Overview
BlockFi is a financial platform launched in 2016 that was originally designed for earning opportunities with Bitcoin and Ethereum. Now it offers a growing list of trading services as well. The platform is well known in the crypto community as a reliable company for earning dividends on Bitcoin holdings that are custodied through the Gemini Exchange.
While the services are limited at this time, the progression they have made in the last few years has resulted in optimized financial services such as:
- Interest earning crypto accounts
- Zero fee trading
- USD loans collateralized with crypto
While many crypto exchanges began by serving global audiences, BlockFi started in the US only and now they state that worldwide services are ‘at your own risk’. BlockFi often splits the middle when it comes to crypto regulations or trends. For instance, while some exchanges (i.e. Kraken and Coinbase) charge for every withdrawal to an external wallet and others (like Gemini) allow for multiple free withdrawals per month, BlockFi takes the middle road with 1 free withdrawal per month. It’s one of the ways in which BlockFi differentiates itself from exchanges. They offer investment services that are more familiar to traditional investors than DeFi applications and which are more conservative in crypto nature.
While their rates may fluctuate, BlockFi has steadily offered 6% APY on Bitcoin and 8%+ on ETH and several stablecoins. They provide the investor with a crypto asset trading experience that is free of “shitcoins” focusing on BTC, ETH and stablecoins backed by other “stabler” assets like USD and gold.
The business model is spread based; BlockFi borrows capital (from users who earn interest rates) and lends it out at a higher rate (USD loans for borrowers against their BTC/ETH/GUSD assets). BlockFi’s target market is primarily institutional counterparties including traders, investment funds, OTC market makers, and other crypto related businesses.
- Available to: 50 US States and worldwide (except sanctioned or watch-listed countries)
- Suitable for: Intermediate to advanced
- Trades: 6+ cryptocurrencies including ETH, BTC, GUSD, LTC, PAX, PAXG, USDC
- Fiat currencies available: USD only
- Fees: Zero trading fees
- Exchange token: No
- Main features: Crypto interest accounts, trading, crypto-backed loans in USD
Core Features
The interest account is where it all started with BlockFi. They make it extremely easy to park your crypto assets and let them earn interest, even as crypto prices ebb and flow. There is no minimum balance to start earning interest.
It takes three easy steps to get an interest account going with BTC, LTC, ETH, and multiple stablecoins:
- Set up your BlockFi account
- Deposit crypto
- Start receiving monthly interest payouts
The current digital asset options you can earn interest with are constantly increasing, along with approximate APYs (which may change). BlockFi has scaled their product immensely over the past 6 months and the boom in early 2021 has been a catalyst for growth in terms of interest bearing coin “deposit” options.
Trading
BlockFi at this time offers a very basic, easy-to-use, zero fee trading experience with minimal options and no order book. It’s more of a buy/sell feature for the digital assets it utilizes.
Crypto Backed Loans
BlockFi will loan you USD when you hold certain assets as collateral. There’s a simple loan calculator that provides your rate depending on loan-to-value (LTV) and what your monthly USD payment will be. The process is far simpler than a bank loan, by leagues.
The LTV varies between 20% and 50% and the lower the LTV, the lower the rate and the monthly payment:
20% LTV = 4.50%
35% LTV = 7.90%
50% LTV = 9.75%
- You can get loans in USD but also three stablecoins: PAX, GUSD, and USDC.
- Your name, email, a bank account number, address and reason for loan are required for the loan process, but that is all.
Resources
BlockFi has a very thorough Resources area that is featured on the homepage with a drop down listing the types of resources:
- Categories such as “business loans” and “how to earn interest with crypto”. For each category they list relevant articles that link out.
- A Help Center with materials explaining BlockFi products.
- Well developed and organized FAQ.
- Quick links to rates, blog and BlockFi live, which features livestreams of the BlockFi Founder/CEO, Zac Prince, as he meets with industry experts.
Withdrawals
- BlockFi’s withdrawal minimums are: 0.003 BTC and 0.056 ETH. Withdrawals for balances smaller than these amounts may take up to 30 days to process.
- Users are allowed one free crypto withdrawal per calendar month and one free stablecoin withdrawal per month. External wallet transfers are allowed.
- BlockFi offers an “allowlisting” feature that allows users to set specific, allowable crypto addresses for withdrawals on BlockFi. All addresses other than those the user sets up will be invalid if this feature is enabled. Additionally, allowlisting will cause each new address to be disabled for the first seven days.
Funding Options
- Fiat and BTC deposits are available.
- For buying and selling, BTC, ETH, LTC, and PAXG are available.
- Cryptocurrency deposits may be made with ETH, BTC, GUSD, LTC, PAX, PAXG, and USDC.
- Credit & debit cards.
There is no minimum deposit.
Verification
BlockFi is registered as a money service business (MSB) and is compliant with the Bank Secrecy Act and related AML/KYC procedures.
What are AML and KYC?
As part of a range of Anti Money Laundering regulations mandated nationally and internationally, KYC involves the requirement of companies to verify each customer’s identity during the onboarding process. Verification is achieved by submitted identification, proof of ownership, and personal information such as name, address, email address, phone number and tax I.D. number.
To verify your BlockFi account, you’ll need to provide:
- Name, DOB, Address & Phone Number
- Tax ID# if in the US
- Identify verification (passport or license)
User Experience / Navigation
BlockFi’s user interface is as sleek as Gemini, yet as easy to navigate as Coinbase. You are prompted at each step with clear directives, relevant information, and disclosures.
Customer Support
BlockFi has a very responsive Help Center, well developed FAQs and tutorials for each of its products, and an easy way to submit a ticket.
The BlockFi app averaged 3.7 stare for 300+ reviews in the App Store, and 4.5 stars for 800+ reviews in Google Play. Most of the negative reviews centered around problems with general functionalities, such as:
- Login and authentication issues
- Difficulty connecting to banks
- Lack of consistency in working properly
Tax Forms
BlockFi issues 1099 tax forms to US citizens who may trigger specific taxable transactions. Additionally, they may provide more data for tax purposes, such as real-time tax positions, unrealized gain/loss positions, and forms 8949.
Institutional Services
For institutional services, BlockFi offers customizable lending and borrowing of crypto, USD and stablecoins, as well as financing for crypto companies such as market makers or investment funds.
Security
While BlockFi is not FDIC insured, they are backed by Gemini Exchange, which is a New York trust company and a licensed depository trust. To secure their systems and user data, they employ:
- Firewalls
- Intrusion prevention
- Encryption
- Authentication systems
- Access control features such as the “allowlisting”, which limits the wallets funds can be withdrawn to.
BlockFi’s custody provider is Gemini, which keeps 95% of digital assets in cold storage. The remaining 5% is placed on online (“hot”) wallets but are insured by AON Insurance Co.
Reliability
BlockFi is a well funded platform, having recently raised $50 million in Series C funding (led by Morgan Creek Digital). Before that, they raised $18.3 million in a Series A funding (backed by Peter Thiel, Winklevoss Capital, etc.). They’ve also been providing crypto interest bearing accounts for over 5 years and have the Gemini’s custody service securing their crypto assets. Additionally, their use of stablecoins tends to help them optimize user returns while neutralizing volatility.
Transparency
BlockFi is very upfront about fee structures and much like Gemini, they are proactive about transparency. They even openly list the cookies they use, sending you to a link to disable them if you so choose.
However, BlockFi, does not list countries that are eligible to use services. Instead it provides a blanket statement, saying it’s open worldwide to countries where it’s legal.
Hacks
BlockFi did experience a SIM swap attack in May of 2020, where hackers compromised their platform for about an hour. The scammers did gain unauthorized access to user data, including names, email addresses, dates of birth, addresses and transaction histories. According to BlockFi’s incident report, they were able to track the hacker’s activities and confirm that no user funds, passwords, tax id numbers, or bank or id cards were exposed.
Summary
BlockFi provides a bridge for traditional traders and investors to the world of crypto, with a strong commitment to optimizing crypto markets through a mix of stablecoins and the longest tested coins – Bitcoin, Ethereum and Litecoin. They make it easy for anyone to start earning a significantly higher interest rate than any bank offers today, and a loan process that is a picnic in the park compared with traditional lending procedures.
Backed by Gemini Exchange and regulated out of New York City (which has very firm regulations over crypto companies), BlockFi offers a conservative way to earn interest, lend, or borrow with potentially very high returns.
What BlockFi Doesn't Offer
- Dollar cost averaging – No recurring buy feature is available.
- Self custody – All assets are custodies through Gemini Exchange.
- Automated trading, futures, chart features – Not available; trading features are minimal.
- Staking – BlockFi is not a DeFi staking protocol and does not have its own token.