Anchor Protocol vs BlockFi – What’s The Difference?

If you’re looking for a way to earn interest on your cryptocurrencies, 2 platforms that you may have heard of include Anchor Protocol and BlockFi.

How are they different, and which should you choose?

Here’s what you need to know.

The difference between Anchor Protocol and BlockFi

Anchor Protocol is a decentralised platform that only allows you to earn interest on UST. Meanwhile, BlockFi offers interest-bearing accounts, cryptocurrency exchange, and low-interest rate loans worldwide. 

Supported cryptocurrencies

Here are the different cryptocurrencies that you can deposit into either account:

Anchor Protocol only allows you to deposit UST

The only cryptocurrency that you can deposit on Anchor Protocol is UST, which is an algorithmic stablecoin.

This is a stablecoin on the Terra Network, and you will need to have a Terra Station wallet to interact with this protocol.

BlockFi allows you to hold 13 different currencies

Meanwhile, BlockFi allows you to deposit 13 cryptocurrencies into your account.

The number of cryptocurrencies that you can earn interest on is much higher on BlockFi.

Type of platform

Anchor Protocol is a decentralised platform. This is advantageous as you do not require to do any Know-Your-Customer (KYC) before you can use this platform.

All you’ll need is to connect your Terra Station wallet, and you can deposit UST straight into the protocol.

However, this means that it is also harder to navigate around the platform, especially if you are new to the decentralised finance (DeFi) world.

You will need to buy UST on a centralised exchange, before sending it to your Terra Station wallet and connecting with the Anchor Protocol.

Meanwhile, BlockFi is a centralised platform, where you are required to do KYC before you can use the platform.

Interest rate

For the Anchor Protocol, the platform aims to pay you a fixed ‘Anchor Rate’ that is pre-determined beforehand.

Currently, the rate fluctuates between 19.3% to 19.5%.

This is a rather high yield, especially since you are earning interest on a stable coin that is pegged to USD.

However, there is a chance that this yield may not be sustainable in the long run. If that is the case, the interest rate may drop eventually.

The interest rates that are provided by BlockFi is dependent on the cryptocurrency that you deposit on its platform.

These rates will be reviewed monthly, and you will be informed of any changes to the rates.

How you earn your rewards

For the Anchor Protocol, you will be able to earn your interest in UST.

You can find out more about the differences between aUST and UST, and how this affects the interest that you earn.

Meanwhile, for BlockFi, your interest is only paid on the first business day of each month.

Withdrawal fee

If you are looking to withdraw UST from the Anchor Protocol to your Terra Station wallet, you will be required to pay a transaction fee in UST.

Meanwhile, BlockFi allows you free withdrawals for each month:

• 1 free crypto withdrawal per month
• 1 free stablecoin withdrawal per month

This free withdrawal can only be applied to one currency only.

After that, you’ll be charged withdrawal fees which depends on the currency you withdraw:

Lock-in period

Both platforms do not have any lock-in periods, and you are able to withdraw your funds at any time. This means that you are able to freely withdraw your crypto any time you wish!

Platform

For the Anchor Protocol, you are currently only able to access it via your desktop.

Meanwhile, BlockFi has both a desktop platform,

as well as a mobile app.

Security

The risk of your funds in the Anchor Protocol is dependent on 2 things:

1. The safety of Anchor Protocol
2. The safety of your Terra Station wallet

In the event that the Anchor Protocol fails, it is possible for you to buy insurance.

You can do this to provide cover against a smart contract failure, or if the UST loses its peg to the US Dollar.

Another thing you’ll need to take note of is the security of your Terra Station wallet. When you are creating your wallet, you will be given a 24-word phrase.

It is important that you do not share this with anyone, as this phrase will allow anyone to gain access to your funds in your Terra Station wallet!

If you lose your 24-word phrase, you will be unable to recover your wallet in the future. As such, do remember to keep your phrases in a secure place!

Meanwhile, BlockFi uses Gemini as their custodian.

However, they also place your assets under the custody of 2 other institutions as well:

1. Coinbase
2. BitGo

As such, you can be reassured that your assets are rather safe with BlockFi.

Verdict 

	Anchor Protocol	BlockFi
Cryptocurrencies	Only UST	13
Interest Rates	19.3% – 19.5	Depends on cryptocurrency
Earning Rewards	In UST	Earns reward on the currency you are holding
Withdrawals	Fee in UST	First free withdrawal every month, after which are withdrawal fees depending on the crypto
Lock-ins	None	None
Platforms	Website	Website and mobile app
Security	Safety of wallet and platform (insurance provided)	Gemini as primary custodian

So which platform should you choose?

Choose Anchor Protocol for a high-interest rate

The Anchor Protocol provides a very high yield on UST, which is very advantageous since it is pegged to USD.

In this way, you do not experience as much volatility compared to a cryptocurrency.

However, it is much harder to access the Anchor Protocol as you will need to know how to:

1. Send UST to Terra Station
2. Deposit UST from Terra Station to Anchor Protocol

You may also want to be very careful about the security of your Terra Station wallet!

Choose BlockFi to earn interest on a wider variety of cryptocurrencies

BlockFi allows you to earn interest on different cryptocurrencies, and not just on stable coins. This is useful if you want to earn interest in BTC, ETH, or other cryptocurrencies.

Conclusion

Both platforms allow you to earn interest in your crypto.

Here are some things you’ll need to consider between them:

1. The type of currency you intend to earn interest on
2. Whether you are familiar with using a decentralised wallet
3. The amount of interest that you wish to earn

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