8.6% Savings Interest Rate? A Review of Blockfi

May 10, 2020 · 7 min read

Sick of getting a .05% savings rate? Yeah, me too.

Stacking Sats at Biosphere 2

With the average inflation rate in the US at 1.5%, I calculated that I was actually making a negative -1.45% APY on my money parked at the local credit union at .05%.

“Savings” becomes a misnomer; it should really be called “Diminishings.”

With the Central Bank’s money printer going infinite Brrrrrr, can higher inflation be far behind?

There’s even talk of negative rates coming to the US. Why not — Sweden, Denmark and Japan already have negative rates. The US will not be immune to this financial experiment. The US already cut its rates to zero, and if the economy needs more nudging the Central Banker’s question will be: what comes after zero?

One from none. Pay to save.

Savings Alternatives

Looking around at the various Ally Banks (1.5%), Varo’s (1.61%), Robinhood’s (1.8%), which all soundly beat the .05% rate I was currently not enjoying, I cast my gaze over to Defi, or Decentralized Finance, the crypto category covering borrowing, lending, savings — bank type functions using crypto. Defi offers financial products outside the purview of governments or financial institutions.

After researching various Defi options such as Aave, Coinloan et al, I found a Defi called Blockfi offering an eye-watering 8.6% APY on USDC, a US dollar stablecoin offered by CENTRE, a consortium of companies working in the cryptocurrency space.

USDC is backed 1-to-1 with the US dollar, in effect becoming a crypto token proxy for any US Dollar amount.


Please note that the major difference between using Blockfi versus your typical bank savings is that your funds are not FDIC insured up to $250,000 .

Blockfi does secure funds using Gemini as their custodian:

BlockFi client assets are securely deposited with our primary custodian Gemini at a unique wallet address generated by Gemini, a New York trust company licensed by the New York State Department of Financial Services. Gemini is a fiduciary under §100 of the New York Banking Law and held to specific capital reserve requirements and banking compliance standards. Gemini also has digital asset insurance coverage and is SOC 2 Type 1 security compliant on its exchange and custodian platform. ~ Blockfi: “How does BlockFi securely store client crypto assets?”

And every month, the US dollar reserves for USDC are attested to by top 5 accounting services firm, Grant Thornton LLP.

That’s all well and good, but like Mike Tyson says:

Photo credit: Fewzion

As in: will my savings be safe in case of say, a black swan event? An economic Tsunami of some sort? Without the FDIC backing that I get from the US of A, how do I entrust my funds without seeing evidence to its safety?

First rule of investing: Don’t lose money

Second rule: don’t forget the First rule.

Well, just as I was getting underway with my investigation into Defi savings rates in February, the world was hit by the Coronavirus. By March, the S&P had fallen 11%, the Dow by 3,000 points.

If ever there was an ultimate stress test of Defi safety, and risk management protocols — this would be it. Blockfi got financially punched with the Coronavirus, and seemed to survive, nay flourish, during this economic drubbing.

You can hear about how Blockfi managed to weather the Coronavirus storm, with its ensuing loan margin calls on the What Bitcoin Did Podcast.

That Blockfi’s safety and risk protocols were able to weather the biggest financial storm of our generation gave me confidence to invest with their Defi offering.

Test Investment

I invested on February 29th with a test amount of USDC. I first went to my Coinbase account, and purchased USDC before transferring it to Blockfi. I found that while you can purchase stablecoins such as USDC and USDT directly in Blockfi by wiring the money, my bank has a hefty fee associated with sending wires, which I could avoid by simply transferring USDC via Coinbase.

And on the first of April I enjoyed my one month’s return of an 8.6% APY.

Defi Not So “De”

Looking around their website, I also saw that they offered a Bitcoin savings rate of 6% APY. With the oft heard Trace Mayer phrase of “Not your keys, not your bitcoin!” ringing in my ears, I realized then that Defi is not really Decentralized much at all.

There’s a risk in keeping your funds with a centralized entity. It’s the price you pay for getting these types of rates. While you don’t retain your keys, what they offer is a way to become sort of partners with a Defi, handing over your crypto, which they then lend it out at a higher rate.


Blockfi makes it simpler than much of the other Defi offerings since you don’t have to think about things such as lending your crypto out, and at what terms such as length of loan, and rates offered. You simply transfer your US dollar stablecoin, and enjoy the high rate of return.

Another nice thing is that your savings are compounded monthly. Meaning that the Annual Percentage Rate (APY) is calculated and paid out monthly. The interest percentage is calculated (compounded) every 1st of the month against your now higher savings + monthly interest amount.

Through the Blockfi dashboard you are able to see your savings grow from month-to-month.

Blockfi also offers a high interest rate for other types of crypto. Getting 6% APY for my long held BTC seemed like bitcoin from heaven. Free bitcoin.

I’m just hodling it anyway, why not get something out of it?

Stacking Sats

For a long term HODLer this is a way to passively stack satoshis. No matter what the price gyrations that bitcoin may do, month after month you’ll see your interest be applied.

When bitcoin is booming it’s easy to be happy, but when the price of bitcoin goes down the interest rate does provide some cold comfort.

In the case of USDC your money goes to work for you at a rate 400%+ higher than what you would see with a typical bank savings account.


Doing a quick comparison, say you deposited $10,000 USDC on April 1st, by May 1st you’d have around $10,068. The 8.6% APY is based on monthly compounding, so the amount would not be a straight 8.6% divided by 12 month scenario, but this is close. The Ally bank savings rate of 1.5% APY would yield only $10,012.50. A $55.50, or 444% difference.

That’s like the difference between a Bacon Triple Whopper meal, and an Outback Steak meal with sides and a drink.

By the end of a year you would have $10,860 USDC vs $10,150 at Ally. A $710 difference.

By contrast, if you deposited a single Bitcoin on Blockfi on April 1st (worth approximately $8,582 USD at the time), by the 1st of May, at the BTC Blockfi interest rate of 6%, you would get around .0048 BTC, worth approximately $41 USD at the deposited price of $8,582. But the price of Bitcoin had risen on May 1st to $8,893, which would make it actually around $43 in interest.

By May 7th the price of bitcoin had jumped to $9,983, and if the trend holds this would bode well for a larger interest payout (in dollar terms). What started as a savings of $10,000 USDC and $8,582 in BTC, by May 7th had changed to $10,068 USDC and $10,025 worth of Bitcoin. Nearly equal.

The beauty of this comparison is you can see a race between currencies: a stablecoin (USDC), and BTC — what some may call a distablecoin. One (USDC) will rise at a constant rate, and the other (BTC) will likely experience the volatility for which it’s known.

The thing to remember is that in Bitcoin terms the interest is calculated in the same stable manner, accruing around .0048 btc per month. It’s only in comparison with the US dollar where we see the volatility — and the hoped for asymmetric investment gains.

Other Crypto supported

Blockfi offers interest accounts for several other cryptocoins such as ETH, LTC, GUSD, and PAX. You can compare rates here.

Apprehension to Thrilled

I was honestly apprehensive at first. At this stage of the crypto game I still had to jump through the hoops of converting US Dollars to the equivalent USDC stablecoin. I then had to transfer from one exchange (Coinbase) to the Defi platform Blockfi, and wait for the confirmation of my funds landing in the account safely. Then, wait till the 1st of the month to see my interest accrue.

Yet, in order to get the mind-blowing interest rate of 8.6% I saw these hoops as fairly minor.

Coinbase is no harder than using any online bank. The same with using the online Blockfi app. And I am certain withdrawing my USDC back to Coinbase and converting to US Dollars would be the same process — just in reverse.

And each 1st of the month I’m thrilled to see the interest stack up for both my USDC and Bitcoin savings.

For a long time HODLer this may be a great way to passively stack satoshi’s, and for the Average Joe and Josette this is a way to make an outsized savings rate on your US dollars.

If you found value in this review, feel free to use my refer a friend link: https://blockfi.com/?ref=2bcac01e. If you use this link and deposit at least $100+ in crypto and hold till at least the interest payment day, we will both receive $10 equivalent in BTC.

Nothing in this article is to be construed as investment advice. Neither the author nor the publication takes any responsibility or liability for any investments, profits or losses you may incur as a result of this information.


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