A Review of BlockFi: Borrow Against Your Crypto and Earn Interest on It

Note: This is an independent review based on my personal experience using BlockFi. I do not receive compensation from BlockFi nor do I have any connection to, or affiliation with, the company. This is not financial or legal advice. Any examples I provide are for illustrative purposes only. I received a middling grade in Economics 101 and dropped out of Microeconomics when I was informed calculus would be required. Be forewarned.


  • BlockFi allows you to borrow cash against your crypto, and, separately, to earn interest on it.
  • Loaning against your crypto can be a good way to cover living expenses without selling your crypto, or raise cash to purchase additional crypto.
  • You can earn some solid interest on your crypto. And interest is earned as crypto!
  • There is no catch. BlockFi makes money by lending your crypto to others.
  • However, you must trust BlockFi to custody your crypto.
  • Which I do.
  • Plus, it is easy to use.
  • I am a fan!


I have been receiving many questions about BlockFi, the platform that allows you to borrow against your crypto, and also to generate interest on crypto that you hold with them. I have been using both features on BlockFi for three months and will share what I have learned.

Disclaimer: If you are philosophically or practically opposed to entrusting others with your keys, then BlockFi is not for you. Using BlockFi requires trusting the company to hold your keys. I discuss security further below.

About Me: I am located in the US. I am comfortable with computers but have no coding knowledge or anything of the sort. I have a good grasp of business finance and personal finance but nothing fancy. I have no ideological commitments vis-à-vis cryptocurrency other than “it has to work.”

What is BlockFi?

BlockFi is a for-profit company headquartered in New York City that serves customers in all 50 US states. The company also has international operations.

BlockFi began in 2018 by offering crypto owners the ability to borrow dollars against their crypto. Borrowers can use the loan proceeds as they please, whether it be to purchase more BTC, cover living expenses, or buy a farm. Users can now borrow against ETH, LTC, and PAXG too, as well as receive the loan as GUSD, PAX, or USDC. Current interest rates range from 4.5% — 9.75%.

BlockFi later added “Interest Accounts,” where users can lend BTC and other crypto (ETH, LTC, LINK, PAXG, USDC, BUSD, PAX, GUSD) to BlockFi and earn interest — like a high-yield savings account for crypto. Current interest rates range from 3.0% — 9.3%. (Starting 4/1/2021, rates on BTC and ETH will change.)

More recently, BlockFi has added an exchange where crypto can be bought and sold. Additionally, the company will soon release the Bitcoin Rewards Credit Card, which will work like an ordinary credit card except that will provide 1.5% bitcoin rewards on all purchases. So psyched!

How do loans work?

Concept: You provide BlockFi with crypto as collateral and receive dollars (or dollar stablecoins) in return. You pay monthly interest, in dollars, to service the loan.

Step 1: Choose your loan amount. The minimum loan amount is $25,000.

Step 2: Choose your Loan-To-Value (LTV) Ratio.

The LTV is simply the ratio of the value of the loan against the value of the collateral. For BTC, BlockFi allows users to select an LTV of 35% or 50%.

Let’s say I want to borrow $25,000, using my BTC as collateral. If I select an LTV of 50%, that means my loan of $25,000 will be 50% of the value of the collateral. Therefore, I must provide $50,000 worth of BTC as collateral. ($25,000 / 50% = $50,000).

Alternatively, let’s say I select 35%. That would require me to provide $71,429 worth of BTC as collateral. ($25,000 / 35% = $71,429).

Choosing the appropriate LTV is very important because it determines:

  1. The amount of collateral you must provide. Your collateral will be held by BlockFi and effectively locked up. (No, you cannot use the collateral to also generate interest in an Interest Account.)
  2. Your interest rate and resulting monthly payment. Higher LTVs are riskier to the lender, so the interest rate is higher: 50% LTV = 7.90% interest rate (APR) at time of writing. 35% LTV = 9.75%.
  3. The risk of defaulting on your loan. BlockFi uses a three-tier risk management system if the value of your collateral drops:

Tier 1: If the value of your collateral declines to the point where your LTV is 65%, you would receive a warning from BlockFi that your loan is approaching “margin.”

Tier 2: If the value of your collateral declines to the point where your LTV is 70%, your loan has entered a “margin call” and you must either provide additional collateral or pay down the loan balance.

Tier 3: If the value of your collateral declines to the point where your LTV is 80%, your loan is in Default and BlockFi would have the right to sell your collateral.

With that said, BlockFi states, “Default Liquidations are not something we actively wish to do and would take as many steps as possible to avoid this if possible.”

For me, the choice of 35% LTV is easy. Though I must put up more collateral to receive $25,000 than I would at 50% LTV, it also means I pay a lower interest rate and am less likely to default. I prefer to sleep well at night, so I will take the less risky approach. At the time of writing, 35% LTV translates to 1.27 BTC as required collateral.

At this point, you provide BlockFi your bank account information, complete some paperwork, and send them the collateral. The entire process can be completed in just a few minutes of active work, though it might take a few days for the loan to be deposited into your bank.

Loan Notes

  • BlockFi does not perform a hard or soft pull of your credit score when you apply for a loan.
  • There is no penalty for prepayment (early repayment). The remaining interest is forgiven, and the collateral is released.
  • BlockFi charges an origination fee of 2% of the loan value. For example, a loan of $25,000 would incur an origination fee of $500. BlockFi keeps this fee — it is not returned when the loan is paid off.
  • Loans can be refinanced if the value of the underlying crypto collateral increases. By refinancing you can borrow additional cash without being required to post additional collateral. You might use this cash to purchase more crypto or cover living expenses. If your investment thesis is that BTC will increase in value over time (as mine is), this is a good way to fund your living expenses.
  • There are downsides to refinancing. First, it triggers another non-recoverable 2% loan origination fee. Second, the more debt you take on, the more risk you are exposed to. Let’s say you take out a loan when BTC is at $50K, then refinance when BTC hits $100K. If BTC subsequently drops back down to $50K, you might be screwed.

How can I earn interest on my crypto, and how much?

BlockFi offers a standalone Interest Account that is like a high-yield savings account for crypto. Users can lend BTC and other crypto (ETH, LTC, LINK, PAXG, USDC, BUSD, PAX, GUSD) to BlockFi and earn interest. Current interest rates range from 3.0% — 9.3%, as shown in the table below. (Starting 4/1/2021, rates on BTC and ETH will change). The best part is the interest is paid in the same currency that you deposit — so if you deposit BTC, you earn BTC.

Source: BlockFi

I love this feature. Six percent interest on my BTC for “free”?* Are you fricking kidding me? There really is nothing more to say here. If you want to earn a healthy interest on your crypto, in the same currency that you deposit it, and are willing to trust others to hold your keys, then this service is for you.

*Nothing is free. Here, you assume custody risk (i.e. losing your crypto.) More on this below.

So what is the catch?

At this point you are probably thinking, “Okay, so I understand how BlockFi makes money off of the loans they make to customers, but how can they give me six percent just for keeping my BTC with them?”

BlockFi makes money by lending your BTC to third parties and earning an interest on those loans. These third parties are mostly market-makers and arbitrage-seekers. Market-makers facilitate trades by bringing buyers and sellers together, taking a small cut in the process. Arbitrage-seekers exploit market inefficiencies (i.e. price differences between markets) to earn profit.

For instance, let’s say BTC is priced at $50,000 on Coinbase but $51,100 on Kraken. The arbitrage-seeker buys 1 BTC on Coinbase and seeks to resell it on Kraken for a $100 profit. The problem is that the price of BTC on Kraken changes so quickly that the $100 profit opportunity might vanish before the Coinbase purchase settles. This requires the trader to have some BTC on hand. So the trader will have already borrowed BTC from BlockFi to cover the sale on Kraken. Then, when the Coinbase transaction eventually settles, the trader will use that BTC to repay the loan to BlockFi, paying BlockFi a small amount of interest in the process. (In this example, the interest would need to be less than $100 for the trader to make a profit.)

BlockFi is able to provide a healthy six percent return on BTC because the broader market is still relatively immature, or “illiquid.” That means there are sizable “gaps” in the market that parties seek to exploit for profit.

Additionally, BlockFi lends a small portion of its crypto to short-traders and crypto-native businesses like Coinbase that require crypto inventory to function smoothly.

How secure is BlockFi? Can I trust them?

Allowing others to custody your BTC involves risk. The questions are: (1) How much risk? (2) Compared to what? and (3) For what benefit?

How much risk is involved?

Risks involved in holding your BTC with BlockFi — either as collateral for a loan or as an interest-earning deposit — include:

  • Somebody hacking your individual login credentials and stealing your BTC.
  • Somebody hacking the BlockFi platform itself and stealing your BTC.
  • Theft by BlockFi employees.
  • BlockFi going bankrupt, out of business, or otherwise failing to meet their obligations.
  • BlockFi temporarily freezing your assets during a volatile market.

As discussed above, BlockFi lends out your BTC. The BTC you “hold” with them is really just a claim to BTC. In other words, BlockFi does not necessarily have the BTC on hand — rather they have an obligation to you in the value of that asset. This is similar to any traditional bank, which does not actually hold your money for you.

BlockFi does not carry insurance that would cover your assets in the event the company is unable to meet its obligations. CEO Zac Prince says this is because insurance is too expensive. BlockFi, however, makes a point of actively complying with financial regulators.

As a layman, I am in no position to objectively evaluate BlockFi’s risk management strategy. Instead, I place my trust in people and organizations based on their values and perceived competence. I believe the rest follows naturally.

I have been using BlockFi as a customer for three months, and I have also listened to a few interviews with Prince, who has been making the rounds in the Bitcoin podcasting world. (What Bitcoin Did, The Investors Podcast.) I have full confidence that BlockFi gives a sh*t, cares about its customers, and has talented staff.

Prince is candid about the risks of using BlockFi and does not dodge difficult questions. He explains the company’s operations clearly and transparently. BlockFi is also backed by a solid group of investors, embraces regulatory compliance, and has grown from a company of a few dozen employees to nearly five hundred with multiple offices, including international locations. The company has operated for more than three years without any notable debacles. For these reasons, I am willing to trust them to hold my BTC.

Lest you think I am a sucker — which I could well be — I have not been so impressed with other companies. For example, I did not enjoy my brief experiment with Nexo. Something just did not sit right with me. I am not saying Nexo is bad or fraudulent — just that they did not earn my trust.

For more info, check out BlockFi’s Security FAQs here.

Compared to what?

Risk is relative. Holding your BTC with others must be compared to the risk of self-custody. I do not belong to the “not your keys, not your coins” crowd because I am (1) not great with technology, (2) known for stupid mistakes, and (3) kind of lazy. I think it is more likely that I would lose my own keys than for BlockFi to lose my assets. A solution like Casa is probably best from a security standpoint, but does not offer the opportunity to earn interest or borrow against BTC.

This question is without a universal answer. You just have to determine what works best for you. Personally, I sleep better at night holding my BTC with BlockFi than in a cold wallet.*

*With that said, please do not hold your crypto on an exchange for longer than necessary. Exchanges are not meant for custody.

For what benefit?

I have discussed the benefits of BlockFi above: the ability to loan against your BTC and earn interest.

For me, the benefits outweigh the risks. You might feel differently, and that is fine.

How well does BlockFi work? How easy is it to use?

I find BlockFi easy to use. It is suitable for novice users; no technical expertise is necessary. When I have had questions, their customer support has been helpful. They even have a phone number that real humans answer! (This can be more valuable than you might think.)

If you are just venturing into the world of crypto borrowing/lending for the first time, BlockFi is a good place to start. You are unlikely to mistakenly send your coin to a random tea vendor in Morocco, for example. Though he probably could use it more than you!

A word on taxes.

Understanding the tax implications of buying, selling, and holding crypto is important. This is no longer fun and games in the sandbox. With each new Bitcoin millionaire, tax authorities care just a bit more. And they are beginning to pay real attention. You might have noticed that the IRS Form 1040 now directly asks whether you have received, sold, sent, exchange, or otherwise acquired cryptocurrency during the tax year.

BlockFi will provide you the necessary forms at the end of the year: a 1099-MISC form reporting interest earned and a 1099-B form reporting any trades executed on BlockFi’s exchange. From there, it is up to you to report as appropriate.


If you are interested in borrowing cash against your crypto or earning some interest on it, and you are comfortable with the risks involved, BlockFi is a great solution. I enthusiastically recommend it.

Coming soon.

A review of Hodl Hodl peer-to-peer lending.



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William Elman

William Elman


Law student at The George Washington University. Big ideas, books, and Bitcoin. @SoyMemoElman