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In this post we are going to cover:

  • BlockFi's safety and Security Measures
  • Blockfi's products and services
  • How BlockFi Makes money
  • And how to get a loan or open an interest account

Plus more... Read on to learn everything you need to know about this growing platform.

About BlockFi

BlockFi is a financial management platform that focuses on cryptocurrency assets. It offers a selection of bank-like services for your cryptocurrency, including interest accounts and crypto-backed loans, as well as bitcoin lending services for large institutions.

Blockfi bitcoin backed loan

BlockFi's home page

The company has gained a lot of traction in recent years, and this review will help you understand exactly how BlockFi works and how it can be beneficial for you.

BlockFi Pros and Cons

Pros

  • Extremely competitive interest rates
  • Get a loan with no credit check
  • Loans clear in 24 hours
  • Crypto to crypto trades easy to execute
  • Well funded and regulated platform unlikely to run away with your money

Cons

  • One data breach occured in 2020 - no stolen coins
  • Gap risk in interest accounts
  • Custodial

Pros

Cons

  • Extremely competitive interest rates
  • One data breach occured in 2020 - no stolen coins
  • Get a loan with no credit check
  • Gap risk in interest accounts
  • Loans clear in 24 hours
  • Custodial
  • Crypto to crypto trades easy to execute
  • Well funded and regulated platform unlikely to run away with your money


What Is BlockFi?

BlockFi is a privately held lending platform with a focus on cryptocurrency that was founded in 2017. Its founder and CEO, Zac Prince, has years of leadership experience at multiple tech companies, including leading the business development teams at Orchard Platform and Zibby.

zac prince interview

Zac Prince on Squawk on the Street

Flori Marquez, co-founder and VP of Operations, also has years of experience managing alternative lending products. Among others, she helped scale a $125MM portfolio for Bond Street.

zac prince interview

Flori Marquez at the South American Bitcoin Conference

The company was created to emulate banks in the cryptocurrency area while also eyeing savings accounts and crypto credit cards. Today, BlockFi offers interest accounts that allow clients to earn interest on their crypto and loans backed by a client’s cryptocurrency.

BlockFi operates with multiple cryptocurrencies, but mainly focuses on Bitcoin, Litecoin, and Ethereum. Other assets include USD-based stable coins such as GUSD or USDC.

What Are BlockFi’s Main Services?

Interest accounts and crypto loans are the two main services currently available. The interest accounts allow users to earn interest on cryptocurrency.

Blockfi bitcoin backed loan

At the same time, the loans are suitable for those who want a USD loan backed by their currency, so they don’t need to sell their currency in order to be able to obtain a traditional loan.

CRYPTO LOANS & INTEREST ACCOUNTS

BlockFi logo

BlockFi

  • Crypto interest accounts earn up to 8.6%
  • Has raised over $108 Million in VC funding
  • Supports Bitcoin, Litecoin, and Ethereum, as well as GUSD and Tether
Ledn logo

Ledn

  • Great for Canadian Bitcoin hodlers looking for CAD loans
  • Crypto interest accounts earn up to 7.5%
  • Coins in custody of Insured Bitgo accounts
Unchained Capital Logo

Unchained Capital

  • Get Access to Loan funds in less than 48 hours
  • Easy to use, intuitive platform
  • Bitcoin stored in Multi-sig wallets


Besides these two main products, BlockFi also offer trading facilities, so users can manage their crypto assets and optimize their portfolio. Unlike many companies in the cryptocurrency sector, BlockFi is regulated and subject to the Bank Secrecy Act.

Blockfi bitcoin backed loan

Let’s have a closer look at BlockFi’s offerings.

BlockFi Bitcoin Interest Accounts

Blockfi bitcoin backed loan

A BlockFi Interest Account works just like a regular savings account you may have with your bank. The account allows users to earn interest in several supported currencies. This is a long-overdue product on the cryptocurrency market, as it allows you to earn up to 8% APY interest instead of letting your cryptocurrency idle.

Blockfi APY

BlockFi's annual interest rates on right column

The interest is paid out at the end of the month, and you can choose from multiple tiers if you’re choosing to hold your Bitcoin in the account. You get 6% for the first 5 BTC, and 3.2% APY for your balance over 5. All rates mentioned in this review are subject to change.

BlockFi's interest accounts compares to others in the space

The good news about the BlockFi Interest Account is that you can earn more interest than in a bank account. In many countries, the interest you could earn from a savings account doesn’t go over 1.5%, and it’s often less than that.

As such, you can buy a stable coin from an exchange and deposit it into a BlockFi Interest Account to earn more interest than your bank would offer you.

Nevertheless, you should always keep in mind that BlockFi has the following statement clearly mentioned on their website:

BlockFi Logo

You should not view the BlockFi Interest Account as a savings account or brokerage account with FDIC or SIPC insurance.


BlockFi Lending

As such, depositing cryptocurrency in this kind of account is done at your own risk.

Withdrawal Limits

Withdrawal limits are another thing to keep in mind, because as in the case of many other custodial institutions, there are limits in place when it comes to how much you can withdraw at a time.

As of 2020, you can withdraw 100 BTC every week, which generally should be more than enough for the vast majority of users. However, power users may want to take a look at the withdrawal limits and fees for each currency.

Blockfi APY

BlockFi interest accounts are available to clients worldwide with a couple of exceptions listed on their website. The interest account is available for clients in most states in the USA, with the exception of New York.

BlockFi Crypto-Backed Loans

Blockfi bitcoin backed loan

As you might gather from the name, BlockFi crypto-backed loans allow you to take out a loan in USD, GUSD or USDC by using your cryptocurrency as collateral. Because the loan to value is at 50%, you can take up a loan of up to 50% of the value of the crypto assets you deposit.

It takes a couple of minutes to apply for such a loan, and if your application is successful, you can expect to have the money in your bank account in under 90 minutes.

There are multiple reasons for which you may want to take a crypto-backed loan, with examples including buying a home, diversifying investments, paying off debt, or funding a business.

Buying property is one of the main reasons people decide to take up a crypto-backed loan, as traditional lenders don’t accept payments for a home in crypto.

Additionally, loan rates are much better than traditional lenders since BlockFi’s risk is so much lower

blockfi loan comparison

BlockFi's lending rates are much better than traditional lenders

Finally, the last reason for using this technique is the need to borrow funds without liquidating assets. Moreover, you can also get some tax benefits, because the IRS treats cryptocurrency as property and taking out a loan against your crypto assets is not a taxable event.

Crypto to Crypto Trades

BlockFi allows users to swap any of the current assets they have on deposit for other assets supported by the platform. There is a small fee involved when trading between assets. You can do crypto to crypto trades between any of the following assets:

  • Bitcoin (BTC)
  • Litecoin (LTC)
  • Coinbase dollars (USDC)
  • Ethereum (ETH)
  • Paxos (PAX)
  • Gemini dollars (GUSD)
blockfi crypto to crypto trades

Blockfi's crypto trading screen

Sending Cash via Wire

The ability to send cash via wire has been added in March 2020, and it’s the first service offered by the platform for those who have never purchased cryptocurrency before. Users can send USD wires to the BlockFi platform to purchase stable coins and earn interest of up to 8.6%.

All wires are immediately exchanged for GUSD, and the feature is available in selected US states and internationally at the moment, with the view of being made available globally in the near future. You need to have a BlockFi Interest Account so all your stablecoin purchases can be deposited there and you can start earning interest right away.

blockfi crypto to crypto trades

Blockfi's recently added wire transfer as an account funding method

While there may be fees charged by the banking institution you are using to send a wire transfer, BlockFi doesn’t charge users for the amount they receive, which will all be reflected in your account. There is a $10 minimum amount you can wire, and the process of adding the funds to your account takes one to three business days.

Is BlockFi a Safe Platform?

BlockFi deposits client assets with their primary custodian, Gemini, a trust company licensed by the New York State Department of Financial Services. Gemini has digital asset insurance coverage and is held to banking compliance standards and specific capital reserve requirements.

zac prince interview

BlockFi holds all customers funds at Gemini Custody

As such, BlockFi is as secure as Gemini is. There are, of course, risks associated with platforms of this kind, and perhaps the biggest one is the counterparty risk (also known as default risk).

This refers to the risk anyone who lends money to anyone gets exposed to. Because it basically works like a bank, BlockFi is no different, so you’re putting yourself at default risk when you use its services.

The platform is very transparent about what would happen in the event of a doomsday scenario. The team mentioned that in the event the platform gets hacked, the assets are kept in cold storage by Gemini, BlockFi’s primary custodian, which is insured by Aon.

In the event user account is compromised, the protocol specified that the account gets frozen for one week, until the team is able to conduct a videoconference with the account holder in order to be able to confirm their identity.

If the identity is confirmed, the user will gain access to their account and their email address and password will be changed.

Everyone defaulting on their loans is a very unlikely scenario with any financial institution, and BlockFi is certain that this is not something that could happen simply because they have a thorough risk management and credit analysis process in place.

blockfi loan payment reminder

BlockFi app loan payment due notification

Because the platform only lends to institutional borrowers or individuals who are willing to post collateral, everyone defaulting on their loans remains a very unlikely scenario.

All BlockFi needs to do to manage the risk is to margin call their borrowers if the market moves against them. This is why BlockFi doesn’t run a credit check against borrowers - they have already posted at least double the value of the loan in collateral.

CRYPTO LOANS & INTEREST ACCOUNTS

BlockFi logo

BlockFi

  • Crypto interest accounts earn up to 8.6%
  • Has raised over $108 Million in VC funding
  • Supports Bitcoin, Litecoin, and Ethereum, as well as GUSD and Tether
Ledn logo

Ledn

  • Great for Canadian Bitcoin hodlers looking for CAD loans
  • Crypto interest accounts earn up to 7.5%
  • Coins in custody of Insured Bitgo accounts
Unchained Capital Logo

Unchained Capital

  • Get Access to Loan funds in less than 48 hours
  • Easy to use, intuitive platform
  • Bitcoin stored in Multi-sig wallets


Does BlockFi Offer Two-Factor Authentication?

The platform offers two-factor authentication for all online accounts, following the industry standard for security. By enabling two-factor authentication, you can add a second layer of protection to the account, and you will be asked to input a verification code generated by an app every time you log into your account.


The LastPass authenticator is our favorite app based U2F option

BlockFi recommends that all users enable two-factor authentication on their accounts and takes no responsibility for unauthorized users that might be able to access the account if you failed to have two-factor authentication enabled.

We reacdhed out to BlockFi and asked about hardware authentication via a device like Yubikey. They told us they were working on it, so hopefully we see it soon.

How Does Block-Fi Make Money?

blockfi loan payment reminder

The platform makes money by lending the crypto assets to traders and investment funds or over-the-counter market makers. They may also lend the assets to businesses that need to have an inventory of crypto in order to be able to provide liquidity to their clients.

BlockFi mentions in a blog post that it works with institutions that are in need of liquidity and lends them crypto assets at a higher rate. The main types of borrowers include the following:

Traders and investment funds

These borrowers require cryptocurrency either to fuel their trading strategies or close mispricing gaps between exchanges.

Over-the-counter market makers

These borrowers connect buyers and sellers that don’t want to make their transactions over public exchanges, in exchange for what is often a steep mark-up. These borrowers generally required to have crypto assets on hand in order to be able to meet demand, so they borrow from lenders such as BlockFi to meet their needs.

blockfi loan payment reminder

traders and OTC market makers borrow from BlockFi

Cryptocurrency ATMs and other businesses that require an inventory of cryptocurrency

These businesses require liquid cryptocurrency for their daily operations, but they prefer to keep the majority of their assets in cold storage.

bitcoin atm

BlockFi’s Outstanding Venture Funding Attempts

The platform started to become well-known in the cryptocurrency world when it began to receive some outstanding venture funding. In August 2019, the company received an $18.3 million Series A fund, which was then followed by a $30 million Series B fund.

zac prince interview

Val Ventures fronted the second venture fund, and there were multiple notable investors involved, including CMT Digital, Purple Arch Ventures, Arrington XRP Capital, Winklevoss Capital, Morgan Creek Digital, Avon Ventures, Akuna Capital, PJC, Castle Island Ventures, Kenetic Capital, and HashKey Capital.

HashKey Capital was one of the most high-profile investors in Block-Fi, and they were the reason the company was able to expand the Singaporean market in less than a year.

Zac Prince

We decided to opportunistically raise the Series B to expand the balance sheet and give ourselves the ability to invest in the things we're doing this year.


Zac Prince

CEO of BlockFi

To date, BlockFi has raised over $108 million dollars.

The BlockFi Mobile App

zac prince interview

In May 2020, BlockFi launched a mobile app available for iOS and Android users, with the purpose of offering easy access to the platform on the go. Some of the features of the app include:

sign up

Easy and secure sign-up

It only takes a couple of minutes to get started and access your entire portfolio from your phone.

sign up

Opening interest earning accounts

You can open a BlockFi Interest Account from your phone and start earning interest on all popular cryptocurrencies, including Bitcoin, Litecoin and Ether.

sign up

Borrow money through the app

Same-day crypto-backed loans are available with just a couple of taps on your phone, allowing you access the cash so you don’t have to sell your crypto assets and trigger taxable events.

sign up

Easy mobile transfers

You can transfer funds directly from one of your crypto wallets into your BlockFi account. The app also allows you to diversify your portfolio without having to make new investments.

sign up

Extra layer of security

All transactions made via the mobile app are secure via BlockFi’s primary custodian, Gemini.

As of June 2020, the mobile app doesn’t have trading features and face recognition for logging, but these are features that BlockFi promised they will make available in the future.

Does BlockFi Have a Referral Program?

BLockFi has a referral program in place for clients who want to bring their friends to the platform. As of May 2020, all BlockFi clients can earn up to $20 in BTC for every friend they refer who opens a BlockFi Interest Account. Clients can earn $10 in BTC for the first five friends they refer and $20 in BTC for the following ones.

zac prince interview

Has BlockFi Ever Been Hacked?

In May 2020, hackers were able to compromise the platform’s security systems and managed to gain unauthorized access to sensitive information that included users’ names, dates of birth, email addresses, home addresses, and activity history.

BlockFi published an incident report on its website, stressing that the activity of the hacker has been locked and as a result “no funds, passwords, social security numbers, tax identification numbers, passports, licenses, bank account information, or similar non-public identification information” had been exposed.

send coins to blockfi

According to the incident report, the hacking attempt was done via a SIM swap attack on one of the company’s employees. Hijackers were able to control the employee’s phone number and were able to reset the worker’s email password and get into the BlockFi systems.

They unsuccessfully attempted to make unauthorized withdrawals. The data breach lasted for approximately 90 minutes, as BlockFi reacted quickly and suspended the employee’s access in order to prevent further misuse.

BlockFi released a statement mentioning that the company was able to prevent a second attempted attack. They are also putting additional identity controls for all employees in place in the immediate future and suspending any SMS second factor.

Zac Prince

We are constantly reviewing and improving our systems and security processes and will be accelerating efforts in a number of areas as a result of this activity.


Zac Prince

CEO of BlockFi

Is BlockFi a Legit Platform?

Despite the hacking of May 2020, everything indicates that BlockFi is a legit platform that allows users to reap the benefits of receiving interest on their cryptocurrency assets and getting access to cryptocurrency-backed loans.

As with anything that has to do with cryptocurrency that leaves your wallet, you need to understand that there is a certain degree of risk associated with it, which means that your assets would be at risk if the platform would experience a catastrophic hack.

How to Set Up an Account on BlockFi

  1. Go to BlockFi.com. Select “Get Started”

    Blockfi home
  2. Fill out the form using your real email address (BlockFi is going to send a verification email to it.)

    Blockfi form
  3. Click on the verification link in the email. This will redirect back to BlockFi.

    verify email

From here you’ll need to choose whethor you are choosing a Bitcoin Interest Account or a Bitcoin Backed USD Loan.

The steps to get each of those accounts are below.

Getting a Bitcoin Interest Account from BlockFi

  1. Now that you are back on the blockfi site, select Interest Account.

    choose interest account
  2. Go through the steps to Complete the KYC verification.

Info: Make sure the scan of your ID is clear. If BlockFi cannot read the ID, it will slow down the KYC process.


  1. Head back over to BlockFi’s site and log in. Then click Deposit.

    Blockfi bitcoin backed loan
  2. Now you must choose which crypto asset you are going to deposit and earn interest on. Click on one of the Crypto assets below.

    Blockfi bitcoin backed loan
  3. Use your wallet to send coins to the crypto address that BlockFi shows you on the next page.

    You can either copy the address or scan the QR code.

    Blockfi bitcoin backed loan

Warning: It is crucial that you send the same kind of crypto asset as you specified in step #4 above. If you chose to deposit Bitcoin in that step, do not send Either, Litecoin, or any other coin. If you do, you will lose your coins forever.


Now let’s talk about Bitcoin backed loans. Find out how to start your account, step-by-step, using the guide below.

Getting a Bitcoin Backed USD Loan from BlockFi

  1. At this point you’ve verified your email and you are back on Blockfi’s site. Select Crypto Loans fromt he menu.

    choose interest account
  2. Go through the steps to Complete the KYC verification.

Info: Make sure the scan of your ID is clear. If BlockFi cannot read the ID, it will slow down the KYC process.


  1. Head back over to BlockFi’s site and log in. Then click Deposit.

    Blockfi bitcoin backed loan
  2. Click on the New Loan button

    Blockfi bitcoin backed loan
  3. Now you must choose which crypto asset you are going to deposit and earn interest on. Click on one of the Crypto assets below.

    Blockfi bitcoin backed loan
  4. Input the USD amount you’d like the loan to be, and click Calculate Your Offer

    Blockfi bitcoin backed loan
  5. Next, choose your Loan to Value (LTV).

    Blockfi bitcoin backed loan

    Tip: Higher LTVs (50%) mean you deposit fewer coins but get charged more interest, and you are at higher risk of being liquidated. Lower LTVs (20%) are the opposite. You must deposit more coins but pay lower interest and are less likely to get liquidated.


  6. Select Proceed.

    Blockfi bitcoin backed loan
  7. Fill in your bank info and what you need the money for, and click Proceed.

    Blockfi proceed
  8. Within 24 hours you should receive an email from BlockFi. It will looks something like the one below.
    Blockfi bitcoin backed loan
  9. The loan agreement will be included in the email. Sign it and return it to BlockFi.

  10. Use your wallet to send coins to the crypto address that BlockFi gives you after returning the signed agreement.
send coins to blockfi

Warning: It is crucial that you send the same kind of crypto asset as you specified in step #5 above. If you chose to deposit Bitcoin in that step, do not send Either, Litecoin, or any other coin. If you do, you will lose your coins forever.


Within a day of the collateral being received, BlockFi will send either USD to your bank account via a wire transfer or a stablecoin to a wallet address of your choosing.

And that’s it! You now have cash in hand and you didn’t have to sell your Bitcoin!

CRYPTO LOANS & INTEREST ACCOUNTS

BlockFi logo

BlockFi

  • Crypto interest accounts earn up to 8.6%
  • Has raised over $108 Million in VC funding
  • Supports Bitcoin, Litecoin, and Ethereum, as well as GUSD and Tether
Ledn logo

Ledn

  • Great for Canadian Bitcoin hodlers looking for CAD loans
  • Crypto interest accounts earn up to 7.5%
  • Coins in custody of Insured Bitgo accounts
Unchained Capital Logo

Unchained Capital

  • Get Access to Loan funds in less than 48 hours
  • Easy to use, intuitive platform
  • Bitcoin stored in Multi-sig wallets


Rating: 4.7/5

BlockFi is our top pick for Bitcoin and crypto hodlers looking to earn a little passive income on their holdings. There are of course risks. Major market movements could potentially prevent BlockFi from executing their risk mitigation measures, but that is why they have such large collateral requirements. This is the primary risk BlockFi users must accept. The other risk is hacks, and though BlockFi has had one breach, no one made off with any coins. However, on all other fronts, BlockFi is very low risk, and the rewards are ample. Their easy to user interface makes it easy to open and fund accounts and the products themselves are great depending on your need.

We give BlockFi a score of 4.7 out of 5!

Pros

  • Extremely competitive interest rates
  • Get a loan with no credit check
  • Loans clear in 24 hours
  • Crypto to crypto trades easy to execute
  • Well funded and regulated platform unlikely to run away with your money

Cons

  • One data breach occured in 2020 - no stolen coins
  • Gap risk in interest accounts
  • Custodial

Pros

Cons

  • Extremely competitive interest rates
  • One data breach occured in 2020 - no stolen coins
  • Get a loan with no credit check
  • Gap risk in interest accounts
  • Loans clear in 24 hours
  • Custodial
  • Crypto to crypto trades easy to execute
  • Well funded and regulated platform unlikely to run away with your money