Blockfi Breakdown
Experiences with Blockfi and general considerations by D-rex
It’s no longer “your” bitcoin when you store it with a third-party custodian.
Drex 11-8-20
This is just something you as a die hard bitcoiner is going to have to swallow if you’re interested in using your crypto for a loan or earning interest from storage. Once you get over this mind hurdle, you can then assess the risks versus benefits.
What are the benefits?
Well, it’s true…you do earn 6% APR interest on your BTC up to 5 BTC worth and then 3% for anything after that. I’ve looked into 3 other lenders and was considering Nexo and/or Celsius to diversify anything after 5 BTC, but something just didn’t feel right when investigating.
As someone who is interested in extra security, I always use google authenticator for 2-factor verification… Blockfi was the only one of these that had a seed phrase you could write down and keep in cold storage should your phone ever die or you need to reset the authenticator. I went as far as emailing both Nexo and Celsius with no resolution.
Additional benefits:
Blockfi is the most trusted in a trustless community for lending and storing your coin. It has first mover advantage and name recognition. If you’ve been in bitcoin for 2 minutes, you’ve already heard of Blockfi.
Could this be a set up for a HUGE rug pull?
potentially… but Blockfi has made it’s name with its reputation and uses Gemini custody to keep it’s coins stored SAFU.
Pros-
- – It’s easy to set up (5 minutes max). Getting your coin on Blockfi is also incredibly simple (just scan or cut and paste).
- – Confirmation emails also provide immediate peace of mind that you sent your precious coin to the right place.
- – There are no limits a small fish like myself would ever hit (something like 50 BCT a day) for withdraws… more on those in a bit.
Cons-
Now on to some cons (which could be pros depending on your view of regulations).
- – It’s pretty clear that Blockfi has a deal with the US government, which sounds scary… but paying taxes is one way to keep a company solvent.
- – Blockfi will calculate what you owe with a tax form, so there are no gray areas with this one… expect to be taxed.
- – Getting your coin off the first time is a huge hassle. Verification with multi-angle selfies is required (at this point there are no doubts about the government’s involvement).
- – It also takes at least 24 hours to get your coin back in your hardware wallet once you submit a withdraw request (pretty standard process).
You do get one free withdraw a month, so make it count…it’s at least a $25 USD fee for each subsequent withdraw.
In terms of loans, I feel they give you a higher APR than a bank would with above average credit. Yes, you can save yourself some capital gains taxes keeping your coin on Blockfi and having them lend you money with your BTC collateral. But at some point, you’re going to have to cash in your BTC and if you truly need the money – that’s a legit use case for BTC as your savings imo.
Do I trust Blockfi?
Yes, I won’t discuss how much of my portfolio is over there, but I’ve recommended this service to my friends and family… they’ve had no issues so far. It’s an easy way to make a passive income by simply holding Bitcoin (minus taxes) in a well-respected company that also has many big-named sponsors (take that with a grain of salt).
I’ve been pleased thus far with my returns and prefer this method to staking questionable alts or trading… especially as BTC dominance continues to rise and the beginning of this next run is just getting started.
A fool and his Bitcoin are easily parted…just don’t let that be you.
Drex – 11-8-20
Best of Luck and let us know if you have any questions in the comments!
-DRex
twitter: @drex_jurassic
