Passive income is one of the best ways to earn money easily without working. It’s getting too popular nowadays.
Are you interested in earning passive crypto income, or are you just waiting for those markets to rise and want to put your crypto to work in the meantime? Well, if you’ve nodded along to any of that, then you’ll probably want to take a look at crypto lending platforms. But which one is the best?
In this post, I’ll be telling you about the pros and cons of Celsius and BlockFi, two of the top crypto lending platforms out there, to see which one reigns supreme. All that is to help you decide if crypto lending tickles your pickle and which is the best platform for you. It also gives me the opportunity to share my top crypto lending tips and reveal which platform I personally use. So, be sure to stick around.
Disclaimer: All the content converted from Coin Bureau’s “BlockFi vs. Celsius: Best For Passive Income?? Compared!” video after getting the whole permissions.
What Is Crypto Lending?
Before I get started, I should probably give you a brief overview of what crypto lending actually is. Now, in short, this relatively new segment of the crypto market is all about supplying crypto like Bitcoin, Ethereum, or stable coins and earning interest in return. A bit like how you supply dollars or euros to a bank, and you get those interest payments.
Now many of you would have heard that and be like, Joseph, my bank pays me 0.1% full interest, and yes, you’d be correct. How do you think those smug bankers afford those snazzy suits after all? Personally, I was getting a whopping 0.3% interest at my old bank before I fired them for taking an anti-crypto stance.
But here are two important reasons why you might consider crypto lending. The interest rates on crypto lending platforms are way better than a bank, and I’m talking about double-digit rates in some cases
And all that whilst retaining exposure to that cryptocurrency’s price action. Sure, you could squirrel away your entire crypto portfolio in a Trezor hardware wallet and completely ignore crypto lending platforms, or you could put a portion of that crypto you have lying around to work and earn interest instead.
Another really important thing to understand is that there are two types of lending platforms in crypto. The first type is decentralized lending platforms DeFi. Now I’ve already covered decentralized lending in another post of mine, so if you want to learn all about that, you’ll have to click below Medium post.Top Crypto Lending Platforms In 2021If you are interested in gaining passive income, this publishing entirely for you.medium.com
Then you have centralized lending platforms like BlockFi and Celsius. Now that’s where a company takes custody of the funds you deposit.
So you’d better be sure that you’re comfortable with a lending platform before depositing any of your cryptos. After all, there have been numerous examples of centralized lending platforms that just turned out to be scams. Bitconnect anyone? But, what separates a crypto lending platform like Bitconnect from the likes of BlockFi or Celsius. Well, it’s all about how those interest payments are generated? So let’s take a look into that.
How Is Interest Paid?
Bitconnect promised users obscene amounts of interest and claimed that was all made possible by their magical trading bot that never lost. Instead, this classic Ponzi scheme was simply about acquiring new user deposits and paying out the interest for everyone else with that money.
However, what Celsius and BlockFi claim to do is to take the crypto that’s deposited by people like you and me and lend it out to institutions or businesses. What type of businesses would want crypto? Well, crypto exchanges would be a pretty straightforward example.
Now that mechanism of lending out an asset like crypto is, to all intents and purposes, a form of securities lending. Now, this is actually one of the major ways that companies like Robin Hood make money. Yeah, it turns out that their commission-free trading wasn’t always that free. Who would have thought?
The likes of BlockFi and Celsius essentially take that business model and apply it to cryptocurrency. So basically, what’s happening is that BlockFi and Celsius are aggregating those crypto deposits from us and then lending them out to institutions, who then pay those lending platforms interest.
The technical term for this is rehypothecation, and it refers to the practice of taking client assets and lending them out to generate a yield. Now given that there’s such great demand in order to borrow crypto from these exchanges and institutions, they are willing to pay more interest. And this interest is then passed on to us, the lenders.
Now, of course, these centralized lending platforms are not doing all this for free. Sure they keep a cut of those rehypothecated gains for themselves, but nowhere near as much as those greedy bankers do. Okay, so you now have an idea of how crypto interest is generated? It’s time to move on to the platforms in question.BlockFi vs Celsius vs HodlnautThis article reviews three centralized finance (CeFi) crypto lending platforms: BlockFi vs Celsius vs Hodlnaut.medium.com
Who Are BlockFi & Celsius?
Now, who on earth are these BlockFi chaps? Well, they’re a privately held new york-based lending platform that was founded back in 2017.
Unlike other lending platforms that raised funding using token sales, these folks went down the old school venture capitalist route.
Back in 2019, BlockFi raised 18.3 million dollars in financing during its Series A round, and that funding round included a bunch of notable names like Valar Ventures, which is backed by billionaire investor Peter Thiel, Mike Novogratz’s Galaxy Digital Ventures, Winklevoss Capital, Consensus Ventures and Akuna Capital.
Now, this motley crew is essentially a list of some of the richest people in crypto, and yes, in case you wondered, Winklevoss Capital is indeed owned by the same Winklevoss Twins, aka the Winklevin.
Now BlockFi’s fundraising efforts didn’t stop there. In March, it finalized a Series D round for a whopping 350 million dollars at a three billion-dollar valuation. So yes, BlockFi is highly unlikely to go broke anytime soon with that sort of money lying around. Also, rich people tend to be rich for a reason, and they don’t typically make silly investments.
Another thing you should know is that BlockFi holds a bunch of lending licenses, which are held under BlockFi Lending LLC, and they also have money transmitter licenses held by BlockFi Rrading LLC.
However, there have been a couple of recent hiccups with regulators in New Jersey, Texas, and Alabama surrounding the BlockFi interest account and if it breaches securities laws. Vermont is also thought to be taking a closer look into the platform.
Now BlockFi believes that these interest accounts are entirely lawful and are engaged in productive dialogues with the relevant authorities. So if you are based in any of those states, then I would recommend that you skip BlockFi for now, that is, at least until all this has blown over.
However, at the time of reading this post, users in all other states are free to use BlockFi as normal. Now irrespective of this securities question, BlockFi is still the most well-funded crypto lending platform out there, so it’s highly unlikely to rug pull on your funds. Something that should be top of your list of priorities, especially when you don’t control your own keys.
Now BlockFi might appear to be a solid option for most people, and that sounds like a hard act to follow, but Celsius is pretty damn impressive too. These guys took a different funding strategy to BlockFi and opted to make a token sale back in 2018, where they raised a punchy 50 million dollars.
Now they were actually founded back in 2017 by Alex Maskinsky. Now, this chap has got to be one of the most impressive people in all of the crypto with his crazy entrepreneurial record.
Those of you who have been to New York probably used the subway and marveled at the free wi-fi, or maybe you even enjoyed wi-fi on that internal U.S. flight. Well, it turns out that a teeny tiny company called Transit Wireless was behind all that, which later sold for 1.2 billion dollars, and guess who founded that business. Yes, it was Alex Maskinsky. But maybe Alex just got lucky with TransitWireless.
Well before that, he founded a business called Arbinet, which he exited for a 750 million dollar valuation.
He was also one of the early developers and inventors of VoIP, which enables 1 billion people today to use voice calls over the internet for free.
I could go on, but the point is that history shows that Alex knows how to build a successful business. And let’s be real, Celsius is already one of the biggest crypto lending platforms out there. So yeah seems a pretty safe bet if you ask me.
So, now that you have that overview of BlockFi and Celsius, it’s time to get into the meat and potatoes of this post and look at the yields on offer. How do the two lending platforms compare there?
How Much Can You Earn?
Celsius allows you to earn interest on a really wide range of cryptocurrencies. That includes 12 different stable coins, so if you wanted to hedge out currency risk by holding a GBP, Hong Kong, or Canadian dollar stable coin and earn a yield on that, then Celsius is probably going to be the option for you.
The platform also allows you to earn interest on three different gold tokens and 27 different cryptocurrencies.
BlockFi meanwhile offers support for half the number of stable coins, the PAXG gold token, and only six different cryptos. That means if you’re holding big altcoin positions and wanting to earn a yield on them, then you’re probably better off on Celsius, at least when it comes to supported cryptos.
But what about those interest rates? Well, when it comes to Celsius, it seems like rates are slightly lower for U.S users as compared to international users. For example, on every stable coin except multi-collateral DAI, U.S residents will be able to pick up an interest rate of 8.88%. That’s pretty damn impressive, seeing that Santander was giving me 0.3% interest.
However, users elsewhere can opt to get that interest paid in CEL, Celsius native token, and receive an astonishing 11.21% interest rate on the same stable coins.
At BlockFi, interest rates work in tiers. Now I know this sounds odd, but if you deposit huge amounts here, you’ll get a lower rate of interest. For example, the 50,000 dollars in USDC, GUSD, PAX, USDT, or BUSD you’ll get 7.5% interest on. However, any amount over that $50K, you’ll only get 5% interest.
If you’re just concerned about getting the highest interest rate possible for your stable coins, then you’ll probably want to go with Celsius. That’s unless you want to earn interest on DAI, where you can pick up 8.5% interest on BlockFi.
When it comes to Bitcoin on BlockFi, you’ll earn 4% APY for the first 0.25 BTC deposited and just 1.5% if you go up to 5 BTC and omega 0.25 above that 5 Bitcoin threshold.
So, honestly, if you’re a bit of a high roller with more than a quarter of a Bitcoin, I’d opt for Celsius and grab yourself 6.2% interest up to 1 BTC.
BlockFi’s highest rate for ETH sits at 4% versus Celsius’s standard 5.35% rate and 6.35% if you choose to be paid in CEL tokens.
U.S users or those not wanting to be paid in the sale should know that BlockFi offers 4.5% interest up to 100 LTC, whereas Celsius offers slightly less at 4.08%.
But aside from that, you’ll find higher interest rates offered on Celsius than BlockFi. These go up to 17.78% if you supply cryptos like SNX tokens and opt to be paid in CEL.
In short, on the raw interest rate side of things, BlockFi only outdoes Celsius on rates for LTC and DAI stable coin. For everything else, you’ll get a better interest rate using Celsius.
Now, sure interest rates are important, but one thing many people forget about is fees and withdrawals. So, let’s get you up to speed on those.
Withdrawals & Fees
Something to be aware of is that. On BlockFi, interest is paid out at the start of every month, whereas on Celsius, it’s paid weekly.
Now with all that being said, you can withdraw your funds at any time on both platforms. There are no annoying lock-ups.
When it comes to withdrawal fees, Celsius doesn’t charge you at all for this. However, BlockFi gives you only one free withdrawal a month and charges you a small fee for additional withdrawals.
You can see that fee schedule below.
So if fees really matter to you and you think you’ll be making multiple withdrawals a month, then you might want to opt for Celsius. You are now having said that BlockFi does have the best withdrawal verification process of any platform I’ve seen in crypto, at least from a security point of view.
They use a social recognition system that requires multiple documents and several selfies along with 2FA and email verification. Those types of systems don’t come cheap, and it seems obvious that BlockFi has heavily invested in withdrawal security.
So that’s why I think BlockFight charges a fee after the first withdrawal. It also means that if you value withdrawal security, then you might want to accept a slightly lower interest rate and go for BlockFi instead.
However, be aware that this rather lengthy withdrawal process can mean that it takes a few days to get your funds off the platform. So, if faster withdrawals are more important to you, then you might want to opt for Celsius. Those withdrawals should go through without a hitch, but sometimes things can go wrong, and you’ll need to get help from customer support. So, how do BlockFi and Celsius stack up in that area?
Now, there is nothing more infuriating than needing help and being completely ignored by a platform’s so-called customer support, and I’m referring to you, Coinbase. But, how do these lending platforms stack up in that area?
Well, if you search around on places like Reddit, then chances are you’ll be slightly alarmed by the large number of posts complaining about Celsius’s lack of support. Indeed some users claim that Celsius never got back to them in their time of need, which is not ideal at all.
Now, this being said, I’ve personally found that they have upped their game in that department this year. I guess they scaled up customer support after being swamped by new users. Now here’s a top tip for anyone dealing with Celsius support, it appears that every time a user sends an email, the Celsius customer support system consolidates those emails together and resets your position at the end of the line. So, if you send multiple emails, then all you’re doing is lengthening the time it will take to get a response.
However, BlockFi’s support ticketing system is honestly one of the best experiences. I’ve had in crypto I’ve got responses in under two hours. Also, they do offer phone support, too but just be prepared to hold the line for a bit if you want this type of customer support.
Now, although support is important to factor in, security is probably right at the top of the list of people’s priorities. So, how do these two platforms stack up there?
As far as I’m aware, no user has lost crypto on either the Celsius or BlockFi platforms. That being said, I should let you know that both have had security breaches in the past.
Celsius had an unauthorized third party gain access to its email distribution system to send phishing emails and SMS messages. Now that resulted in some Celsius users getting nefarious messages that appeared that they were from Celsius with the intent of phishing people to steal their crypto. However, funds on the platform were safe.
But sadly, some people were caught out by the incident, something to be aware of. However, all has not been plain sailing at BlockFi either. Last year these guys fell foul of a data breach where some client data was stolen through a sim card attack performed by one of BlockFi’s employees.
Fortunately, the attackers were unsuccessful when it came to withdrawing funds. However, some of that stolen personal data could have potentially been used by criminals to extort BlockFi users.
Then you had another incident where BlockFish systems were hijacked to send obscene and racist emails to journalists. Yes, no money was lost in that attack, but it was still not a great look.
On top of that, BlockFi also messed up some promotion payments earlier this year, which saw some users credited up to 700 BTC by accident. Now they managed to get the Bitcoin back, but it was a bit of an embarrassing episode for the company.
Anyhow, the point is that both BlockFi and Celsius have had snafus when it comes to security. Yes, users with funds on the platforms didn’t lose their crypto, but I think these incidents are still important to know about. Now, next, I want to move on to quickly let you know about the additional features offered by BlockFi and Celsius.
For ages, Celsius only had a mobile app which was honestly a bit of a bummer for laptop junkies like me.
The good news is that they’ve recently released a very snazzy web app, so yes, you have that mobile and desktop support now.
BlockFi also offers web-based and mobile support. So, there isn’t much to separate these two platforms in that department.
But one thing that I really like about BlockFile, though, is that you can choose for your interest to be paid in stable coins. Now, this is unlike Celsius, where you can only choose to be paid in sell or the in-kind cryptocurrency you’re supplying. All that makes things a lot easier when it comes to paying taxes on your crypto dabbling
Now, both platforms will also allow you to take out a crypto loan as well. But honestly, folks, I wouldn’t recommend you do this unless it’s for a very good reason that doesn’t involve buying more crypto with that loan. Seriously guys over-leveraging yourself with crypto is a bad idea.
Anyways, Celsius also offers a feature called CelPay, and this allows you to send or receive crypto directly from the Celsius app, which is pretty handy if all your mates use Celsius and you want to split a taxi or meal using crypto.
Where BlockFi stands out right now is that they also offer an inbuilt crypto exchange. Pretty damn useful if you want to access those crypto interest rates and do a bit of trading with a single account.
On top of that, BlockFi is also currently rolling out a crypto credit card. This has no annual fees or foreign transaction fees, and moreover, you can earn up to 3.5% cashback on the card during your first three months of card ownership.
Now, it seems that Celsius doesn’t want to be outdone in that department and has also got a waitlist open for its own crypto credit card. However, I am a bit of a cashback junkie, and at the time of writing this post, there are no details on cashback for this one. So, I definitely check out the BlockFi card if that floats your boat.
So, are you still tossing up which crypto lending platform to go for? Well, you’ll probably want to know what deals are kicking around, so with Celsius, you can sign up with my link, and if you deposit $400 or more, you’ll get 50 free.
However, at BlockFi, you can get a bonus of up to $250. So if you are serious about earning crypto interest, then you’ll probably want to nab that bad boy. Check out the link here.
If you want to take advantage of any of these deals, and by the way, if you want to learn even more about the Celsius platform, I have a completely dedicated post on that, so feel free to read that by hitting the below Medium post.Celcius (CEL): Hottest Crypto Lending Platform?Centralized Finance versus Decentralized Finance, Celcius Network provides unique opportunities to grow up about…medium.com
That’s about all I have time for today. However, I do want to share a few quick closing thoughts. What’s important to understand is that neither of these platforms is completely 100 risk-free. Given that they’re centralized lending platforms, they control your private keys. That means that they are in control of your crypto and your funds are only as safe as their coin storage protocols. Of course, decentralized lending platforms also come with their own collection of risks, smart contracts often have bugs, and hackers sometimes exploit these platforms and drain their lending pools. So, whichever way you hash it, there is an inherent risk with generating passive income by using any form of crypto lending. Remember that one.
It’s for that reason that I’m never going to lump my entire portfolio into crypto lending of any form. Personally, I only allocate a portion of my crypto to earn interest. Sure, most of my stack isn’t earning any interest whatsoever, but then again, I do sleep well at night knowing that I won’t lose it all in one horrendous security breach.
Now even then, I’m not the type of chap to go entirely all in on a single lending platform either. Sure BlockFi and Celsius both have their pros and cons. However, my strategy is to spread my risk by using both platforms. That way, if one gets compromised in the future, then I have limited my losses, and this might be something you want to consider too.
Categories: CRYPTO PROJECTS