Fancy earning some interest from a traditional bank? Good luck with that, unless you have millions to deposit. Interest rates for the general population haven’t been too kind in recent years. Luckily for anyone who owns Bitcoin or Ethereum, they can now deposit their crypto on BlockFi and receive 6% annual interest. Sounds good, right? Usually though, these things are too good to be true.
The announcement by Pomp (Anthony Pompliano) yesterday that BlockFi was introducing a 6% annual interest rate raised a few eyebrows. Pomp is the co-founder of Morgan Creek Digital and also happens to invest in BlockFi, so of course he is happy with the announcement. There is nothing wrong with that, of course – he has put his company’s money where its mouth is, so to speak.
Questions can be raised about the guaranteed rate of return though. Infamously, another cryptocurrency by the name of Bitconnect offered similar promises. BlockFi is certainly not Bitconnect, or even a scam, but there are certainly risks attached. In fairness to Pomp, he has encouraged those doubters to do their own research.
— John Carvalho (@BitcoinErrorLog) March 6, 2019
Digging into the terms and conditions, as John Carvalho has, doesn’t fill me with trust. BlockFi claims it can “immediately halt deposits and withdrawals of cryptocurrency either temporarily or permanently. BlockFi is not and will not be responsible or liable for any loss or damage of any sort incurred.”
The company goes on to state: “Your Crypto Interest Account is not a checking or savings account, and it is not covered by insurance against losses.”
The phrase “not your keys, not your Bitcoin” comes to mind. I am not attempting to FUD BlockFi out of existence. They have partnered with some big names in the space, including the Winklevi. Pomp as well has been a great evangelical ambassador for spreading knowledge about Bitcoin. They are not in the same mould of a typical cryptocurrency scam. This is a legitimate business.
Despite this, there is certainly a risk associated with what BlockFi is offering, so like Pomp says: make sure you do your own research!