BlockFi Review: Is It Too Good To Be True?

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• Published: August 31st, 2020
• Updated: September 23rd, 2020

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So what is BlockFi?

After launching in August of 2017 with a hesitant audience, it wasn’t until recently BlockFi began to pick up a lot of steam.

It’s likely due to their more aggressive marketing this year with the targeting of influencers like Barstool CEO David Portnoy.

BlockFi is an innovative service that aims to bridge the gap between the traditional finance world and cryptocurrency.

Boasting a guaranteed 8.6% yearly compounding interest on investments and an intuitive lending system, we know what you’re thinking:

Is BlockFi too good to be true?

Keep reading, as that’s what you’ll find out. Let’s jump right into the different services BlockFi offers.

BlockFi Services

Interest-Earning Accounts

One of BlockFi’s most attractive services is their interest-earning accounts, by holding Bitcoin, Ethereum, Litecoin, GUSD, Litecoin, Pax, and USDC, users are able to earn 4.5% to 8.6% yearly interest.

At the moment, Bitcoin offers 6% interest, Ethereum at 4.5%, and Litecoin at 5%. All other stable coins offer 8.6% interest.

What’s great about these interest-earning accounts, is that they are calculated daily, and paid out monthly. BlockFi’s rates are subject to change at any point in time, but from what I can tell, they haven’t changed rates yet.

You might be wondering where this money comes from.

We’ll cover this in the next section!

Cryptocurrency Loans

As we stated above, BlockFi funds its interest-bearing accounts through its lending service. By putting up your own cryptocurrency as collateral, you can receive USD without having to sell your holdings.

BlockFi offers a calculator for users to learn how much collateral they’ll need to put up.

For example, if we wanted to take out a loan for $20,000, we’d need to put up 3.46 BTC ($40,000).

We can take the loan amount divided by the collateral amount to learn the LTV ratio. In this case, it’s 50%.

If we instead did a $20,000 loan with $80,000 in collateral, we’d have an LTV of 25%.

You can view and use it here. Once signed up, you can put in different LTV ratios.

For this $20,000 example, with a 50% LTV ratio, we’d receive $20,000 with a monthly payment of $162.50 and an interest rate of 9.75%.

A lower LTV ratio of 35% would equal a monthly payment of $131.67 and an interest rate of 7.90%.

As you can tell, the more collateral you offer, the better the rate on the loan will be as it’s higher risk.

Here are some examples of what BlockFi says customers can use the loans for:

BlockFi Trading

BlockFi also allows for free trading between all of the assets on their platform. Their only fee comes from withdrawals, and even then users will get one free withdrawal a month. We would say the average customer will never be charged a withdrawal fee. This fee is calculated in the cryptocurrency you’re withdrawing.

In our experience, there’s isn’t much reason to trade on the platform, but the ability to without fees can be pretty useful.

Supported Countries

From what we can tell, BlockFi is supported in all countries around the world, outside of any country with sanctions. Cryptocurrency has no borders!

Where is BlockFi based?

BlockFi is based in New York City, one of the places with the toughest cryptocurrency regulations in the world. This is an even greater sign that BlockFi is operating in a legal and trustworthy major.

How Good is BlockFi Customer Support?

From my limited experience, they’ve been very quick to respond and persistent to help. Everyone’s experience will be different but we have no reason to doubt theirs is not good.

You can contact BlockFi customer support at [email protected]

Institutional Accounts

BlockFi features institutional accounts for the more custom suited needs of an institution. You can read more about this here.

Frequently Asked Questions

How is BlockFi sustainable?

BlockFi is sustainable by being a middleman for the lending fee. When you deposit cryptocurrency on the platform, they are using funds to lend out to people at a higher rate. This is known as rehypothecation.

How does BlockFi handle forks?

While there haven’t been any major forks BlockFi has been around for, they claim to have the same fork policy as Gemini. Gemini’s fork policy is:

In the event of a Fork, you agree and understand that we may temporarily suspend the operations of Gemini (with or without advance notice to you) while we choose, in our sole discretion, except as described herein, which Forked Networks to support. You agree and understand that in our best estimation we are unlikely to support most Forked Networks and that the Digital Assets of most Forked Networks will likely not be made available to you.

We would say outside of a major fork the size of Bcash, you will not receive your forked coins.

This can be seen as a downside, but as someone that claimed several forks in the past, it’s not really a big deal. In the event, you wanted to capture a fork you could take the coins off to a personal wallet briefly.

Conclusion: Who is BlockFi For?

Overall, BlockFi can be great for anyone, from the beginner cryptocurrency newbie, all the way towards the cryptocurrency pro. It’s a service that I as the site owner use.

As always, we recommend 0ur readers to DYOR (do your own research) and decide if BlockFi is a good fit. From what we can tell BlockFi is an extremely safe and legitimate service.

Receiving additional cashflow for assets you weren’t planning to sell anytime soon is an amazing feeling! It’s also compounding interest, which has a powerful snowballing effect over time.

If any current events happen that give us a reason not to trust BlockFi we will update the article ASAP.

Thanks for the read and leave a comment to let us know if you have any questions, or to let us know your experience with BlockFi.

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Austin Tuwiner Administrator
Austin is the owner of Bitpremier, and got involved in Bitcoin in 2012. After working as a cryptocurrency journalist and and at several blockchain startups, he decided to start Bitpremier and educate the world on Bitcoin.
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