BlockFi – the centralized lending / borrowing service for crypto-assets particularly Bitcoin, recently lowered down it’s interest rate or Annual Percentage Yield (APY). The custodial service stated on it’s website that it’s because of the rising Bitcoin prices and falling demand for borrowing BTCs. It’s one of the services heavily promoted by many crypto-influencers, a surprising behavior considering BlockFi isn’t decentralized, carries custody / insolvency risks, but is explained by the service’s referral link and commission based business model.
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 or they might even charge people for providing this custody service. Luckily, if you want to earn yield on your BTCs in a decentralized manner, DeFi services can take over the role of their centralized counterparts with better risk profile 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 it’s multi-chain main-net. The current APY for staking in Bitcoin pools is around 3% – 8 % against BlockFi effective 0.5% – 2%. It must be noted that THORChain is decentralized and doesn’t require users to lose custody of their assets.
THORChain is the first protocol to offer this functionality with transparency, logic verification, wide node distribution, permission-less and unrestricted access to liquidity, hardened price oracles, incentive driven mechanism, non custodial staking and 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 offered 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 for 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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