BlockFi

CeDeFi lending

Basics

• Based in:
• Started in:
• "providing access to high-interest crypto accounts and low-cost credit products to clients worldwide."
• Has KYC
• From the CoinDesk 50:

"Crypto lending platform BlockFi is staying nimble through the coronavirus-led market turmoil, adding new lines of business and raising interest rates for bitcoin and ether deposits. Even as other firms buckle at the prospect, BlockFi has begun extending credit to miners, and expanding its loan book. From the end of 2019, BlockFi has increased its number of lenders from 60 to about 90, serving primarily market makers and proprietary trading firms. Earlier this year, the Jersey City, N.J.-based firm began supporting a fiat-on ramp option through wire transfers powered by Silvergate – allowing clients to buy cryptocurrencies on BlockFi’s platform with cash. The firm also offers interest rates that are four times what traditional fintech platforms offer on savings accounts. The firm is now looking to offer a consumer credit card that pays rewards in bitcoin. In February, BlockFi closed a $30 million funding round led by Peter Thiel’s Valar Ventures."

History

They were a child company of Gemini. But got bought by FTX for $240M on 1-7-2022 after the market crash happened. That didn't go well, but in 10-2023 they emerged from bankrupcy.

 Tech

• Whitepaper can be found [insert here].
• Code can be viewed [insert here].

 How Decentralized is it?

• Was classified CeFi on the HackerNoon rankings of 25-4-2019. "CeFi products are custodial, use centralized price feeds, initiate margin calls centrally, centrally determine interest rates, and centrally provide liquidity for their margin calls."

• A BIG side note, is that the blog was written by Kyle J Kistner who is Chief Vision Officer at bZx. He gave his own project the highest ranking. What a surprise.

 Is it trustworthy?

• From this extensive blog criticising Centralized and Decentralized Finance (16-12-2019):

"BlockFi is a relatively new player with strong backing. They are a child company of Gemini, which they leverage as their insurer, or better said, security provider. It gives the platform good social standing, as any BlockFi fail would directly hurt the reputation of Gemini, which has a lot of skin in the game. Regarding assets, they are closely tied to Gemini itself, which is very conservative. The only stablecoin supported by the platform is GUSD. This means you are not only lending your funds to Gemini, your underlying collateral entirely depends on the stability of Gemini itself as a platform.

Interest rates are good when compared to the industry standard, but nobody knows how the interest is actually calculated. Looks like not even the company itself. From the above explanation, our guess is that the interest rate depends on how well the clients of BlockFi slept the night before. Not that other platforms are crystal clear.

Overall they are the crypto standard when it comes to interest rates (opaque as hell) and financial security — in this case you are trusting the Winklevoss twins. According to BlockFi, they are making profit by lending your money/crypto to other “strategic partners” which is basically the same sales pitch all other platforms use.

Summary:

+ Winklewoss twins will frown disapprovingly at anyone who attempts to steal BlockFi funds

+ Decent yield

+ No historical red flags (read: no useless ICO)

- Interest rates are decided by reading tea leaves

- Stablecoin collateral is limited to GUSD and directly linked to Gemini (increasing systemic risk)

- Who are the borrowers?"

Roadmap

• Can be found [Insert link here].

• From CoinDesk (13-2-2020):

"In the first quarter of this year, the startup plans to develop a mobile app and the ability to send fiat wire transfers. In Q2 2020, BlockFi plans to offer Automated Clearing House (ACH) payments.

It also expects to double the size of its 75-person team by the end of 2020."

Audits

• Bug bounty program can be found [insert here].

Bugs

• BlockFi said an attacker got hold of users’ data by compromising an employee’s phone and taking control of the person’s phone number through a SIM swap attack.

Usage

• From CoinDesk (13-2-2020):

"The firm reports having more than $650 million in assets on its platform, a 160 percent increase from the $250 million in assets it reported in August, with a 0 percent loan loss rate."

Pros and Cons

Cons

• During the FTX 2022 November crash, BlockFi paused withdrawals on its platform (10-11-2022):

"A key issue is that BlockFi is not actually an on-chain crypto protocol, and as such, what the company does with customer deposits isn’t transparent. “Given the lack of clarity on the status of FTX.com, FTX US, and Alameda, we are not able to operate business as usual,” the company said on Twitter, before saying that pausing withdrawals was part of a move to “limit platform activity.” While not explicitly stated, the simplest explanation for the move is that BlockFi doesn’t have enough assets on hand to cover clients’ withdrawal requests."

It has been rumored since that BlockFi, as part of the FTX acquisition, had to move its entire treasury into FTX.

Team, Funding, etc.

Team

• They are a child company of Gemini
• Zac Prince; CEO & Founder
• Flori Marquez; co-founder
• Chris Ferraro; board of directors, partner at Galaxy Digital
• Announced that it had hired Wittney Rachlin (previously American Express) as Chief Growth Officer and David Olsson (Credit Suisse) as Global Managing Director of European and Asian markets.
• Will be “reducing [its] headcount by roughly 20%” to around 600 (5-7-2022). Not too long after, bankruptcy and acquisition deals got floated.

Funding

• From CoinDesk (13-2-2020):

"Raised $30M in Series B Led by Peter Thiel’s Valar Ventures with participation from repeat investors Morgan Creek Digital, PJC, Akuna Capital, CMT Digital, Winklevoss Capital and Avon Ventures. New investors included Castle Island Ventures, Purple Arch Ventures, Kenetic Capital, Arrington XRP Capital and HashKey Capital."

• From Forbes (9-4-2020):

"BlockFi announced that it has brought on Three Arrows Capital as a strategic investor to the company. Three Arrows Capital, based in Singapore, is a registered hedge fund and cryptocurrency investor. "

• From CoinDesk (20-8-2020):

"After $50 million in fresh capital, crypto lender BlockFi has now raised nearly $100 million in the past 12 months." The round was led by Morgan Creek Digital.

• PompCryptoJobs; on of the three backers (27-1-2021). The project is created by Pomp, who is a partner at Morgan Creek Digital.
• Raised $350M in its Series D round (16-3-2021).
• Invested in a $15M funding round for Coin Metrics (5-5-2021).
• Stroked a $680M credit deal with FTX US and an acquisition path (2-7-2022). Got bought for $240M by FTX according to different source the day earlier.

Partners

• From this article (2-12-2020):

"Visa has partnered with BlockFi to offer a credit card allowing customers to receive 1.5% of their purchases back in bitcoin instead of cash."