Bitcoin prices may be dropping, but one cryptocurrency-based lending startup is looking to expand the appeal of digital assets. BlockFi, which is backed by the Winklevoss Twins’ cryptocurrency conglomeration Gemini, has agreed to lower the BTC investment threshold for participating in its interest generating program.
Last month, BlockFi announced the creation of the world’s first interest-bearing accounts for Bitcoin and Ethereum. The New York-based firm will be paying out 6.2% in interest on deposits of Bitcoin and Ethereum, all backed by the Winklevoss twins’ Gemini cryptocurrency exchange.
However, after extensive community feedback, the lending startup made the decision to lower the minimum amount of BTC required to receive the full interest reimbursement to 0.5 BTC, which will be applied retroactively to April 1st of this year. In an official blog post updated on April 23, BlockFi told users,
We are retroactively dropping the minimum required BTC balance to earn interest to 0.5 BTC. After launching BIA, a lot of users reached out to our team asking that we drop our minimum eligible balance to earn interest.
We’re excited to let our community know that BTC balances of 0.5 BTC and up will now begin earning interest on their deposits. And as an added bonus, we’re applying this retroactively as of April 1st.
That means if your BIA BTC balance was between 0.5 and 1 BTC in April, you’re eligible to receive interest at the end of April. We expect to lower our minimum balance further in the near term.
BlockFi also reports receiving a surge in demand from Indian-based customers, and has added India to the list of 65 countries that it currently services with interest-bearing crypto accounts. BlockFi claims to hold $53 million in client-based cryptocurrency, and reports that it works with institutional counterparts on investing in order to offers users the competitive interest-rate of 6.2% APY.
Interestingly, the company reports capping Ethereum deposits eligible for the 6.2% in interest at 250 ETH, explaining that they have had a decline in demand for Ethereum borrowing over the last month. Because the company relies upon lending deposited cryptocurrency as a way of generating client-paid interest, it has to balance demand with the amount of coins coming in.
Compared to other models of generating profits from cryptocurrency, interest-bearing lending is proving to be an intriguing avenue. Numerous economists have come forth to discredit Bitcoin and cryptocurrency as a legitimate form of money, citing its high price volatility as a barrier for use in lending. BlockFi is trying to prove the opposite, and will give a revealing state of the industry over the next several years.
Interest-bearing accounts also provide a way for current cryptocurrency investors to generate profit while decreasing their risk. Compared to speculating on the open market, BlockFi provides a guaranteed rate of return. For long-time holders, it also provides an avenue that puts accumulated coins to use in lending to other clients, while also generating a profits comparable with the yearly S&P Index returns.
Staking for Proof of Stake cryptocurrencies, such as the algorithm Ethereum is working to integrate over next eighteen months, could lead to even more adoption for interest-bearing accounts, if BlockFi and the like can continue to offer competitive rates.