Blockfi is an online lending platform that allows customers to earn compound interest on the cryptocurrency already owned or use cryptocurrency as collateral for a loan. With investment backing from reputable names like Valar Ventures, Galaxy Digital, Fidelity, Akuna Capital, SoFi and Coinbase Ventures, BlockFi has deep pockets to draw on to back the company’s financial endeavors. In a newer industry like cryptocurrency, BlockFi has a long history and is one of the most well-known in the space.
The interest rates BlockFi offers vary, but are between 3 percent and 9 percent (depending on the cryptocurrency and amount deposited). This is much higher than a savings account and historically has not jumped up and down, making it a safe place to store wealth. With that said, other players in the space, like YouHodler, have rates up to 12 percent, so customers should actively look into various products to get the best bang for the buck.
The company offers loans against the cryptocurrency customers already own. The loan terms are 12 months with a monthly payment only required on the interest (which starts at 4.5 percent APY). This way customers get cash up front, but also don’t have to sell cryptocurrency. However, the company’s minimum loan amount is $2,000, whereas other competitors like Nexo, offer a starting point of $500.
While not backed by the FDIC, BlockFi’s assets are held by Gemini Trust company and regulated by the New York Department of FInancial Services, which has an excellent reputation. Customers can feel secure doing business with BlockFi.
There is a one day waiting period for withdrawing funds, which can be problematic if assets are needed right away. The company also only allows two withdrawals every month for free; after that fees are charged. It seems likely that active customers will have more than two, so this should be noted and compared to other companies’ offerings.
BlockFi experienced a data breach in May 2020. Although no funds were lost, customers’ personal data was compromised. The company was transparent about the incident and has since made changes to strengthen its cyber security, but customers should be careful to take note of any security issues should a repeat occur.
While rates don’t change frequently, they have dropped in the past and customers agree to BlockFi’s terms, to allow the company to change the APY rate at will. This doesn’t particularly benefit customers, and should be monitored actively.
As with digital currencies, customers’ money is not FDIC insured, due to the fact of it not being U.S. dollars. So if BlockFi were to be hacked or have a major incident, customers have no backup or way to recover funds.