One of the most exciting developments in the blockchain space in the last couple of years is the ability to earn interest on bitcoin and other cryptos.
With crypto interest accounts the entire ecosystem moves one step closer towards replicating the existing banking system.
Blockfi is the easiest way to earn interest on Bitcoin, Ether, Litecoin, USDC and GUSD.
BlockFi is an American non-bank lender company based out of New York.
To date they’ve raised over $60 million in funding and have achieved a respected status within the cryptocurrency ecosystem.
In this article we’ll look at:
Let’s jump into it.
The amount of interest it’s possible to earn using BlockFi varies and changes quite frequently, depending on supply and demand.
Given how volatile the cryptocurrency market is sometimes there is high demand for crypto so the interest rate will be higher, and sometimes the demand falls so the rate goes lower.
As of publication, the interest rate for USDC on BlockFi is 8.6% APR while the rate for Bitcoin is 5% APR.
Ethereum can earn just 3.6% APR.
The best way to find out how much you can earn on BlockFi, as well as compare rates on other platforms, is to use LoanScan.io.
Currently, you can get free crypto as a bonus for depositing with Blockfi:
Although BlockFi is most famous for their support of Bitcoin, this is not the only currency that it’s possible to use on their platform.
In addition to Bitcoin they also offer interest rates on stablecoins like USDC and GUSD. As of publication the interest rate for both of these dollar-pegged coins is 8.6%.
In terms of pure cryptocurrencies BlockFi supports Bitcoin, Ethereum and Litecoin. They typically offer the highest interest rate on Bitcoin and the lowest interest rate on Ethereum. In fact the interest that they pay out for Ethereum and Litecoin deposits is often 2 to 3% less than what they pay for Bitcoin.
Blockfi offers very competitive features without the added distractions of an unnecessary ICO. This means all of the funding and development go to improving the platform and services you care about as opposed to a coin. Blockfi makes money when you make money, whereas other interest accounts make money from selling their coins.
Blockfi is also funded and managed by a team of experienced finance professionals with a long track record in traditional finance. See our table below for a quick glance at some of the great advantages offered by Blockfi.
|Interest Paid in Crypto|
|ICO Token Required|
|Long Fund Lockups|
|Lends Your Crypto on Exchanges|
|Interest Rates||BEST IN INDUSTRY||SUBSTANDARD|
When considering whether to open a BlockFi account it’s important to check whether the service is available where you live.
BlockFi is not available in all US states. More information on its availability can be found on their website.
BlockFi has a mandatory KYC program to enforce their policies.
To get started earning interest on your Bitcoin with BlockFi you can follow these steps.
Go to BlockFi.com and click on “Get Started”
Fill out the form below with your info. The email must be authentic as BlockFi will send a verification email to this account
Verify your email by clicking the link in the email.
After verifying your email, go back to the blockfi site and choose Interest Account. You will then be asked to submit your documents for KYC.
Complete the KYC verification. When you scan your ID remember that it must be clear as a blurry scan can cause the KYC verification process to fail
After completing KYC, return to the website and log in. Select Deposit, shown below.
Select which asset you want to deposit: Bitcoin, Litecoin, Ether, GUSD or USDC.
BlockFi will then provide you with a crypto address to send your coins to. Using your wallet, input the address or scan the QR code given to you by Blockfi.
Double and triple check that the asset you are sending matches the one you chose in step #7. If, for example, you send Bitcoin to an Ether address, you will lose your Bitcoins. Please make sure both match before pressing send.
You now have an account funded with Bitcoin or other crypto which will begin earning interest immediately.
To keep your account secure you must enable 2FA (2 Factor Authentication). This is a standard requirement for many exchanges within the cryptocurrency ecosystem.
Yes, interest compounds on the BlockFi platform.
An annual interest rate of 6% actually ends up yielding 6.2% interest on an annual basis due to compounding interest.
This makes BlockFi an especially attractive option for those who would like to earn a passive income from their crypto holdings.
If you are unsure of the difference between simple and compound interest, this video sums it up well.
BlockFi pays out interest just once at the beginning of each month.
This infrequent interest payment is done to reduce complexity.
Traders who absolutely must have daily interest payments may want to consider working with a DeFi platform.
While it’s possible to take out a loan against the Bitcoin in your account there are a number of requirements that must be met before you can do so.
For instance, BlockFi requires your social security number, a full KYC verification and also a copy of your financial history. Besides that there are other requirements.
NOTE: Bitcoin collateral loans pose certain risks that are not present in traditional loans from banks. Because the collateral put up for these loans are volatile speculative assets, the loans can get margin called.
That means, if the price of the coin you put up as collateral drops in value, you will lose some or all of the collateral after you pay off the loan. If the entire loan is margin called, you won't owe the money any more, but you also wont be able to get your coins back.
Keep this in mind if you plan on only paying interest and keeping the loan open for long periods of time. The longer the loan is open, the more risk there is of a major price movement that liquidates your position.
If you meet all of these requirements and would like to take out a loan you can follow these steps.
Create a BlockFi account on their website (outlined above)
Click on the New Loan button
At the form, select which cryptocurrency you’d like to use as collateral.
Fill in the dollar amount in USD you’d like to get a loan for and select Calculate Your Offer
Select which Loan to Value percentage you’d like to use.
The higher LTV of 50% requires a lower amount of collateral but has a higher interest rate and is more likely to get liquidated in a major price movement..
Fill out this form with your banking information as well as your intended use of the funds and select Proceed
You will receive an email response from BlockFi within 24 hours
Read the offer agreement and if it looks good, you can sign the agreement
Send the crypto collateral to BlockFi (process is similar to depositing coins on Blockfi in the section above)
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.
Interest payments can be made using ETH, LTC, BTC or USD.
If you as the borrower stop paying off the loan then BlockFi can “repossess” your crypto. The only way to get your crypto back again is to pay off the loan in full.
Standard terms for the loan are twelve months with a 4.5% interest rate. However that interest rate can change at any time depending on market conditions. Loans can be payed off early or also refinanced after the loan term has ended.
A loan can be originated for up to 50% of the value of the crypto deposited as collateral. For example, if you deposit $50,000 worth of Bitcoin you can take out a loan worth up to $25,000.
As a startup BlockFi still depends on seed funding from investors.
Thankfully they’re not having any trouble getting it as they just raised another $30 million. The purpose of the money, according to BlockFi, is to help the company go “mainstream.”
BlockFi’s CEO Zac Prince recently gave his reasoning for raising additional capital in an interview with Coindesk,
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.
Whether that’s a viable goal now, when the crypto ecosystem is still so small, remains to be seen. However, the warchest that BlockFi is currently holding is quite impressive.
They have more than $650 million in AUM (assets under management) which makes their company not that much smaller than the entire DeFi movement which just reached $1 billion AUM.
To reach mass adoption BlockFi plans to release a mobile app and also to make it easier for users to integrate their bank account directly with BlockFi for seamless transfers. Finally, they also want to release a crypto reward credit card. Instead of giving customers points this card would reward them with crypto.
It’s a novel idea but it may be just the thing to expose more people to crypto. If they sign up for the credit card and receive a bonus in crypto, it may incentivize them to get involved in the blockchain ecosystem.
Given the long history of hacks in the blockchain space, and the billions of dollars’ worth of assets stolen so far, it’s a really good idea to consider BlockFi’s security record.
In fact they have an excellent security record that is bolstered by their partnership with the American exchange Gemini.
Well-known for their methodical approach to security, Gemini has never been hacked and is generally considered an extremely reliable exchange.
Partnering with Gemini in order to store funds was a smart move for BlockFi as they didn’t have to worry about building a cold storage model from the ground up.
Besides the security measures that Gemini employs, BlockFi also institutes a couple of their own. For instance, they have made 2FA mandatory for all accounts. That means that all users must work with Google Authenticator in order to generate one time passwords in order to log in to their accounts.
BlockFi also has a monitoring system that scans all withdrawals to look for suspicious activity. All things being said the platform is very secure and they’ve yet to be hacked. Whether you’d like to earn interest on your crypto or take out a loan against it, you can feel safe using BlockFi.
By far the most popular way to earn interest is through the DeFi movement based on the Ethereum blockchain.
Unfortunately this mostly only works for Ethereum, DAI and other ERC20 tokens which run on the Ethereum blockchain.
Currently it’s not possible to earn interest on Bitcoin via DeFi, at least not without jumping through some hoops. Thankfully there’s BlockFi.
Blockfi is, by far, the largest, most trusted, and most well-funded institution offering interest earning accounts for Bitcoin and other digital assets.
Their team of financial professionals in tandem with its location in the United States means that you are getting top notch management and the benefit of some of the most stringent financial regulations on the planet. BlockFi is very unlikely to run off with your Bitcoin and is likely managing risk appropriately.