BlockFi is an American financial technology company founded in 2017 by cryptocurrency enthusiasts Zac Prince and Flori Marquez. BlockFi revenue generation is similar to other fintech companies but with a cryptocurrency slant. It makes money via interest fees, rehypothecation, withdrawal fees, spread, Bitcoin trust, and mining.
| Business Model Element | Analysis | Implications | Examples |
|---|---|---|---|
| Value Proposition | BlockFi’s value proposition includes: – Cryptocurrency Interest Accounts: Offering interest-bearing accounts for various cryptocurrencies, allowing users to earn passive income on their holdings. – Crypto-Backed Loans: Providing loans secured by users’ cryptocurrency holdings, offering liquidity without selling assets. – Trading and Exchange: Enabling users to trade cryptocurrencies on the platform. – Simplicity and Accessibility: Simplifying cryptocurrency investing and lending for a broader audience. BlockFi aims to make cryptocurrency more accessible, offering passive income, loans, and trading services. | Attracts cryptocurrency holders seeking to earn interest. Provides liquidity options through crypto-backed loans. Enables cryptocurrency trading on the platform. Simplifies cryptocurrency management for a wider user base. Establishes a strong value proposition in the crypto finance sector. | – Earning interest on cryptocurrency holdings. – Access to liquidity without selling assets. – Cryptocurrency trading services. – User-friendly cryptocurrency financial services. |
| Customer Segments | BlockFi serves the following customer segments: 1. Cryptocurrency Holders: Attracting individuals and institutions holding cryptocurrencies. 2. Crypto Investors: Providing a platform for cryptocurrency investors seeking passive income and trading options. 3. Borrowers: Offering loans secured by cryptocurrency assets to users in need of liquidity. 4. Traders: Catering to users interested in cryptocurrency trading and exchanges. BlockFi targets cryptocurrency holders, investors, borrowers, and traders in the digital asset space. | Attracts cryptocurrency holders looking to maximize returns. Provides a platform for crypto investors seeking financial services. Offers liquidity solutions to borrowers using crypto assets as collateral. Engages traders in cryptocurrency trading and exchanges. Targets a broad range of customers in the crypto finance ecosystem. | – Individuals and institutions holding cryptocurrencies. – Crypto investors seeking passive income. – Borrowers looking for crypto-backed loans. – Traders interested in cryptocurrency trading. |
| Distribution Strategy | BlockFi’s distribution strategy includes: – Online Platform: Providing a user-friendly online platform and mobile app for accessing its services. – Partnerships: Collaborating with various cryptocurrency companies and exchanges to expand its reach. – Referral Program: Encouraging users to refer others to the platform in exchange for rewards. – Marketing and Education: Running marketing campaigns and educational content to attract and educate users. BlockFi distributes its services through online platforms, partnerships, referral programs, and education efforts. | Offers accessibility through an online platform and mobile app. Expands its reach through partnerships and collaborations. Encourages user referrals for growth. Attracts and educates users through marketing and educational content. Implements a comprehensive distribution strategy aligned with its financial services. | – Online platform and mobile app accessibility. – Collaborations with cryptocurrency companies. – User referral programs. – Marketing campaigns and educational content. |
| Revenue Streams | BlockFi generates revenue through the following channels: 1. Interest Spreads: Earning the difference between interest paid to users and interest earned through lending or other investment activities. 2. Loan Origination Fees: Charging fees for originating cryptocurrency-backed loans. 3. Trading Fees: Earning fees from cryptocurrency trading and exchange services. 4. Institutional Services: Providing financial services to institutional clients for a fee. BlockFi diversifies its revenue streams through interest spreads, loan fees, trading fees, and institutional services. | Generates revenue from the interest spread on cryptocurrency holdings. Earns fees from originating crypto-backed loans. Collects trading fees from cryptocurrency trading. Provides financial services to institutions for additional income. Diversifies its revenue within the cryptocurrency finance industry. | – Revenue from interest spreads on cryptocurrencies. – Fees from originating crypto-backed loans. – Trading fees from cryptocurrency trading services. – Income from institutional financial services. |
| Marketing Strategy | BlockFi’s marketing strategy involves: – Educational Content: Providing educational content and resources about cryptocurrency, financial planning, and investment strategies. – Referral Programs: Encouraging users to refer others to the platform and earn rewards. – Partner Collaborations: Partnering with influencers and cryptocurrency companies for endorsements and promotions. – Community Engagement: Building an active community of cryptocurrency enthusiasts and investors. BlockFi focuses on education, referrals, collaborations, and community engagement to promote its cryptocurrency financial services. | Educates users about cryptocurrency and financial planning. Encourages user referrals for growth. Collaborates with influencers and companies for promotion. Engages the cryptocurrency community through active participation. Implements a multifaceted marketing strategy aligned with its mission. | – Educational content on cryptocurrency and financial planning. – User referral programs for growth. – Partnerships with influencers and companies. – Active engagement with the cryptocurrency community. |
| Organization Structure | BlockFi’s organizational structure includes: – Management Team: Comprising executives and leaders responsible for overall strategic direction. – Technology Team: Managing the development and maintenance of the online platform and mobile app. – Financial Services Team: Focusing on interest-bearing accounts, loans, and trading services. – Marketing and Community Team: Handling marketing campaigns, educational content, and community engagement. BlockFi maintains an organized structure to support its cryptocurrency financial services, technology development, financial operations, and marketing efforts. | Led by a management team responsible for strategic direction. Employs a technology team for platform development. Offers financial services through specialized teams. Manages marketing, education, and community engagement efforts. Maintains an organized structure aligned with its cryptocurrency-focused mission. | – Management team for strategic direction. – Technology team for platform development. – Specialized teams for financial services. – Marketing and community engagement teams. |
History of BlockFi
BlockFi is an American financial technology company founded in 2017 by cryptocurrency enthusiasts Zac Prince and Flori Marquez.
The idea for BlockFi came after both Prince and Marquez applied for loans and were not able to use their cryptocurrency assets as collateral.
”Despite the fact that they’re an investment of substantial value, I couldn’t use this asset as a financial tool and that really helped me realise how much work was still left to do in maturing crypto as an asset class”, Prince noted in a 2018 interview.
Initially, BlockFi positioned itself as a non-retail bank lender offering cryptocurrency-backed US dollar loans. This resulted in several benefits to consumers. For one, crypto enthusiasts could borrow cash without having to sell currency they believed would appreciate later. BlockFi also brought additional liquidity to borrowers who did not want to sell at depressed prices and catered to larger investors eager to borrow coins for short selling.
When the service launched in 2018, it was available in 35 states. A successful round of venture capital funding soon followed to the tune of $1.55 million. As one of the first such loan services, the company experienced rapid growth in the following years.
Today, BlockFi is worth approximately $3 billion. The platform now incorporates cryptocurrency trading and offers a Visa Bitcoin credit card to members.
BlockFi revenue generation
BlockFi revenue generation is similar to other fintech companies but with a cryptocurrency slant.
To see what we mean, continued reading to find out how the company makes its money.
Interest fees
As a loan provider, it is perhaps no surprise that the bulk of Blockfi revenue is earned via interest fees.
Users can borrow collateral based on a 50% Loan to Value (LTV). This means they can use no more than half the total value of their crypto assets as loan collateral.
Interest fees are based on the amount of collateral posted and money borrowed. Fees also depend on the loan repayment period, with interest rates starting at 4.5%.
Rehypothecation
Rehypothecation is a sophisticated but rather common process where a financial institution re-uses collateral assets pledged to it as if the assets were its own property. These assets encompass both bank deposits and loan collateral.
In some cases, BlockFi lends deposited cryptocurrency to other institutions to either collect interest fees or profit from price movement speculation.
Withdrawal fees
If a user wants to transfer funds out of a BlockFi account, the company charges a transaction fee if weekly withdrawal limits are exceeded.
Fees are based on the type of cryptocurrency being withdrawn.
Spread
BlockFi also makes money on the spread between the buy and sell price when users trade cryptocurrency on its platform.
Here, revenue generation is maximized by the company directing crypto trades to the highest bidder.
Bitcoin Trust
Bitcoin Trust was created to give individual and institutional investors a more cost-effective entry point into the crypto market.
To accomplish this, BlockFi issues shares through private placements with the value of those shares equal to the value of bitcoin held by the trust.
As the trust sponsor, BlockFi charges a 1.75% sponsor fee of the total funds invested.
Bitcoin mining
BlockFi has recently begun mining bitcoin in a partnership with Blockstream, an experienced mining company with a 300MW facility in the state of Georgia.
BlockFi generates income on the bitcoin it can mine. In all likelihood, a portion of mined bitcoin goes to Blockstream for providing the necessary infrastructure.
Key takeaways:
- BlockFi is a fintech company founded in 2017 by cryptocurrency enthusiasts Zac Prince and Flori Marquez. Both experienced difficulty securing loans using cryptocurrency as collateral, motivating them to create a service catering to similar applicants.
- BlockFi is a loan provider first and foremost, so a significant proportion of the money it makes comes from interest fees. The company also makes money via rehypothecation, a process where assets are lent to other institutions or where BlockFi utilizes customer cryptocurrency to speculate on price movements.
- BlockFi earns money on the bid-ask spread whenever cryptocurrency is traded on its platform. It also collects a sponsor fee for its Bitcoin Trust service and has recently started mining bitcoin to bolster its revenue generation strategy.
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