To create an indented block quote, you start each line of the quote by a greater than symbol, in a manner to quoting in email or Usenet (news) posting.
> Block quote example > second line > Second paragraph.
Would render as
Block quote example second line
Second paragraph.
As can be seen, the specific positions of single newlines within block quote are ignored: all of it is formatted as indented paragraph. If you want to create paragraph breaks in a block quote just follow the two newline rule.