If you’re not yet familiar with the company, BlockFi is a platform that acts as a financial and asset management service. Recently, BlockFi has been making a name for themselves in the crypto community, but is all the hype really worth it? Let’s find out and dive into a detailed BlockFi review.
BlockFi is a service that helps you manage your financial assets, and invest them. The service tends to concentrate on crypto assets, though not exclusively, especially bitcoin. They like to describe themselves as the safest and easier way to invest your crypto, though this certainly comes at a price, as they have some high fees for withdrawal. Their main selling point is that their service is easy to use, and caters towards laymen, and not the more experienced crypto traders who want to take their assets into their own hands. We will go into detail about the loans, interest accounts, the start of the company, and exciting new updates.
What is BlockFi?
BlockFi supports assets such as Bitcoin, Ethereum, Litecoin, and a few stable coins, though these are the main three. Unlike their competitors, they don’t have a native coin. This allows the company to spend 100% of their time focusing on making returns and managing their assets. BlockFi manages to fuse the two worlds of traditional asset management with the world of cryptocurrency. Their main services are loans and interest accounts, much like you would get at the bank.
All of their supported assets are as follows:
- Coinbase Dollars
- Gemini Dollars
BlockFi was launched in 2017, by founders Flori Marquez and Zac Prince in the US. The company is still owned and operated in the US, which means they are subject to strict laws and regulations. But, there are some limitations to a few countries outside the US, so it might pay to visit their website and see what that means for you. BlockFi is also a centralized company, which tends to rub many crypto traders the wrong way, as it could potentially open the company up to security breaches.
If you are interested in opening an interesting account with BlockFi, you will only be able to use Bitcoin, Ethereum, or Litecoin for this. Initially, though there are absolutely no fees, and you can make up to 8.6% interest on your investment every year. However, for a fee, you can trade between the three coins as you wish. Essentially, with this account, you will lend your Bitcoin to BlockFi for a yearly interest rate. The interest rate is very good at the moment, however, the company is technically still in its infancy, so it might be a gamble to invest with them.
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At the moment, though the interest rates are good, they limit withdrawals to one per month for all kinda accounts and charge very high fees thereafter. This is a technique to encourage you to leave your funds on the platform, which can actually be a good thing if your goal is to save and accumulate interest.
The interest rates for one of these accounts are between 2% and 8.6% depending on the type of coin you invest, as well as the amount. For example, the lowest is Ethereum >500, 2%. And one of the highest is PAX >0,8% interest rate.
What’s the Risk of BlockFi
As with any investment, there is a risk to the interest accounts with BlockFi. Since BlockFi will be using your Bitcoin (or other coins) to fund their loans. There is the danger of the Bitcoin price spiking enough to cause a gap risk. BlockFi always pays its investors back before themselves, however, there is still the danger of this gag risk, spread out over many accounts, causing a major loss for both the investors and the company.
Learn About BlockFi Loans
Though the non-US baked users have in fact reported some issues with the loan system BlockFi offers, it seems to be a pretty straightforward process within the country. Not to mention the fact that BlockFi uses crypto as collateral, so you won’t need to risk your credit score or physical assets.
The minimum loan amount is $5000 US, and your interest rate is calculated depending on your loan to value amount. When you get a loan from BlockFi, you’ll get the funds on the same day, and can use them to finance a house, car, business, or even use it to trade crypto.
The loan to value amount is entirely dependent on the amount of collateral you decide to put down. I.e. putting $20000 on a $10000 loan will give you a 50% LTV. You’ll need to provide this collateral in the currency you wish to loan. Higher collateral means lower interest and vice versa.
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There are definitely a few advantages to lending from BlockFi rather than a traditional bank, however, your investment will be subject to a special risk, due to the volatile nature of Bitcoin in general. For example, if the price of Bitcoin spikes too much your collateral could be margin called.
If your entire account is margin called, this will result in you not having to pay back the rest of your loan (not including the interest), but you’ll lose your entire collateral. In some cases, you might only lose a part of your account.
This is especially important to keep in mind if you intend on paying back only the interest on your loan per month and keeping the loan open as long as possible. It is always best in these situations to pay back the loan as soon as possible.
One exciting new BlockFi update is its launch of the BlockFi app on the 7th of May 2020. Available for download on both Android and IOS, there isn’t much to complain about this new mobile feature.
Signaling a new, more convenient age, most of their competitors are also concentrating on the potential of mobile. With a focus on user experience, and in line with their values for simplicity and ease, the app is very straightforward and easy to use.
You can view your balance, make withdrawals, deposit, and apply for new loans. There is also an integrated two-factor authentication to keep your account as safe as possible. They have also decided to use Gemini as their custodian, which is one of the industry leaders. This is a good indication that BlockFi’s mobile app will have top of the line security.
Crypto-related companies are notorious for having bad support. However, BlockFi really doesn’t do themselves any favors by not having either a support phone number or a live chat on the website. The only way you can currently reach them is through email. There are mixed reviews on this topic, as some claim to get fast responses, which is good enough. Others, however, stress the importance of having a direct line especially when the company is asking you to invest tens of thousands of dollars into their service.
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In our opinion having a company email is an absolute minimum requirement. And as a customer, you should expect to be able to get a hold of any company you are holding an account with immediately in case of an emergency. If you are comfortable signing up with BlockFi despite their lack of customer support, then definitely stay vigilant and try to establish some form of communication with them through email as soon as you open your account.
BlockFi is still in its infancy but has already seemed to achieve so much in just their first few years of operation. They have a great interest account and loan system, great security with two-factor authentication, and are just starting to expand into the mobile world. On the other hand, the customer service aspect definitely needs some work. You would expect a large company like BlockFi to take their customer’s complaints seriously and hopefully, we’ll see them establishing better customer support in the coming years. Plus, withdrawal fees could add up in the long run.
By lending from BlockFi, you can use crypto as collateral, and avoid endangering your credit score or physical assets. However, with the volatile market, paying off your loan as soon as possible should always be a top priority.
All in all, it seems to be a great new service that blends the crypto world and the world of traditional finance into one. Hopefully, the company will stay on track and have a bright future in the coming years.