It's time for another foray into a passive income opportunity! I've been heavily into crypto for years now and have loved the rise of proof-of-stake currencies due to their passive income opportunities. This has led me to stare longingly at my Ledger Live balance of Bitcoin in a desire to put that BTC towards making myself more money. Well over the last few months I've been experimenting with various platforms that allow you to do just that! BlockFi, being a high profile platform, is chief among them. We're going to start with a breakdown of it's offerings and then delve into the good and the bad.
BlockFi has multiple functionalities but the most important is the ability to earn interest on the funds you deposit onto the platform. They support BTC, ETH, LTC, USDC, GUSD, and PAX.
Bitcoin, Ethereum, and Litecoin are all very well known. But in case you're unaware of the other coins here is a small breakdown.
- USDC is the exchange Coinbase' stablecoin that is pegged to the US Dollar. 1 USDC = 1 USD.
- GUSD is Gemini Exchange's direct competitor to USDC that is very similar. 1 GUSD = 1 USD.
- And joining the stablecoin group, PAX is Blockchain.com's answer to the coins of other platforms. 1 PAX = 1 USD.
All you need to do to start earning interest weekly is deposit the appropriate coin onto the platform. It's that easy! The various rates do vary, greater rates are available on the stablecoins, and they are as follows:
- BTC = 6% APY
- ETH = 4.5% APY
- LTC = 3.8% APY
- USDC, GUSD, PAX = 8.6% APY
Edit: APY stads for "Annual Percentage Yield." This is the % of your money you would earn were you to leave it on the platform for an entire year.
Some of those rates are JUICY. Particularly the stablecoins if you're into them. I myself only made use of the platform to earn interest on Bitcoin. I found the experience of depositing, earning interest and withdrawing to be relatively painless. One thing that's nice is you can earn your interest in the currency you deposit, or any other currency on the platform. I'm also liking the fact that there is no game to play to try and earn higher interest rates.
Other similar platforms will try to lure you into their platform specific coin with the allure of 1 or 2 extra percentage points. And often these platform specific currencies aren't great investments and don't have any use outside the platform. Here's looking at you Celsius and Crypto.com If you do end up signing up with BlockFi be sure to make use of promotional codes like referral links that give you a bonus of $10-$15 after holding $100 of crypto on the platform for 1 month. Wouldn't want to miss out on free money! Any link in this article is a referral link which will give you your bonus $10 after 30 days, so feel free to follow it if you want to support my passive income articles.
That's the gist of earning passive income holding your funds on BlockFi. There's not much to it really! You can take those rates and make a calculation of how much you will earn. Personally I find it "worth it" once you're talking about funds in excess of $500 or so.
BlockFi also has a referral program that you can use to try and generate more for you from the platform. However it's not the ideal style we would prefer for continuous income. The referral utilizes a link which is nice because it is easy to integrate into blogs or other places on the internet. But the negative is that it only offers you a one time payment for your referral rather than an ongoing percentage of the earnings of those who you refer.
You will earn $10 for ever user you refer who holds $100+ in their account for a period of one month. After you refer a total of 5 users you will begin earning $20 per referral. One aspect that does help is the users you refer will get an incentive of a $10 bonus for being referred as well. It really helps you onboard users when there is a financial incentive for the reader.
Now let's discuss the platform itself. The user interface on desktop is really nice and has a very professional feel. This makes sense given BlockFi's association with the Gemini Exchange owned by the Winklevoss Twins of Facebook fame. I spent almost all my time with BlockFi using the desktop version, but once I completed researching this article they launched a mobile application in June. It has only around 5k downloads on Google Play but at first glance it seems just as smooth and responsive as the desktop version. Although there do seem to be complaints about it constantly forgetting login information. Which may be a good thing for users security honestly...
Look at those guys! Don't you want to trust them with your money? Okay so I've been spending a lot of time so far singing the praises of BlockFi. And this is due to the fact that it does exactly what it says it will. Great job, the product functions. However it's not without fault.
Withdrawing my funds was not an enjoyable experience. Firstly, BlockFi only offers one fee-less withdrawal per month. And this one free withdrawal is a recent addition. All other withdrawals fall under a fee schedule that is prohibitively expensive and not justified. These fees are as follows:
- Bitcoin - .0025
- Ethereum - .0015
- Litecoin - .0025
- Stablecoins - $.25 USD
For many if you're processing more than one withdrawal in a month these fees will solidly eat into your interest earnings. Especially if you're not storing a large amount on the platform. I also found withdrawals to take quite a long time. After requesting my withdrawal there were a few days before I received it in my wallet. BlockFi states this is for security reasons, and while I understand there are some benefits i find it excessive. It does allow users to correct an address mistake, as well as preventing bad actors from withdrawing all your funds by gaining access to your account just once. But no user should ever be making an address mistake in the Bitcoin universe in the first place.
The long withdrawal process doesn't help people trust the platform. It's already tough in this space convincing users to allow you as a company to control their funds, but when you make it a long process to withdraw it amps up your users concerns. Personally I want to feel like I can access my funds immediately if I suddenly get worried about handing over my crypto to another party. After all, "not your keys, not your coins."
And BlockFi definitely has issues with trust as of late. They are backed by Gemini, a very large exchange in the cryptocurrency space who holds all the funds stored on BlockFi and this helps give them a lot of credibility. But recently they underwent a very high profile leak of customer information. An unauthorized third party managed to get into their system and make off with the Name, Email Address, Date of Birth, Postal Address, Activity History, Phone Number of all users. As well as User's Current Account Balances, and Pending Withdrawals. This is a massive amount of information! And they offered no compensation to the users unless it was specifically requested. Not a good look BlockFi.
BlockFi does offer more than just interest on cryptocurrency. They offer loans using your cryptocurrency as collateral. You can receive 50% of the current value of Bitcoin, Litecoin, or Ethereum as a loan. They generally charge a fee of 2% of the value of the loan up front, and then 4.5% a year. Requiring monthly payments of at minimum, the interest on the loan.
These rates are also dependent on how much you loan. They cite these particular interest rates for loans of $10k which would require roughly 2 BTC in collateral. When I put in the numbers for a $5k loan I was quoted a much higher rate of 12% per year. Personally I havent actually used the crypto-loan service and don't plan to. But they may be a route to explore if you have crypto you don't want to liquidate and are also struggling with other high interest debt.
These products are BlockFi's bread and butter currently, but they have plans for a Crypto Rewards Debit Card to be released later this year. This card is intended to be linked to the new mobile app and they've recently hired a former American Express executive to spearhead it's launch. I'm going to have to come back during it's release to check it out.
All in all BlockFi does it's job perfectly fine. You are given the ability to earn interest on your crypto in a relatively safe way. However there will always be inherent risk in handing over your hard earned currency to anyone. BlockFi has already had one concerning data breach. Although all funds are supposedly held in cold storage and were never at risk according to BlockFi. Honestly if you are going to be using your crypto to earn passive income BlockFi is likely one of the safer platforms given their association with Gemini and the high status in the crypto world that it brings.