BlockFi – the centralized lending/borrowing service for crypto-assets particularly Bitcoin, recently lowered down its interest rate or Annual Percentage Yield (APY). The custodial service stated on its website that it’s because of the rising Bitcoin prices and falling demand for borrowing BTCs. Crypto-influencers heavily promote this project. BlockFi is not decentralized and carries custody/insolvency risks. That’s why it is strange behavior. On the other hand, the service’s referral link and commission-based business model are well explained.
The declaration made on the recent blog posts for rates coming into effect from April 1 ‘21 also hints at interest rates eventually reaching zero or worse even getting negative. BlockFi states under the second paragraph “Putting Principles Into Practice” that “On the flip side, a deflationary currency like BTC should theoretically have 0 or even negative interest rates. That’s because the purchasing power of that deflationary currency should hold over time.”
It means that in the future, lending your Bitcoins with BlockFi might not pay any interest at all. They might even charge people for providing this custody service. Luckily, if you want to earn a yield on your BTCs in a decentralized manner, DeFi services can take over this role. This helps in providing better risk profiles and higher interest rates. Let’s look at these two DeFi services offering better yield than BlockFi.
THORChain – 3% to 8% APY
THORChain – the project offering direct conversion of crypto-assets without relying on any wrapper or custodial service recently launched its multi-chain main-net. The current APY for staking in Bitcoin pools is around 3% – 8 % against BlockFi effective 0.5% – 2%. THORChain is decentralized and doesn’t require users to lose custody of their assets.
THORChain is the first protocol to offer this functionality. It has many features:
- Logic verification
- Wide node distribution
- Unrestricted access to liquidity
- Hardened price oracles
- incentive-driven mechanism
- Non-custodial staking
- Direct asset swaps.
Badger Finance – 10% to 60% APY
Badger Finance is another alternative, offering yields but on wrapped Bitcoin (WBTC) which can carry custodial risks. However, the APY offers through the Yearn/Badger vaults for depositing the WBTCs are sky-high. They are 60% at $100M deposits, 10% at $400M and 25% at $1B mark. The procedure used to earning yield is transparent and Yearn/Badger are widely known and respected crypto-teams. There is a possibility that interest rates can come down, however, they are likely to be still more than BlockFi offerings.
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