The BlockFi business model involves lending, borrowing, or providing financial services for cryptocurrency assets, as well as offering trading services coupled with financial advisory services. BlockFi generates most of its revenue through interests charged on loans, management fees, and of course, trading fees.
BlockFi is a financial services provider in the crypto space. It was initially created to provide credit services to markets with limited access to financial products such as fixed deposits, term insurance, motor insurance, recurring deposits, and government bonds.
In this article, we’ll cover everything you need to know about BlockFi’s business model, including who owns this company, how it works, how it generates money, and its key competitors.
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BlockFi is a New York-based financial services company founded in 2017 by Texas State University graduate Zac Prince and Cornell University graduate Flori Marquez. The company aims to bring the power of institutional-grade financial products to individual investors and to make it easier for people to access and use crypto assets in their everyday lives.
BlockFi’s initial focus was on providing crypto-backed loans, allowing individuals and institutions to borrow cash or stablecoins against their crypto assets as collateral. This service quickly became popular among investors looking to access liquidity without selling their crypto holdings. This, in turn, helped establish BlockFi as a trusted player in the crypto lending space.
Over time, the company has expanded its offerings to include a range of financial products and services. This includes interest-bearing accounts that pay interest on crypto holdings, a trading platform that allows users to buy, sell, and trade crypto assets, and financial advisory services to help customers understand and navigate the crypto market.
After the outbreak of the deadly coronavirus disease, BlockFi raised $350 million in a Series D funding round. This was led by Morgan Stanley, whose actions saw the company’s valuation rise to more than $3 billion. But even before then, it had been snowballing rapidly, hiring hundreds of employees and expanding its operations around the globe.
BlockFi is also known for its commitment to security and regulatory compliance. They’ve been working closely with regulators to ensure that all of its products and services comply with local laws and regulations.
Zac Prince owns BlockFi. That said, it’s important to note that BlockFi is a privately held company. This means that details of its ownership structure are not publicly available.
According to this company’s official website, BlockFi’s mission is “To earn interest, borrow cash, and trade crypto from the most trusted financial services provider in crypto.”
BlockFi is a financial services platform that offers a variety of services. One of the most widely used services is the issuance of loans. Under this platform, you can borrow loans in cash or stablecoins. These loans are backed against your crypto assets as they serve as collateral.
BlockFi allows its users to borrow loans with interest loans that charge as low as 4%. You can receive funds on the same business day, making it a very lucrative platform. Afterward, you can pay off the loan as early or late as possible with no prepayment penalties.
You can access loans using cryptocurrencies such as Bitcoin, Ethereum, and Litecoin, just to mention a few. But, suppose you want to access a loan; you must start by creating an account with the platform. You must then deposit your crypto assets, including Bitcoin and Ethereum, into your BlockFi account.
Once the loan is approved, you can withdraw the funds and use them however you intend to. But you must know that should the collateral’s value drop to a point below the threshold, the user may be required to add even more collateral which or repay the entire loan.
BlockFi’s interest accounts, also known as BIAs, allow users to earn interest as high as 8.6% every year on their cryptocurrency accounts. This works by BlockFi using the users’ deposits and loaning them to institutions and corporate borrowers.
These borrowers pay interest to BlockFi, which in turn translates to interest for the initial users who deposited with the platform.
BlockFi makes money through four primary channels:
Withdrawal fees simply refer to the charges levied on a user when they withdraw funds from their platform. Trading fees refer to those fees which are charged on the total value of the trade, while interests in crypto-backed loans refer to the amount BlockFi makes for availing these loans to its users. Lastly, rehypothecation reuses collateral assets pledged to it as if these were its own propery.
BlockFi charges a withdrawal fee on the withdrawals made on its platform. Sometimes, they charge a flat rate, while other times, they charge a percentage of the total amount being withdrawn. Either way, withdrawal fees are one of the primary channels through which BlockFi makes money.
The trading fee is typically the amount charged on the total value of a trade. This depends on the asset or commodity being traded. This crypto financial service provider also makes money by earning the spread, which simply refers to the difference between the asking price of an asset and its bid price.
Like a traditional financial institution, BlockFi also makes money by charging interests on its crypto-backed loans.
This is a process where a financial institucion, such as BlockFi, reuses collateral assets pledged to it — like bank deposits and loan collateral —, as if the assets were its own property.
The BlockFi Business Model can be explained in the following business model canvas:
BlockFi customer segments consist of:
BlockFi value propositions consist of:
BlockFi channels consist of:
BlockFi customer relationships consist of:
BlockFi revenue streams consist of:
BlockFi key resources consist of:
BlockFi key activities consist of:
According to BlockFi’s official website, this platform has set itself apart by being the only independent leader with backing from investors such as:
Although not much about BlockFi’s partners is known, some of the partners that have gone into business with this trading platform include Gemini, Celsius, and BitPay.
BlockFi’s cost structure includes the following:
Below, there is a detailed swot analysis of BlockFi:
If you want to grow the value of your cryptocurrency passively, one of the best platforms that will allow you to do so is BlockFi. It provides a great and, in some cases, superior alternative to the traditional services in the Finance and DeFi sectors. This means that you can earn significantly competitive interest rates on your cryptocurrency.
You can also earn loans relatively easily and quickly to conveniently meet your impending financial obligations. However, the company’s business model revolves around centralization coupled with the short track record in the market, making it a bit risky for those looking to invest in the platform.
All said, BlockFi is a solid platform, with a solid business model, for those looking to grow the value of their crypto holdings passively.
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