completely free withdrawals (maybe wishful thinking on my part). No Minimum Balance to Earn Interest — The BlockFi Interest Accounts no longer require a minimum balance to be eligible to earn interest.

— The BlockFi Interest Accounts no longer require a minimum balance to be eligible to earn interest. No ETH/LTC/Stablecoin Cap — For ETH, LTC, & Stablecoins, BlockFi accounts have no maximum limits so your entire balance will earn 4.5%/8.6% whether that’s 1 ETH or 10000 100k USD.

USDC, LTC, PAX Support — They’ve added USDC, PAX, and LTC support in 2020, allowing users to earn interest on additional assets.

— They’ve added USDC, PAX, and LTC support in 2020, allowing users to earn interest on additional assets. More Consistent Earnings? — Their rates continue to be more consistent than other platforms (rates haven’t changed for a few months now in 2020), that being said, they have continued to exercise their right (as indicated in their ToS) to change their rates on a regular basis. They don’t change their rates weekly like Celsius, it’s more like every 2 months, but these changes mean many depositors may have to move their coins to another platform or back to their wallets if they deem new rates undesirable. I still prefer BlockFi compared to dealing with weekly fluctuating APY (Celsius) as it still gives you more room to breathe.

— Their rates continue to be more consistent than other platforms (rates haven’t changed for a few months now in 2020), that being said, they have continued to exercise their right (as indicated in their ToS) to change their rates on a regular basis. They don’t change their rates weekly like Celsius, it’s more like every 2 months, but these changes mean many depositors may have to move their coins to another platform or back to their wallets if they deem new rates undesirable. I still prefer BlockFi compared to dealing with weekly fluctuating APY (Celsius) as it still gives you more room to breathe. Earn In-Kind or Payment Flex— In-kind means you receive interest in the original asset invested, so you earn BTC if lending BTC and ETH if lending ETH. They now offer the ability to earn interest in the asset of choice (BTC, ETH, LTC, GUSD, USDC, or PAX) with Payment Flex. This means if you want to invest GUSD and earn your monthly interest in BTC, that is now possible. A pretty nifty feature, but keep in mind they charge up to 1.5% for this service!

Monthly Statements — They make record-keeping painless with monthly statements similar to what you would receive from a bank. It tells you how much you hold, how much you’ve earned, and how much you’re projected to make the following month. This used to be sent out in email form but now they’re available as pdf downloads in your account.

— They make record-keeping painless with monthly statements similar to what you would receive from a bank. It tells you how much you hold, how much you’ve earned, and how much you’re projected to make the following month. This used to be sent out in email form but now they’re available as pdf downloads in your account. No Utility Tokens Required — Unlike the competition, BlockFi does not require utility tokens to take part in their service. Instead, all users are treated equally. This means you are not forced to trade/hold platform utility tokens which are often used by competing platforms to incentivize higher interest rates.

— Unlike the competition, BlockFi does not require utility tokens to take part in their service. Instead, all users are treated equally. This means you are not forced to trade/hold platform utility tokens which are often used by competing platforms to incentivize higher interest rates. Gemini Custodian Services — Your assets are securely stored at a unique wallet address generated by Gemini, a New York trust company licensed by the New York State Department of Financial Services. Gemini is a fiduciary under §100 of the New York Banking Law and held to specific capital reserve requirements and banking compliance standards. Gemini also has digital asset insurance coverage and is SOC 2 Type 1 security compliant on its exchange and custodian platform.

— Your assets are securely stored at a unique wallet address generated by Gemini, a New York trust company licensed by the New York State Department of Financial Services. Gemini is a fiduciary under §100 of the New York Banking Law and held to specific capital reserve requirements and banking compliance standards. Gemini also has and is SOC 2 Type 1 security compliant on its exchange and custodian platform. Web & Mobile — They now offer mobile access in addition to web-access. BlockFi apps are available in both iOS and Android.

Responsive Support — BlockFi support responds to user inquiries more promptly compared to my experience with Celsius and other platforms. Not to mention the fact that they have a physical phone number where you can speak to a live person — something no other platform offers. The number for those curious is 646–779–9688 and can be found at the bottom of their website along with their address and lenders licensing details.

— BlockFi support responds to user inquiries more promptly compared to my experience with Celsius and other platforms. Not to mention the fact that they have a physical phone number where you can speak to a live person — something no other platform offers. The number for those curious is 646–779–9688 and can be found at the bottom of their website along with their address and lenders licensing details. Community/Outreach —I had previously stated their community outreach as being lacking, but they have been actively improving their exposure to the online community since I first wrote this article. They hold interviews with BlockFi staff on their youtube page and are more actively promoting their services on social media, managing to build a decent online engagement on Twitter that seems to be growing steadily.

Things to Consider (Cons):

Monthly Payouts — I prefer more frequent withdrawals especially now that many competitors offer daily or weekly payouts. A month feels like a very long time to wait for your interest distributions — comparatively. That being said, you will receive your interest on the 1st business day of every month, so don’t freak out if you don’t receive your interest if the 1st lands on a national holiday or weekend.

High Fees — Beyond the single free withdrawal per month every user receives, something to keep in mind is that BlockFi’s withdrawal fees are quite high at 0.0025 BTC and 0.0015 ETH, respectively. This is supposedly set by the custodian, Gemini, and these fees are passed on to them. I hope to see unlimited fee-less withdrawals in the near future. Stablecoins charge 25 cents per withdrawal.

Adjustable Interest Rates —As mentioned above, you will need to keep in mind, BlockFi has the ability to adjust their rates freely at their own discretion (and they do). They had initially promised 6.2% APY lending rates on all their digital assets; however, shortly thereafter lowered the ETH interest rates to 3.3% APY due to a stagnant ETH lending market. But keep in mind this can go both ways as they raised the stablecoin rates to 8.6%.

BTC Lower Tier Interest Rate— There is no longer a minimum balance required, so balances up to 2.5 BTC (lowered from the most recent 5 BTC cap) earn 6%. All balances over this limit will earn a lower rate of 3.2% interest. To clarify, if you had 3.5 BTC in your BIA account, the first 2.5 BTC would earn interest at 6% and the remaining 1 BTC will earn interest at 3.2%.

There is no longer a minimum balance required, so balances up to 2.5 BTC (lowered from the most recent 5 BTC cap) earn 6%. All balances over this limit will earn a lower rate of 3.2% interest. To clarify, if you had 3.5 BTC in your BIA account, the first 2.5 BTC would earn interest at 6% and the remaining 1 BTC will earn interest at 3.2%. Limited Asset Options — They only offer BIAs for BTC, ETH, LTC, PAX, and GUSD, USDC.

— They only offer BIAs for BTC, ETH, LTC, PAX, and GUSD, USDC. Lower Value Withdrawals — Any withdrawals under 0.003 BTC and 0.056 ETH could take up to 30 days to process.

— Any withdrawals under 0.003 BTC and 0.056 ETH could take up to 30 days to process. Withdrawal Times — Your withdrawal request has a 1 business day hold (for security purposes) so expect withdrawals to be processed the following day — but keep in mind they’re hours of operation are standard business days, meaning pushing through transactions on the weekend may not go as planned. If you request a withdrawal on Friday you’ll receive your funds on Monday, so plan ahead! BlockFi also reserves up to 7 days to process a client fund withdrawal, subject to additional review from their compliance team, but as far as I’m aware they’ve never exercised this right yet.

— Your withdrawal request has a 1 business day hold (for security purposes) so expect withdrawals to be processed the following day — but keep in mind they’re hours of operation are standard business days, meaning pushing through transactions on the weekend may not go as planned. If you request a withdrawal on Friday you’ll receive your funds on Monday, so plan ahead! BlockFi also reserves up to 7 days to process a client fund withdrawal, subject to additional review from their compliance team, but as far as I’m aware they’ve never exercised this right yet. Must Pass KYC to Earn Interest — You can create an account, but in order to deposit funds and earn interest you must submit all required information.

— You can create an account, but in order to deposit funds and earn interest you must submit all required information. Security — As the age-old adage goes, “Not Your Keys, Not Your Coins.” Always make sure to only invest what you’re comfortable with as nothing beats the assurance and security of controlling your own keys.

— As the age-old adage goes, “Not Your Keys, Not Your Coins.” Always make sure to only invest what you’re comfortable with as nothing beats the assurance and security of controlling your own keys. Data Breach — BlockFi has suffered a data breach of its marketing database on May 14th 2020. Details of the incident are still not completely clear, but in response, they have hired Adam Healy as their Chief Security Officer who has laid out a comprehensive roadmap to revamp their security protocols. He has held roles within the U.S. Intelligence Community and Department of Defense, Microsoft, Palantir Technologies, and in his previous role as CISO at Bakkt, he oversaw security operations for safeguarding institutional clients’ digital assets. This is a very encouraging sign they are taking their security seriously. Adam Healy himself also made a statement on the matter that’s worth a read.

Can I trust BlockFi?

When people ask why I trust a company like BlockFi, I think my general response is, have you ever trusted any crypto exchange in the past? It really is no different. This being an unregulated space, there really are no assurances of any company acting in the users' best interest. Exchanges have been caught running fractional reserves and taking part in illicit activities in the past. So if you are willing to take on counterparty risk by keeping your crypto parked on an exchange (earning no interest), why wouldn’t you place your trust in a company like BlockFi that pays you interest for lending them your idling funds; a company that has large institutional backing from reputable companies like Coinbase, Consensys, Fidelity, Morgan Creek, and Mike Novogratz’s Galaxy Digital; uses trusted and licensed custodial services like Gemini; who also is fully regulated with lending licenses and operates above board under Article 9 of the Uniform Commercial Code.

Data Breach

I’ll be the first to admit I was not pleased to hear about the data breach. Of course, I was notified my information was compromised as were many others. They sent out an incident report to users detailing what had occurred. It was their marketing database holding customer information. Thankfully, no funds were lost. But our data is something we take for granted that can have wide-reaching impacts on our livelihood if we’re not careful.

To put things into perspective, there were two other institutions I do business with that suffered the same fate in May — these incidents are becoming more and more common and companies need to do a better job adapting to the times and staying ahead of the curve with the new wave of hackers and phishing scams scouring for weaknesses everywhere.

At the end of the day, actions speak louder than words, and in BlockFi’s case, there’s no denying they took this incident very seriously. They promptly hired Adam Healy as their Chief Security Officer who has laid out a comprehensive roadmap to revamp their security protocols. He has held roles within the U.S. Intelligence Community and Department of Defense, Microsoft, Palantir Technologies, and in his previous role as CISO at Bakkt, he oversaw security operations for safeguarding institutional clients’ digital assets.

If anything, this should encourage new users to choose BlockFi as I believe this is evidence they are more secure than they have ever been.

What about Rehypothecation?

Some critics in the past have mentioned the legalese in their ToS allowing “Rehypothecation” of user funds. BlockFi has responded to these concerns with this blog entry. However, for anyone that has read ToS and User Agreements for similar lending platforms, the language used in these contracts is strikingly similar and often includes “Rehypothecate/Rehypothecation” — yes, this includes the crypto community’s golden child of lending Celsius Network’s ToS. And if you’re uncomfortable with one, you will more than likely be uncomfortable with all of them.

Again, this is not to say there are no risks because there always are. Everyone should perform their own risk management and decide what they are comfortable with.

In Conclusion

BlockFi has its share of caveats, but the most important thing to keep in mind is the trust that they have built with users like myself. At the end of the day, you control where you deposit your valued coins, and if you’re keen on earning interest on your crypto, why not do it with a company that has survived the turbulent March 2020 price dump who has been heavily praised by borrowers on their platform for responsive support and helping avoid liquidation? When times are tough, a company’ s true nature usually bubbles to the surface and in BlockFi’s case, they’re doing a top-notch job with a client-first mentality.

For those curious to hear more about BlockFi, I highly suggest checking out the podcast with BlockFi CEO Zac Prince linked below. I found it very informative hearing what the company is aiming to achieve and how they plan on making waves in the crypto space while keeping our funds safe.

You’ll have to decide whether BlockFi is the right fit for you! There are plenty of lending platforms out there with their own pros and cons — as always, I suggest doing your own due diligence and make sure you stay informed!

If you’re interested in creating a BlockFi Interest Account follow my Step-by-Step Guide.

If you found this article helpful, please consider using this LINK and code 4f72f3d2 on signup. You’ll receive $10 in BTC when you deposit $100+ and maintain balance for 30 days.

For further inquiries, you can always reach BlockFi support at support@blockfi.com

Happy earnings!

Visit BlockFi Here