There’s no denying that we’re in the middle of an unprecedented “crypto rush.” The value of Bitcoin is fast-approaching $60,000 per token and Ethereum recently passed its former $3,000 resistance barrier.
As more and more investors continue trading their fiat currency for cryptocurrency, there is a huge need for wealth management and banking-related services. These services are typically referred to as decentralized finance services, or DeFi, for short.
So, what exactly is BlockFi? How long have they been around, and what are some of the popular DeFi services they provide?
Founded in 2017 by Zac Prince and Flori Marquez, BlockFi is one of the fastest-growing DeFi platforms in the world. It offers a number of services designed to help investors manage and utilize their cryptocurrency funds. From savings accounts that accrue interest to Bitcoin-backed loans, a full trading platform, and crypto-to-fiat currency exchange, BlockFi’s DeFi services are growing to accommodate its increasingly large user base.
In today’s article, I’ll be showing you an in-depth look at the BlockFi platform.
First, I’ll give you a quick breakdown of the most popular DeFi services provided by the platform. Then, I’ll dive into answering some of the most common questions I’ve received from readers regarding the various uses and security of BlockFi.
This could just be one of the most revolutionary crypto banking platforms that have ever been made. Let’s take a look!
BlockFi: Crypto Wealth Management Made Easy
Five years ago, cryptocurrency was relatively unknown. Sure, people used it to trade money overseas and there were some who invested in it for fun, but it wasn’t anything major. Then, in late-2017, cryptocurrency had a small “boom,” which quickly corrected as prices dropped.
However, in 2020, cryptocurrency and blockchain technology saw a massive explosion in popularity. Today, it’s no longer “geek currency”; it’s a full-fledged financial revolution with a total market cap valued at over $2 trillion. One of the first major signs of the boom was when PayPal implemented Bitcoin payments to their payment and P2P money sending app.
The only problem is that there aren’t many ways to manage all of this money. Banks don’t allow you to store it, so you have to keep it in digital “wallets,” and there are only a handful of Wall Street funds that let you invest in the technology.
BlockFi is unprecedented in the number of decentralized financial services that they provide. Once you create an account, you’ll be able to store your funds in a BlockFi Interest Account (BIA) where your funds can accrue interest at an incredible rate of up to 8.6% every year. Compare that to the meager 0.05% interest rate offered by traditional fiat banks!
In addition to their interest-accruing accounts, BlockFi also allows its users to use the following financial services:
- Fee-free cryptocurrency trading allows you to trade major coins like BTC, ETH, LTC, and PAXG as well as several “stable coins” that are based on the value of the US Dollar.
- Receive USD financing with cryptocurrency-backed loans at interest rates as low as 4.5%.
Essentially, BlockFi has quickly become the go-to platform for individuals who are looking to put their crypto assets to work. Additionally, they’re only months away from offering one of the first-ever Bitcoin credit cards that will allow users to earn 1.5% BTC-back on all purchases!
The 9 Most Frequently Asked Questions About BlockFi (244 per)
Now that you know a little bit more about the background of BlockFi, what it is, and the services provided by the platform, it’s time to move on to the second part of this article- the Q&A. If you’re already a crypto investor and you’ve got funds stored in a wallet or in an exchange like Coinbase, then you likely have a few questions of your own.
So, I decided to take the liberty of compiling some of the most common questions that I’ve been asked regarding BlockFi over the past couple of months with detailed answers. Hopefully, you’ll find the answer to your questions below! If not, I appreciate any feedback and hope to answer additional questions in future posts.
Q1- Is BlockFi A Wallet?
Yes, BlockFi can also be used as a wallet. First and foremost, BlockFi is a financial service provider. Part of that means that all customers have access to a blockchain-based crypto wallet with its own unique hash address. Whenever you deposit cryptocurrency funds to your BlockFi account, they will be delivered directly to your crypto wallet.
Once the funds are available (which could take anywhere from 5 minutes to 24 hours, depending on the current network speed of the currency), you’ll be able to start putting them to use. On BlockFi, one of the most common options is to simply store the funds in your wallet and let them accrue interest. BlockFi offers an unprecedented APY return on stored cryptocurrency. If you just let it sit in your wallet, you can earn up to 5% annually.
If you’re a more active investor, you can use BlockFi’s exchange to invest in a few of the major tokens as well as a few stable coins as well. All cryptocurrency exchanges will utilize the funds available in your BlockFi wallet. If you end up requesting a crypto-backed loan, then you will be required to leverage the crypto funds in your wallet in order to obtain the loan.
The main difference between BlockFi’s wallet and more traditional crypto wallets is that BlockFi only provides you with a virtual wallet. All of the funds will be securely stored on the blockchain and attached to your hash code. However, traditional wallets (such as Trezor, for instance) provide users with the option of having a hardware wallet in the form of an external USB drive where crypto can be stored off of the blockchain.
Another interesting thing about BlockFi’s wallet is that they don’t directly manage it. Instead, they employ Gemini (a very reputable crypto exchange and wallet provider) for custodial services. This means that your wallet is protected by Gemini’s industry-leading security. Although [Gemini] was previously hacked in May of 2020, no funds were lost and minimal customer data was released. Since then, their security has doubled, so you can rest assured that your BlockFi crypto funds are safe.
Q2- Is BlockFi An Exchange?
Yes, BlockFi is an exchange. Among the several decentralized finance services that BlockFi provides, one of their most popular services is their exchange. An exchange is a platform or DApp (decentralized application) that allows users to exchange and trade various cryptocurrencies.
The biggest exchange in the world right now is Coinbase, which recently went public in April 2021.
You’ve probably heard of it and may have even used it before. BlockFi’s crypto exchange is quite similar to Coinbase with one exception- there aren’t a lot of different coins that you can invest in. The BlockFi exchange currently only supports eight cryptocurrencies:
- Bitcoin (BTC)
- Ethereum (ETH)
- Litecoin (LTC)
- US Dollar Coin (USDC) *
- Tether (USDT) *
- Gemini Dollar (GUSD) *
- Paxos Standard Token (PAX) *
The tokens that feature an asterisk (*) beside them are referred to as “stable coins.” The goal of these tokens is to provide a 1:1 ratio that constantly mirrors the current value of the US Dollar. This means that no matter how much the prices of cryptocurrency fluctuate, the value of the stable coin will always match the value of the asset that’s backing it (the almighty US Dollar, in this case).
While BlockFi’s list of supported coins is expected to grow in the coming years, it doesn’t quite compare to larger exchanges like Coinbase (which lists over 25 tokens), Binance (52 tokens), Bittrex (100+ tokens), and others. The more tokens that an exchange allows users to trade, the more room for [high-risk investments] there is. One of the biggest reasons why BlockFi has been slow to add new trading options to its platform is that they want to create a more “stable” DeFi platform.
So, if you’re eager to get into cryptocurrency investing and you’re expecting to make quick flips and invest into altcoins (smaller cryptocurrencies), then BlockFi probably isn’t the best exchange for you… at least yet. As I mentioned, BlockFi is a relatively new exchange and they may yet add support for trading a larger number of tokens.
On the other hand, if you’re a more casual investor and you’re mainly concerned with making long-term investments into the major coins like Bitcoin, Ethereum, and Litecoin, then BlockFi provides an excellent exchange platform for doing so.
Q3- Why Use BlockFi?
Still not sure whether or not BlockFi is a good choice or not? Perhaps, you’re thinking something along the lines of, “my Coinbase account is fine for me,” or “BlockFi seems a bit too similar to a traditional bank.”
The best reason to use BlockFi is that you can earn interest just from holding cryptocurrency in your account. You’ll also have opportunities to get crypto-backed loans and get access to a safe wallet to save and spend your crypto.
These are all valid points. These days, it seems like exchanges and wallets are a dime a dozen. However, I’d like to point out that BlockFi isn’t just another exchange or crypto wallet. BlockFi is unprecedented in terms of the value that they bring to the table for your crypto asset management.
In my opinion, it’s a revolutionary new platform that is setting the bar high for the DeFi environment of the near future. Here are a few of the top reasons to use BlockFi that come from off the top of my head.
Earn Interest Just For “HODLING”
No, that wasn’t a typo. The term “HODL” originated from early crypto investing forums where the word “hold” was often mistyped into “hodl.” For some odd reason, the misspelled word stuck and it has become a common term to denote the act of holding a certain token for the long-term (as opposed to rapid-fire trading for short-term profits).
As it stands, Bitcoin has increased by 53,000% since it was first created in 2009. This means if you invest just $1 in 2009, it would be worth $53 grand! It also goes to show the value of long-term holding of cryptocurrency assets, as many individuals believe that they are only going to grow exponentially.
While BlockFi certainly allows users to invest in crypto with USD and hold it in their wallets in the hopes of it increasing, they’ve gone a step further. By storing your cryptocurrency in your BlockFi wallet, you’ll have the chance to earn up to 8.6% APY every year! This means that you’ll be able to generate residual income just by saving and holding your funds.
Crypto-Backed Loans For You or Your Business
One of the other really neat services offered by BlockFi is their crypto-backed lending service. This service is simpler than almost any other lending service and doesn’t require the lengthy, days-long interviews by lenders. In order to get the loan you need, all you need to do is leverage 50% of the amount using your crypto funds.
For example, if you wanted to get a $10,000 cash loan in USD, then you would need to offer $5,000 worth of your crypto up as collateral. If you’re [strapped for cash] and you need a small loan, then you’re probably better off using a payday loan service.
However, if you already have existing capital and you’re just searching for an opportunity to make your funds stretch farther, then BlockFi’s crypto-backed loans can provide you with exactly what you need. The best part? Annual interest rates on the loan are relatively low and average around 5% (but may vary, depending on your personal credit and the amount you’re borrowing).
The First-Ever Bitcoin Credit Card
As I mentioned earlier, BlockFi is in the process of launching the first-ever Bitcoin credit card. Essentially, it works like a traditional credit card. However, you’ll receive “Bitcoin-back” instead of cash-back rewards. The Bitcoin you earn back from using the card will be transferred directly into your BlockFi balance where it will continue to grow as you manage it.
Currently, their waiting list is open for all those who wish to apply. The card offers some considerable benefits such as a $250 BTC bonus if you spend $3,000 in the first two months and an additional 2% APY on your stable coin balance (up to $200 payable per year). Last but not least, the card is crafted out of a durable metal allow that will catch eyes wherever you spend your money!
Q4- What Coins Can You Buy On BlockFi?
BlockFi is slowly expanding the number of coins and tokens that you can purchase and trade on their exchange platform. However, as I mentioned, they are trying their best to create a more stable environment for trading and investing. This is opposed to the rapid-fire alt-coin trading and short-term profits offered by exchange platforms such as Coinbase or Binance.
BlockFi currently lets you buy BTC, ETH, and LTC major coins. They also allow you to buy several stablecoins, including USDT, USDC, GUSD, and PAX. They also plan on adding a greater number of coins in the future.
That being said, BlockFi is still an excellent platform to purchase some of the larger, more reputable coins if you’re looking for a more stable investment. BlockFi is putting most of its trust in coins that show long-term value as opposed to the ever-changing alt coin market that presents more risk of losing money.
Here are the coins that are currently listed on BlockFi’s exchange.
Currently, BlockFi allows users to trade the three largest cryptos in the world:
- Bitcoin (BTC)
- Ethereum (ETH)
- Litecoin (LTC)
These are the “original three” and were some of the first majorly-traded cryptocurrencies in the world. These three tokens also have the highest market cap, compared to any of the other alt coins on the market.
Stable coins are tokens that are linked to a physical asset. While there are some stable coins that are linked to precious metals and other natural resources, the most common stable coins are linked directly to the value of the US Dollar (the world’s leading currency).
The current stable coins listed on the BlockFi exchange are:
- Tether (USDT)
- US Dollar Coin (USDC)
- Gemini Dollar (GUSD)
- Paxos Standard Token (PAX)
Q5- What Is BlockFi Crypto (Does BlockFi Offer A Token)?
As it stands, BlockFi does not yet have its own cryptocurrency tokens. You can only trade major crypto tokens and stablecoins on the BlockFi trading platform. This sets it apart from other exchanges like Binance or Gemini which each have their own platform-based tokens.
If you’re unfamiliar with the idea, then let me explain. Recently, one of the world’s largest cryptocurrency exchanges, Binance, decided to create its own tokenized cryptocurrency coin- Binance Coin (BNC).
When the news first came out, many wondered, why would a cryptocurrency exchange create its own token? Well, the answer is for a few reasons.
One of the biggest reasons for releasings its own coin was to facilitate transactional costs and speeds. Whenever you make an exchange on the blockchain (buying, selling, or trading cryptocurrency), most platforms require you to pay a small fee to pay for the effort required to [facilitate the transaction] on the blockchain. Traditionally, this fee was paid using Bitcoin or Ethereum. However, once Binance released BNC, they started allowing users to pay their fees using BNC at a rate of 50% of what they were paying prior to the use of BNC.
Additionally, Binance will reap the profits of having a new currency on the market. As more traders begin to trade and speculate BNC, the value will go up. Binance almost certainly has kept a stake in the original BNC coins for themselves, meaning that they will have the chance to profit in the future as the value of BNC goes up.
So what does all of this have to do with BlockFi?
Well, nothing yet. Many of BlockFi’s users are speculating whether or not the platform will release its own native “BlockFi coin” to help facilitate transactions and pay for user services and fees on the BlockFi exchange and DeFi platform.
Q6- Is BlockFi FDIC Insured (Deposit Insurance)?
If you’ve ever been to a bank, then you’ve probably noticed the little plaque by the teller or by the ATM that states that the bank is FDIC (Federal Deposit Insurance Corporation). Essentially, this means that the bank is insured by the federal government and that each account holder is insured for up to $250,000.
What this means is that if a bank robber or a scammer were to steal money from your personal accounts, you would be able to receive compensation up to $250,000 for lost funds. FDIC insurance also typically applies to credit cards, personal investment accounts, etc. If your information or identity is compromised and your money is stolen, you can get it back.
BlockFi is not FDIC-insured. Unfortunately, however, cryptocurrency does not yet share the same legal protections afforded to the rest of the banking world. The United States Treasury and Congress do not yet consider cryptocurrency to be a “currency,” at least not in the traditional sense of the world. This means that cryptocurrency exchanges and wallets cannot receive the same level of federal protection.
This, in turn, means that you’ll need to be extra careful with your data, passwords, and personal information. BlockFi also provides a number of intuitive security features that you can take advantage of, such as:
- Two-Factor Authentication.
- Blockchain-based hashcode protection.
- Gemini’s industry-leading security systems (as the custodial account holder).
Q7- Does BlockFi Have Dogecoin?
So, you’re interested in investing in Dogecoin? There’s no denying that the “joke currency” has exploded over the course of the past few months. The coin was created as a blockchain project in 2015 by former IBM computer engineer, Billy Markus. It can be easily identified by its monicker of a Shiba Inu dog; an image that had become a popular internet meme at the time.
Unfortunately, if you’re looking to invest in Dogecoin, you cannot purchase it on BlockFi’s exchange (yet). By far, the easiest platforms to purchase Doge on are Robinhood and Webull, where you can buy it with your USD funds.
Just last year, the coin was valued at less than half of one cent. Today, it’s valued at $0.65 cents and proponents are hoping to see it rise to $1 or more. This rapid explosion was due to sheer chance and was the result of Redditors pushing investment of the coin and a few choice tweets by Elon Musk about how it was his “favorite cryptocurrency.”
Q8- Is BlockFi Available In Canada?
Yes, BlockFi is available in Canada. If you’re a Canadian citizen and you’re interested in managing your cryptocurrency with BlockFi’s DeFi platform, then there are no laws or regulations preventing this. All Canadian citizens can sign up for a BlockFi account and start saving money today.
Investing your CAD (Canadian dollars) into cryptocurrency and holding the cryptocurrency in BlockFi’s interest accounts can give you a far greater return on your investment than holding your CAD in a traditional bank. Traditional banks offer less than 1% interest rates, while BlockFi offers up to 8.6% APY!
Q9- Is BlockFi Available In The UK?
Yes, BlockFi is available in the United Kingdom. In fact, the UK has one of the largest growing crypto investment markets, and the laws and regulations governing crypto investing are relatively similar to those in the United States.
The only countries where BlockFi is unavailable are those that have been sanctioned by the United States government. This is due to the fact that BlockFi is an American-based company, and as such, is not legally allowed to do business with the economic enemies of its home country.