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Paxtradings Report: Celsius Network

//Paxtradings Report: Celsius Network

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What is Celsius Network?

Celsius Network aims to allow users who deposit their coins on the Celsius wallet to earn interest or borrow fiat against their deposit.

— Alex Mashinsky

Paxtradings Quick Facts

  1. Building a P2P Decentralized Lending and Borrowing Platform
  2. .30 USD = 1 CEL token
  3. March 15, 2018 — March 22, 2018
  4. 325,000,000 CEL available / 650,000,000 CEL total supply
  5. 9,606 people already registered

Q&A with CEO, Alex Mashinsky

Paxtradings: For those who are not familiar with Celsius Network, can you explain what it is, and what the team aims to accomplish?

Celsius was created to bring the next 100 million people into crypto, and both Keith and I have been in crypto for a long time; Keith actually longer than me. He participated in the Ethereum ICO, in fact.

So I’ve been a coin holder since 2013. The shame is that I have fewer coins today than I had back then. That’s what happens when you trade. But when we were thinking through this, we realized that we kind of ran out of anarchists to bring into the movement pretty quickly in 2010 and 2011. In 2013, we ran out of libertarians to bring into the movement; and now it’s 2018 and we think we’ve run out of speculators. So the whole industry’s stuck in that early adopter phase, and we can’t really cross the chasm into mass adoption.

We were thinking through why can’t we get to mass adoption, and the answer became clear: most people on the planet really don’t need to trade coins with each other or participate in an ICO. These are not killer apps for the average person. So we spent a lot of time thinking: What is a killer app? What is that Netscape moment that’s going to change everything? Because Netscape got 100 million downloads in 6 months, and they ushered in mass adoption of the Internet. Well, we think that for crypto it’s all about credit: access to credit and earning interest.

So we’ve simplified this into something very, very basic where we have an app, you have crypto, and, for example, you can borrow at 9%. Or you can earn 5% interest. It’s a very, very simple two-step process, but the idea is that the wallet will be used as effectively as a browser, becoming the gateway for all these people to access many, many other services. Our idea is to add 100 other services into our wallet, as long as those services really represent the best interests of the community in general, as well as our community, the Celsius community. That’s the broad purpose of the Celsius Network.

Paxtradings: How does the Celsius Network (CEL) function within the platform and why is it needed?

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I am a co-entrepreneur. I have had seven startups before; Celsius is my eighth. I have had two of the top ten exits in New York in the last 20 years — Arbinet and Trans-Wireless — so my entire career was about building marketplaces through raising money through venture and creating value, then exiting or doing a public offering.

Here, it’s almost the opposite. Here it’s all about enabling a community; creating a service and scaling it to the next level. Because really, in my view, the thing that Ethereum created is not really a smart contract. Almost no one uses a smart contract for anything. The invention of Ethereum is the ICO. And the beauty of the ICO is that it enables us to create an open-architecture decentralized platform with its own community like Ethereum. But the value creation is completely separate and external, so the ether token measures the value of the community every day. That’s what we are trying to do, as well. We are trying to create a token that will measure the value of the Celsius Network.

So what does that mean practically? It means that we do the best for all of our members. Meaning we charge less interest. We charge little over half the interest that SALT charges. They charge 16–18%, but we charge 9%. Also, we pay 5 times the interest that banks pay depositors. The average bank now pays less than 1%, and we’re promising 5%. So why are we doing that? If I was showing this to a VC, they’d say “You’re crazy. You’re giving your customers way too much.” But if you are doing it for the community and putting all your value into the token, that’s a great business plan.

Paxtradings: Celsius also requires a stable borrower and lender community to work. How do you intend to keep this number? Are you willing to partner with other crypto-investment platforms?

That is a big challenge, and I spent almost a year on that question because almost every peer-to-peer platform to date — including 10 of them that have already run ICOs — they’re all one-to-one. They say, “Hey, come to us, and we’ll match you to a borrower on the other side.”

That just doesn’t work. It didn’t work for Lending Club. It really didn’t work for anybody. So that whole model of peer-to-peer, one-to-one, seems like the role model, but what we are doing is very, very different.

So we asked ourselves what things we are trying to achieve. We are trying to incentivize good behavior and disincentivize bad behavior. The good behavior is HODLing your coins, and the bad behavior is moving them around and creating a lot of volatility. So what if we pooled all the coins together and created a giant pool of BTC? Would you lend to us against that?

Like the old joke goes, if you take a loan out from a bank for $10, you don’t sleep at night. If you take a loan out for $10 million dollars, they don’t sleep at night. You want to show up at the financial institution with a very large pool of assets and then get the best deal on behalf of the entire community. So we partnered with a very large financial institution. They are our custodian. Unfortunately, I cannot mention their name, but they have trillions in assets. It’s one of the largest companies around.

We’re solving some problems for them: they want to be in the crypto business, but they didn’t know how to enter, and we came in and showed them how: We’re going to aggregate all of their users into a giant pool, under custodianship. Then, against that asset, we will be lending to individuals. So all of our loans are asset-based. We only lend to the crypto-community, and we only lend to the people who have given us crypto. So if you have given us crypto and you ask for a loan, that’s fine. But some other people just give us crypto and want to earn interest.

This process I just described is very different from every other attempt to date.

Paxtradings: You imply that Celsius Tokens (CEL tokens) will be more stable than other cryptocurrencies, which are infamous for their instability. How will CEL tokens be different?

We are not a stable coin, or at least we are not promising that. Think of Filecoin and how Filecoin has people who have storage and people who need storage. They have an internal economics, an internal engine, so their token economics are very clear. That’s all we mean. We are saying we have very clear token economics, meaning that with Celsius you don’t need all the speculators to get all excited about what you’re doing to create demand for the token.

So let’s just role play a quick example here. I’ll be the coin contributor and you’ll be the borrower. Let’s say you deposited one bitcoin, and it’s worth $10,000. You want to borrow $4,000. We basically never go above 50% — anywhere between 30–40% is good, and that is done to protect both you and the community. We never want to have the margin called.

So if you get $4,000, and let’s say that the interest is 12% a year, you’re going to pay $480 a year. That’s all you pay. We’re not charging you principal, only interest. Why? Because we have your asset. I just rounded the numbers there — we actually charge you 9% per year. Every month, you have to pay $40 (again, rounding the numbers). So how do you pay the $40? In the Celsius app every month, you say “buy me $40 worth of tokens.” You don’t care if the token price is 20 cents, 30 cents, or $2. As long as you’ve paid your $40, you’re done. You’ve paid your interest, and you are good to go. You don’t have to do anything else.

So the price of the token measures the value of the community. It is not used as a payment method. Yes, it is used as a transfer of value between the person who borrowed and the community, but — just like I think is really the case with Ethereum and Bitcoin — the only way to value it is to understand that it’s really just pricing the community. So sometimes when you execute a transaction, you will pay 30 cents, and other times, you will pay 50 cents.

Now, we take those sale tokens and distribute them based on who provided the coins. That allows us to do proof of stake and get our dollar loans issued.

We use three parameters:

How long have you been with us? The longer you have been with us, the more you get out of the interest. So if you deposit coins and then leave, and then later come back, we reset your clock, because we want to give you incentives not to create volatility inside our system. So we penalize you if you move coins out of Celsius and back in, or if you trade them around, or other similar things.

How many bitcoins or ether do you have with us, and

How many CEL tokens have you ever been given since day 1, or purchased, and how many do you have now. The ratio between the two tells us if you are a supporter of the community or just a speculator. So, basically, the more you are a HODLer on all of those points, the better interest we pay.

So it’s all based on the value for the community. Again, we distribute basically anything that is not used to pay our salaries back to the community. So if we get a million members, the spread between the bid and the ask on the loan will be less than 1%, because our operating costs will be very, very low compared to the amount of money we’re lending. So it will actually be like 7%; we charge 7%, and we pay 6% (something like that) — which no bank will ever do.

You know, the only reason that the bank checks your credit score, your FICO, is to know how much they can charge you. How much they can screw you. This means we don’t need a credit score, since all of our loans are asset-backed, so we can issue them for less and less and less.

Paxtradings: Many cryptocurrency-based financial institutions have been hacked in recent years, some of which lost millions. How does Celsius intend to protect themselves from security threats; how is Celsius more secure than other cryptocurrency-based financial institutions?

All of our coins and all of our tokens are stored with a custodian. Our custodian is 100 times bigger than CoinBase — which is considered the best solution today — and most of the time, almost all of our tokens or coins are stored in cold storage. So it is the best of both worlds. You want the largest financial institution to hold your assets; you want them in cold storage; here, you’re getting paid to do so. Coinbase will never pay you anything for holding their coins; to the contrary, they charge you as much as possible, both ways.

So when you do it for the people, by the people, then the service looks very, very different. There is no reason to not do what we are doing, because our incentive, everything we do — and Keith corrects me sometimes when I stray from the path — everything we do is for the best interest of the coin holders. If we really believe in that and we follow that every day, then our tokens will increase in value, because many, many people will say, “Why would I ever park my coins somewhere else? I’ll move them to Celsius!”

Paxtradings: In your mission, you claim that blockchain will be the future of lending and borrowing. What incentive is there for the world economy to change; what is your role in being a part of that change?

So I want to tell you a little story about my background, because I think it will resonate with what we are doing here. Back in 1994, I built one of the first companies that built voicemail systems based on PCs. That doesn’t sound like a big achievement, right? But in ’94 when the Internet kind of came to be, I thought, “Gosh, we can use the same systems to do voice over the internet.” And I build the first VoIP gateway in 1995, and I went and wrote the original patents and algorithms and protocols for VoIP, and the original patent from October 1994.

I went to AT&T, and I showed them the stuff, and they were like, “Man, this is really nice! This could save us a lot of money,” and “How about we plug all these nodes into our network? We’ll save a lot of money.” Well, that’s what JP Morgan is trying to do today. They are looking into blockchain, and they are saying, “Wow, this blockchain thing is really cool. We could save like $10 billion in our back office.” But my point with AT&T was that this is about billions of people using this everywhere and not paying you $3 a minute to call Korea or Japan. Those were the rates back then. AT&T used to make 90% of its profits from International VoIPs!

So we started this revolution, and obviously today when you say VoIP and you use the service [Skype] we are using right now, no one even thinks about it. But back in ’95, it wasn’t obvious at all.

The analogy is that blockchain without crypto is not going to solve anything. Crypto is the fundable platform that enables global access without caring which country you are from, or what your background is, or which college you went to, or all the FICO stuff. None of that matters. That’s what we’re really pushing for. Our wallet couldn’t care less; we treat a guy with $1 or a guy with a million dollars exactly the same way. If you are the guy with the $1 and you came before the guy with the million dollars, and you never sold your coins, you’re going to earn more interest than he does, thanks to our algorithms.

A billion people or so use VoIP every day, and we want the same experience to happen in crypto. So if we create a trusted wallet, and if we add the right services, things doing good for the community, then this thing will thrive. That’s why, when we started this conversation, I told you that we are focused on the next 100 million people. All of these things tie together. So all of our answers to your questions tie back to, “Is this going to bring the next 100 million people or not?” Because that’s how we can measure our success.

Paxtradings: Let’s talk a little bit about competition and competitors. Do you guys have any competitors, and if so, what features make Celsius different to your user base?

Keith is sending you a table that compares us to a bunch of other guys.

The biggest comparison: If you look at SALT or Ripio, they are all basically centralized toll collectors. They pretend to be crypto guys. But take SALT: They charge you 16% to borrow against your ether, and they take all the profits. That’s great for the token holders, but not great for the community.

So I think it’s all about the purpose of the company. ETHlend is a better system. I think ETHlend is a more ‘for the people, by the people’ kind of group, but they are lending crypto against crypto, which is a very difficult model. Most people don’t need more crypto against their crypto. They just need more access to dollars, and they want to defer their taxes, etc. So I don’t think they are really solving the problem.

Also I think airdropping your profits is going to become a legal problem from a regulatory standpoint, and they haven’t solved that issue, either.

Let’s look at SALT again. SALT raised $35 million. They gave about a thirty-something percent discount, so they are left with $22 million, or something like that. That’s exactly what they have lent out. They lent out their own capital. They had over a billion in demand, but they cannot scale, because they don’t have a financial partner like we have.

The reason I have a financial partner is because I raised over a billion from VCs, and I returned $3 billion to them. So when I come and talk to these guys, they are thinking, “Whoa, this guy is going to make us money”. They are not doing it because they want to build the crypto community, believe me! They are not trying to help us in any way. They are just scratching their heads, asking how much profit can they make.

For asset-backed loans, the secret — I will share it with you, and I’m happy for you to publish it. Even if you know the secret, it is not easy to replicate it. So, today, if I have a Charles Schwab account or an e-Trade account and I want to borrow against my stock, I will pay about 2% per year per interest. Why? Because the loan provider is very happy to give me a loan when they have 200% of assets as a backup, so they give me a very, very cheap loan. All we really did is copy the same thing in crypto. The biggest problem was finding someone who would lend against crypto. That was the crux of the matter, and that’s what we’ve solved. And no one else has solved it.

Paxtradings: How far along is the project today and when can contributors expect to use the platform? What does the roadmap look like for 2018?

So, our app should be in the App Store next week. We promised it before our public sale, which is scheduled for March 15th, so I hope Apple is not going to screw up our plans, because it’s all in their hands now.

The first version of the app does very little. It allows you to become a member, and it allows you to apply for a loan. So it doesn’t have all the bells and whistles that we have listed on our website. If you get a chance to look at it, you will see a video of our alpha version running on our TestNet. Those features should arrive in the real app in April, probably.

One important distinction: We intentionally do not sell ether or bitcoin or anything like that. Meaning you cannot give us dollars and buy coins from us. We intentionally want you to take the coins from somewhere else and move them into our wallet. The reason for this is that we think a lot of the volatility — especially what you saw yesterday and a few weeks ago when prices dropped like crazy — is because people park their coins on exchanges, and the exchanges basically lend these coins to others. So there is twice as much volatility. So we remove every coin from the exchange and put it in cold storage with our custodian, reducing volatility, and then we incentivize you to keep it there.

So our wallet has been designed in stages so that we can deliver the services I just mentioned.

We are doing everything by the book. Again, March 15th is our public sale. We will have it out by then, and then the next version sometime in April.

Paxtradings: As a non-Celsius question, we like to ask for unique predictions for the ICO and cryptocurrency space in the future. Where do you see both in the next 3–5 years?

I will be doing a lot of talking about that — and I have made myself controversial because of this — but we believe this is like the Cambrian Explosion. You have a tremendous amount of innovation, which will be followed by a nuclear winter. The reason for the nuclear winter is that currently we are using up a lot of this capital that has been given to us (“us” meaning all the ICO companies and projects and all the other stuff that is happening). A lot of it is being used for things that have nothing to do with scaling, with crypto, or with enabling the community or bringing the next billion people into the community.

So, basically, everybody is throwing stuff against the wall and seeing if it sticks, and that just doesn’t work. I mean, imagine if VCs did that? I feel like we are burning precious capital, and for me most of these projects are like mosquitoes, just sucking blood out of the crypto community. So I am very negative about a lot of these projects. I am an advisor to, I don’t know, 5 or 6 companies, and I have invested in probably 20 ICOs. I am not the ultimate judge, I just feel that…

Let me say this differently: Crypto and the blockchain really solve financial issues. They’re not really here to solve healthcare or solve real estate or to solve whatever else. So I think the first few winners, the Amazons and Facebooks of this industry, are going to be all people that solve financial issues. They’re going to take something that has been done a certain way for hundreds of years, and suddenly it’s done in a very, very different way, and everybody says “Oh my gosh, this is so much better — I am moving all my assets to that.”

So that’s what we are trying to become. But all these people are trying to apply these solutions to diamonds or whatever else. Those projects will have a very hard time with adoption.

Pre-ICO Information

The Pre-ICO sold a total of 260,000,000 Celsius Network tokens (CEL).

The Pre-ICO price was .20 USD = 1 CEL token

ICO Information

The main ICO will begin on March 15, 2018 and will end on March 22,2018. There are a total of 65,000,000 Celsius Network tokens (CEL) available during the Pre-ICO and main ICO, representing 10% of the total CEL supply. A hard cap of $50,000,000 is set for this period.

.30 USD = 1 CEL token

Current accepted currencies for Celsius Network include ETH, BTC,USD.

Celsius Network is an ERC-20 token, so it’s important that contributors use ERC-20 compatible wallets to send funds to the ICO smart contract, and to receive the Celsius Network tokens.

Token Distribution Information

There are a total 650,000,000 CEL tokens being created, with 65,000,000 available during main ICO.

Contributors will have their tokens distributed shortly after the end of the ICO. Visit the Celsius Network website for more information and the contribution address.

Use of Crowdsale Proceeds

Allocation

Roadmap

Team

Social Media

View the Celsius Network website here.

View the only comprehensive list of active and upcoming Initial Coin Offerings (ICOs) here.

References

  1. Celsius Network Website, Celsius Network (2017)

2. Celsius Network Whitepaper, Celsius Network (2017)

2018-03-16T22:37:46+00:00 March 16th, 2018|Categories: ICOs|

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