Is BlockFi Safe? Safety and Security Explained

Introduction

Is BlockFi Safe? Get the answer in this post.

BlockFi is a comprehensive cryptocurrency ecosystem designed for experienced bitcoin traders. It has over a million verified customers and assets worth more than $10 billion.

Users of this system may appreciate the variety of items provided by BlockFi. BlockFi, in addition to its cryptocurrency exchanges, offers low-interest loans, a cryptocurrency rewards credit card, and an interest-bearing account with up to 8% APY. Is BlockFi Safe? Read on to learn more.

Is BlockFi Safe?

Is BlockFi Safe? Although BlockFi maintains good security standards, the fact that it offers crypto-backed loans poses a danger during market instability. To determine how secure BlockFi is, we will examine its security measures, followed by the possible risks of its loan scheme.

BlockFi’s security measures are comparable to those of other leading exchanges. It supports two-factor authentication (2FA), which needs two pieces of identification to access an account. It also has a function called allow listing (sometimes known as allowlisting), which will enable you to limit withdrawals to known addresses you’ve added to your allowlist.

Is BlockFi Safe? BlockFi does not hold cryptocurrency funds. It works with custodians to accomplish this, with Gemini serving as its primary custodian. Gemini puts most of its cryptocurrency in cold storage, which means it is kept offline and has insurance to cover cryptocurrency stored online.

One of BlockFi’s primary risks is that it accepts cryptocurrencies as collateral for monetary loans. These typically have an LTV ratio of 50% or below, implying that the security is worth at least twice the loan amount. If the collateral’s value falls, the borrower must add more, or BlockFi may liquidate its investment.

Despite these precautions, BlockFi suffered an $80 million loss in 2022 when one of its major clients, Three Arrows Capital (3AC), failed to increase its loan collateral. BlockFi encountered financial instability due to this and a bear market and was forced to make a contract with the FTX exchange. As part of the transaction, FTX committed to give BlockFi a $400 million line of credit and to purchase BlockFi.

Trade Experience

BlockFi provides an online dashboard as well as Android and iOS mobile apps. Generally, trading on BlockFi is simple. Users wishing to make a simple transaction on the desktop would go to the table at the top of their screen and specify the assets they wanted to swap.

Customers with a BlockFi Interest Account can set up recurring trades. Trades can be scheduled to occur daily, weekly, or on the first and fifteenth of each month. BlockFi distinguishes itself from competitors due to its repeating transactions feature.

Overall, for individuals who are used to utilising financial applications or an online brokerage account, the trading experience is simple.

Fees 

BlockFi’s price structure differs from many exchanges, which frequently offer simple maker/taker fees. While there are no trading costs at BlockFi, withdrawal fees and withdrawal limits exist. You are entitled to one free withdrawal each month with specified assets. Others, however, will charge you a fee for each withdrawal. For further details, see BlockFi’s entire fee structure.

Security

Is BlockFi Safe? BlockFi uses a variety of user and platform security techniques. Users will be required to confirm their identity when signing up for a BlockFi account to help prevent fraudulent behaviour on the network. You must supply a government-issued photo ID in addition to some basic personal information to do so. Is BlockFi Safe? BlockFi also provides optional two-factor authentication, which aids in the protection of user accounts. Users are currently not forced to utilise two-factor authentication; however, it is encouraged.

BlockFi’s money is held in cold storage by its partners, including Gemini. Cold storage refers to the storage of assets that are not linked to the internet, making them safer in general.

Conclusion

BlockFi may be a fantastic choice for a cryptocurrency exchange with innovative features and products, including crypto-backed loans, a cryptocurrency rewards credit card, and an easy-to-use interface. However, it is critical to be aware of some of the issues that users have encountered, such as slow-to-respond customer service and longer-than-expected transaction times.