BlockFi: an easy 7.5% APY on your stablecoins!

BlockFi alternative logo animated, a secured 7.5% interest rate generating platform on your stablecoins

With stocks doing their best to become stonks, the steafy average return of 10-11% might be difficult to sustain in the foreseeable future. What if I told you there was a non-riskier way to earn 7.5% interest on your stablecoins ?

I’ve always held my coins on my ledger, and my trading bag on exchanges. I’ve searched around for the best way to increase my passive income, it turns out now that 50% of my USDC (not USDT) are now on BlockFi!

Still, never forget there ain’t no such thing as a free lunch. No investment ever is 100% safe. It’s just a matter of choosing the best return given the amount of risk that you can sleep on. Let’s see what BlockFi is made of!

BlockFi’s Summary Table

logo empty tables comparison

BlockFi logo secured 7.5 interest rate comparison.interest rate FIRE

Year

2017

Founders 
Place of recruitments

Zac Prince and Flori Marquez 

USA

Interest

Monthly

Highest Interest Rate Available

8.5% (with DAI stablecoin if less than 50k DAI )

Base Interest Rate on USDC or USDT

7.5%

Base Interest Rate BTC and ETH

4%

Compound Interest

Yes (monthly)

Lock-in Period

No

KYC

Yes

Withdrawal Fees

1 free crypto/1 free stablecoin per month

Platform

Mobile, PC

Security

Gemini as primary custodian

Insurance

200m$ on Gemini

Income stream

Lending to hedge funds, exchanges, institutional traders, and retail customers

Platform token

None

Other services

Loans, Card

Note

BlockFi’s Facts

Founded by Zac Prince and Flori Marquez in 2017 in the US. They are fully regulated lenders and use Gemini, a New York trust company regulated by the New York State Department of Financial Services, as their primary custodian.

BlockFi is backed by some of the biggest names in the crypto space, from investors such as Valar Ventures, Galaxy Digital, Fidelity, Akuna Capital, Bain Capital Ventures, Coinbase Ventures and Winklevoss Capital. In total they have 15B+ assets under management and 225,000+ users.

BlockFi’s revenue stream 

TL;DR: they lend coins to hedge funds, exchanges, institutional traders and retail customers.

BlockFi is a spread business that makes money by borrowing capital at a certain rate (the interest rates it pays to users) and lends it a higher rate (the interest rates it offers for BTC/ETH/GUSD loans). The company primarily works with institutional counter-parties to offer them liquidity.

These large institutions’ financials are heavily audited by BlockFi’s risk team and institutional desk. BlockFi has an outside accounting firm preparing their financials on a monthly basis and it is audited on an annual basis. BlockFi has an institutional onboarding program that companies like Bitfinex do not do. For example, if one of their institutional counter-parties wants to borrow 10 million dollars in BTC, they will have to post at least 11.5 – 15m in USD as collateral. There is a very intensive risk management model behind BlockFi’s business. You can read about how they generate their yield for the interest accounts in this BlockFi blog post.

Bitcoin

Bitcoin

$19,497.65

BTC 0.77%

How secure is BlockFi ?

Gemini is BlockFi’s primary custodian. Gemini keeps 95% of their assets in cold storage and 5% in hot wallets that are insured. Gemini is a regulated and licensed custodian. You can read more about their compliance here and their security here. You can read more about BlockFi’s security here.

You can earn in kind (deposit USDC, earn USDC) or opt for interest payment in another asset (deposit USDC, earn either BTC, ETH, LTC, GUSD, BUSD , DAI, LINK, PAX, PAXG, BAT, UNI). However, if you chose another asset, they will charge 1% for that service.

Regarding their interest rates, there is no “utility token”, that would determine your interest rate based on how much of it you have. However, there are multiple tier rates depending on how much asset you have on the platform (see the latest interest rates here). These rates can be adjusted at BlockFi’s own discretion. No crazy 12% for ever promised here, their rates will actually adjust to market demand, which I believe is a good hint of a non-Ponzi structure!

How safe is BlockFi ?

Now the crucial part, the thing that interests you and me the most, and yet the thing that is usually not much discussed elsewhere.

Visa Deal

One of the biggest “positive” signals. They have a card connected to Visa, a well-known banking company that decided to do business with them. Surely, they must have done some due diligence and have access to data that we as humble peons can’t have access to.

Lock-in

There is no lock-in period on your deposits. If you feel like shit will hit the fan, you can get out of the platform “almost” immediately. Why “almost”? Well, a withdrawal request has a 1-business day delay, for security purposes.

Customer Support

Well, who never had any issues with exchanges, or CeFi platforms ? I had some, due to some dumb mistake I made. Kraken made sure that I could die of anxiety before they answered. In contrary, BlockFi customer support is apparently responsive! They even have a phone line where you can reach an employee! Just in case, I hope you will never need it:  (646)779–9688.

Black swan performance

In March 2020, a sudden crash has liquidated mismanaged and overleveraged retail and companies. Risk management is at the heart of lending platform like BlockFi, as they are on the front line of such spirals into liquidation events. Not only did BlockFi come out unscathed of this event, but they have also been praised by their community. They did their best to protect borrowers from liquidation as stated in the testimonial below (note also the fact that he could reach them by phone!)

"I just want to point out that I’ve spoke over the phone and through email with a lot of different Blockfi employees yesterday during the black swan event. I have to say that they really calmed me down and made me feel safe about my collateral being liquidated from my loan. They make sure to do everything in their power not to liquidate people and you can tell they aren’t just in this to hurt people and make themselves more wealthy. Shout out to Daniel, Dave Jon and Leetal. All people who I’ve talked to in the last couple of days. I have no affiliation with the Blockfi team. I am just a customer for one of their USD loans that I’ve backed with ETH collateral. I’m happy I’m dealing with them and not someone else. I don’t normally give reviews unless I really feel respected. A+ ."
Data breach

On May 14th 2020, BlockFi experienced a temporary data breach. Hackers accessed customer informations that were held in their marketing database. Hopefully, no funds were lost. However, this could lead to phishing attempts of these customers. Phishing attempts are common nowadays, so always be on guard on anything reaching you by email!

BlockFi then decided to beef up their security and hired Adam Healy (he worked for Palantir Technologies, Microsoft and the U.S. and Department of Defense). Have a look at Adam’s overview of BlockFi’s evolving security journey.

You can also see him directly interacting on twitter with people regarding BlockFi security.

Got an email from a VC this morning and this was the opening line. I don’t know where to begin.

We lost a legend today. Until Valhalla, brother.

Shadow recession time. Why?

The White House needs a recession to stop inflation for technical reasons.

The White House can’t have a recession for political reasons.

How’s this play out?

Very well might be my favorite pictures of the Jeep.

Moving to the country has had a huge impact on my groceries/eating

#1 No Seamless
#2 Real farm to table – yogurt, beef, chicken, coffee, eggs, and produce all sourced from farms within 2hrs of me
#3 Fixing things for older neighbors as a favor results in a surplus of baked goods

Load More…

This is a very concerning issue. Yet, I am aware how marketing databases are usually the weakest point of companies. On the bright side, no funds were lost, and if anything, it can be viewed as an anti-fragile event: it forced them to be more secure than they ever have been!

Summary

Pros
  • March 2020 stress test
  • High base interest rates
  • BlockFi’s custodian, Gemini
  • No lock-in period
  • General level of transparency
Cons
  • Monthly compounded interest
  • Previous data breach

 

Conclusion

I’ve been using BlockFi for 2 years now. No issues. Data breach pissed me off, but it forced them to become more secure than ever. Nothing better than a punch in the face that hurts but breaks nothing, to remind you to bring your guard up!

Crypto is still the Far West. Yet BlockFi is for me the most solid and secure interest earning option to earn some passive income. I currently have put 50% of my USDC on BlockFi.

In case you are not yet registered on BlockFi, and were “convinced” by this overview, please click here to use my referral link (you can earn up to 250$ by signing up, depending on the amount you will deposit on BlockFi). If you are hesitating with Nexo, have a look at my comparison here. If you are already registered on BlockFi but enjoyed my take on the platform, or learned interesting things, or want to support me, please feel free to send me a coffee over.

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