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Note about the title:
As the title of the article states Ethereum created more millionaires because almost all their initial investors in their ICO were NOT millionaires and had become ones as the ETH price rose. Most investors today in public companies who participated in the A or B rounds were VC’s and rich investors who are already multi-millionaires. Small unaccredited investors did not get a chance to get into Amazon, Facebook or Google as private companies. That is why the few successful ICOs like Ethereum will create more wealth for more people than any of the public companies.
It is no wonder that our guest today was on the Crypto Top Influencers list.
Alex Mashinsky is a force to be reckoned with in the crypto and blockchain space. He speaks with great passion about the blockchain and Celsius Network, the industry-leading crypto lending platform. To date, Celsius Network boasts $632 million in loans and zero forced liquidations in the last 6 months of 2018. It is by far the largest company in the crypto-lending business.
Alex’s vision is not confined to just what Celsius Network does today; his vision is to take control back from centralized banks and toll collectors and put the control back in the hands of hardworking individuals.
Having seen his share of busts and booms over the past 35 years, Alex is no stranger to the fast-moving NY business world. He has founded 7 successful business ventures and has over 50 patents to his name. He has not only witnessed but took advantage of the Dotcom bubble and is not deterred by this crypto winter, “we will bounce back much higher than the last highs, it cannot be any other way” he stated confidently.
We at CryptoTapas believe that we need more people like Alex who are not only idealistic but have the experience to carry out their ideals.
Celsius is one of the projects that is doing extremely well, even in this crypto winter. Since their launch in June 2018, Celsius Network has lent over $632 Million dollars worth of coins in 2018!
Decentralization is the superpower of ethereum blockchain explorer
“The power of blockchain is the power of decentralization,” Alex says, and he believes it is our opportunity to make the system right.
He is doing his part.
His company, Celsius Network, is bringing the concept of interest income and crypto lending to the masses. While Celsius lends in fiat, it distributes the interest in crypto to the investors who deposit their coins with Celsius. This is an excellent combination to undermine the big banks and institutions who have the power to monopolize the lending business while bringing liquidity into the crypto market at the same time.
Even the superpowers need mass adoption
Today, to receive low-interest loans on through Celsius Network, you have to deposit collateral in crypto. This will take some time to sink into Western culture, since they are used to getting loans without collateral. Credit is abundant in the US; half of all the credit on the planet is issued in the US.
But, that lack of collateral comes at a great cost. An average credit card charges an APR of 25%, while some Payday loans charge up to 700%. Compare that to Celsius Network, which charges 4.95% a year on crypto backed loans.
Alex proudly states, “we have not had a single forced liquidation in the $632 Million we loaned because we represent the interest of our depositors.” That is quite an achievement for any company in the crypto space or in the traditional lending and borrowing space.
Investors can also deposit their crypto securely within the Celsius Network app and receive interest at rates of 3-7% (rates subject to change).
Collateral-based loans are common in most nations and so is banks paying interest on deposits. Most US banks, for instance, do not pay interest on your deposits; some even charge you fees for not having recurring deposits. However, they can take your money and multiply it using a fractional reserve system and lend it out to the needy at the 25% rate on the credit cards they issue. The bank is using your money to make a huge profit and not share it with you.
This shady practice has been going on for so long that the Western population has gotten used to it and doesn’t know any better. As banks merged, the interest they pay has dropped by close to 90% as the competition has decreased.
Celsius wants to change that using blockchain technology and cryptocurrencies; however, it needs many more people to realize that they are being taken advantage of and are losing a lot of money keeping it idle at traditional banks.
“Before focusing on banks, I disrupted the phone companies’ monopoly. They used to charge $3 a minute and now we use VOIP for free (search Wikipedia for my name) – I helped write the patents and develop the technology back in 1994. My grandma in Russia used to hang up on me because calls used to cost us a fortune, and she didn’t want me to spend that kind of money. Whatsapp came in and changed all of that by offering unlimited free VOIP for FREE, but even Whatsapp needed masses to make Whatsapp successful.” Alex related, “Celsius is no different. Inertia in financial space is more difficult to break, but it will happen eventually when people see the value and understand they are being taken advantage of.”
I am in the elite 1% myself, but…
Alex is not doing this for charity, and he certainly is not a hippie who is waging war against Wall Street. Quite the contrary; he is using his 30+ years of business acumen to build a truly decentralized business that could change the lending segment completely.
“Today, most people rely on wages to survive, and the wage system is a pyramid model where everyone in the bottom of the pyramid is busting themselves to make the top 1/10th of 1% richer,” said Alex.
He makes it clear in no uncertain terms that he himself is part of the 1/10th of 1% purely by the measure of net worth. “I am considered to be the 1/10th of 1% myself, but I made that wealth bringing prosperity to others. My focus now is on taking this revolution of decentralization to the masses by collecting and distributing 80% of our interest income back into the Celsius community instead of the rewarding the officers and shareholders of the company like the banks do. We are focused on growing the community while others are focused on profit maximization.” He clarified, “if we do good, we will also do well ourselves – but not before the community benefits.”
The concept of ethereum Blockchain Explorer is not a new one
Talking about the need of critical mass for the success of any great technology, Alex spoke about how Satoshi Nakamoto himself borrowed the concept of blockchain, digital signatures and public key distribution from the works of others from 1957, 1980 and so on (see page 9 of Satoshi white paper referring to Scott Stornetta and others).
“Blockchain is not a new concept; it goes back as far as the 1980s, and Satoshi Nakamoto himself referenced to the work he relied on in his whitepapers.” Alex enlightened us, “most people don’t check the references, but that’s where the origins can be found.”
We checked his statement and found Satoshi’s references that dated as far back as 1957. We have since added all the references from Bitcoin whitepaper in our Blockchain Research Reports Database. The main reference Satoshi is using is an advisor to Celsius Network.
Vision worth cheering up for
Alex’s vision of helping people earn interest on their hard-earned income instead of paying interest to the banks while making loans affordable is quite commendable.
In a world where politicians are backing payday loans that suck the blood out of the hard working class in the name of lending charging up to 700% interest using the ‘fine print’, people like Alex and projects like Celsius Network are a much-needed solace.
Test it out to believe it
“Don’t take my word for it,” Alex challenged us confidently, “download the app – check how easy it is to send crypto to anyone using our CelPay service; even those who don’t understand crypto can use it. Try it and see for yourself; it’s the only way to bring the masses and take the power away from the banks.”
Alex is right on so many levels. The biggest hurdle that blockchain and crypto face is the barrier to entry. There is just no easy way for people to acquire crypto, and when they do acquire the crypto, there is not enough utility because most people don’t know how to use it.
If projects like Celsius find a way to make it easier to own, deposit, earn and lend in crypto, it is a massive step forward for the crypto space.
We encourage everyone reading this article to take Alex’s challenge quite literally. Go test out the app for yourselves: Celsius.network.
Disclaimer: Our excitement in recommending you to try is our opinion, not affiliation or solicitation. Please form your own opinions.
Cryptotapas: Congratulations on the well-deserved Top influencer recognition.
Alex Mashinsky: Thank you.
Cryptotapas: Tell us a little bit about yourself and your vision behind venturing into Crypto space and starting Celsius
Alex Mashinsky: I like to think of myself as a disruptor. I have started 7 different companies and each of them disrupted some industry or another. Not all the companies did well, but they all changed something. I invented VOIP with a company called Arbinet back in 1994 and now over 3B people use it for free. I brought wireless to the NYC subways with a company called Transit Wireless and now 8m people have connectivity and use it for free. My community benefited before I did.
See a list of all the conferences I had to attend back in the 1990s to promote VOIP and all the MOIP (Money over Internet Protocol) events I have done to promote Celsius.
To make a shift in the current financial market structure, we give up to 80% of the profits back to the depositor community. The moment you are in it for profits, your thinking changes. When you are in it for the community you think much differently.
Cryptotapas: When companies like SALT have not fared well – what made you think that Celsius would be any different?
Alex Mashinsky: It’s easy to miss the simple concepts we represent.
We loaned $632 million with zero forced liquidations. We pay back up to 80% of the income to our community as coins in their wallets. We are all about the community, and when you focus on the community your operational model is to always act in their best interests. Most other businesses, including the example you gave, are in this for profit optimization which hurts the community.
Our loan rates are a fraction compared to some of the other lenders because what we pay to our depositors is nothing they can get anywhere else. Because again, our focus is on making our community one of the strongest in the crypto space.
Let me give you an example. We were recently selected as the founding member of the United Nations SDG Impact Fund to accept and manage donations in crypto. Fifth Element group realized that blockchain has huge potential in tracking the journey of donations, but more importantly, Celsius Network offers one of industry’s best wallet and custodian service using BitGo with the added layer of funds earning interest.
It just makes sense.
Sensible and simple always win, but also most often missed. That’s where we are different; our focus on community and our vision to change the system helps us think differently, and that helps us become stronger.
Cryptotapas: What happens when the collateral’s value goes below the loan amount? How does Celsius tackle that deficit?
Alex Mashinsky: Our loans are 25-50% LTV, that is, 25% of Loan to Collateral value. If you deposit $10,000 in crypto, you can take $2,500-$5,000 in the loan at the predetermined interest rate of 4.95% – 8.95%.
If the market value of your collateral goes below the required LTV (with resistance level at 50%) we have a mechanism to recover the deficit from the collateral if you do not want to deposit more coins, but if the coin value goes up, you keep all the profit and you only paid small interest to the rest of the community. The banks don’t get to make any money from this transaction.
BitGo acts as the custodian protecting the customers from any unauthorized withdrawals, while it also protects our community by ensuring that we are not going below the liquidity levels on our loans.
Cryptotapas: How do you ensure Safety of collateral digital assets?
Alex Mashinsky: BitGo, who act as custodian for Kraken/Bittrex, also manages Celsius Network funds. They never had a single breach or hack in 7 years, so it is quite safe.
Cryptotapas: The need to un-bank is the most in third world countries more than the western world, what are your plans to reach countries that do not use USD Fiat?
Alex Mashinsky: First, we need to perfect the system before we can take this to the other parts of the world. We lend out in different forms of Dollar like Euro, Pounds, etc.
Right now, people work hard for their wages. These financial institutions are milking their customers for their profits. Their first and only focus is on profits – we need to change the equation from banks lending our own money and keeping most of the profit to making lending a decentralized process in which the community keeps most of the profit.
This is how we find a use case for the blockchain and the lending space. This is a great use case for blockchain which can bring the next 1B people to crypto. We get the masses to utilize this service and that’s how we bring blockchain potential to the masses. Decentralization takes power from the 1/10 of 1% and puts it in the hands of a broader middle class.
Don’t get me wrong, I am part of that 1/10 of 1% myself, which is the result of the ventures I did over the years and 50 different patents I own, but I started with nothing. I came to America as an immigrant with less than $100 in my pocket, so I know the hard life others are living every day. I was born in Russia during Communism and grew up in Israel – which has socialism, but for the last 30 years, I have lived in the US under Capitalism. Today 0.01% of Americans or 33,000 people have the same wealth as 90% or 300,000,000 Americans. This is not a system that can last for a long time. One just needs to remember the French guillotine.
My focus right now is to bring the power of finance back to the people by decentralizing interest income and dollar borrowing and scaling the space. Build one of the biggest communities. Once we have established it here in the western world, we can then replicate it in other regions where we will need to issue much smaller loans that cost more to issue.
Without mass adoption, even the Blockchain can die from transaction starvation.
Cryptotapas: What is your thought process in coming up with the idea of 100 million people in Crypto concept?
Alex Mashinsky: Critical mass. For any industry to start disrupting – they need critical mass. For instance, if Whatsapp only had 15 million users, it wouldn’t have made the dent it had in the VoIP industry. The financial industry is much bigger and tougher to change and it needs a certain amount of critical mass.
I am disappointed that only 25 million crypto wallets exist in 2018 at the 10th birthday of Bitcoin. We need 10x more.
As disruptive and as amazing this revolution is, it won’t sustain without many more people. Many great technologies have come and gone because they did not find the critical mass to sustain and thrive.
Did you know when the first blockchain was proposed? It was long before the 2000s. The idea of blockchain kept floating and drowning since the 1950s.
Satoshi Nakamoto in the Bitcoin whitepaper mentions on page 9 all his references. Blockchain as a concept is not new. It has never been applied in a global decentralized model; Bitcoin was the first time someone had done that. We have an opportunity to take that momentum forward, but we cannot do it without critical mass.
Cryptotapas: Do you believe that we are in a fight with the traditional financial system? Do you see any way for the traditional financial system to collaborate or even accelerate the blockchain/crypto space?
Alex Mashinsky: Yes, there is no question about the war against traditional banks and their shark-like models to compete with decentralization. We are challenging the core fabric of the current financial system and the rich people who run big banks will not take it lying down when we are disrupting their business and cutting into their ludicrous profits.
Right now, it’s difficult to get into Crypto.
Do you know what Fiat means? It comes from a Latin word that closely means ‘nothing behind it’. The US Dollar is backed by big nothing, and most of the world’s currencies are backed by big nothing. The dollar has over 22 Trillion in debts and no gold or silver behind it. A system that keeps 90% of its population suppressed will not stay that way for long. At one point or the other, the system will be disrupted, it cannot be any other way.
Ethereum created a lot of wealth. Those who invested in it early made millions of dollars. Institutions who couldn’t participate in ICO’s cannot even grasp how they could miss this.
Whereas previously, any new idea was first available to the wealthy of us to get on the ground floor and it was later dumped on masses in an IPO, like Facebook or other public company shares.
Ethereum created more millionaires because almost all their initial investors in their ICO were NOT millionaires and had become ones as the ETH price rose. Most investors today in public companies who participated in the A or B rounds were VC’s and rich investors who are already multi-millionaires. Small unaccredited investors did not get a chance to get into Amazon, Facebook or Google as private companies. That is why the few successful ICOs like Ethereum will create more wealth for more people than any of the public companies.
Cryptotapas: You were part of the traditional finance system, including VC space, now you are a force behind Crypto revolution, what kind of ridicule or resistance have you’re faced from your friends from the Wall Street?
Alex Mashinsky: Most people complain that I am messing up with their great system that rewards the already rich.
Right now a bank takes money from retail investors at 0% or 1% interest a year and then turns and lends your money to others through credit cards for 25% a year. That 24% margin is a 95% profit for the bank. Our model is changing that to give back to the community of depositors 80% of all money we make and only charge those that need a loan about 5-9% a year. We do not penalize people for late payments, and we do not charge loan or late fees or subject people to unnecessary costs.
And, the banks are scratching their heads as to why I am messing up their lucrative gig, after all, I used to be on their camp. They are happy about the crypto winter because it slowed down our progress, but it did not stop us. To have lent $632 Million dollars since June 2018 is a testament that the idea is solid, and our depositors have received interest every Monday since we launched. Crypto prices will bounce back multiple times once the market recovers; however, we are not going to sit back until that happens. We will carry our vision forward.
Cryptotapas: JP Morgan CEO slashed Bitcoin for 3 years now and JPM is now issuing their own coin. Do you think the entrance of these nefarious companies will impact blockchain/crypto negatively?
Alex Mashinsky: Look, banks are not your friends, and they are definitely not here to do good. They make over $80 Billion in profits, not just revenue, but in profits.
What they are trying to start now is an intranet or private blockchains. This is no different than when companies like IBM tried to build intranets and promised people a safe place to use the internet back in the 80s, but we don’t hear about them because the power is in open networks such as the public Internet and public blockchains. The Internet is the largest network and it won over these attempts to centralize the internet.
The larger the network, the more successful it will be. This is why Whatsapp was such a massive hit.
These banks may try to create a private blockchain to fool people into believing them, but once we scale our own public blockchain network, their users will have the opportunity of doing everything they are doing now, and they will join us instead of JP Morgan. When that happens, people will realize that they were played once again – just like no one is using AT&T to make $3 a minute long distance calls.
The real value of blockchain is really in the public blockchain where masses can participate. It is not easy since there are so many barriers to entry in the blockchain and crypto space. But that is why we need more and more people to work in the space to make it more accessible to the common public.
For instance, check our CelPay service in our wallet which makes it easier to send crypto, even to those that have no crypto accounts or do not know how to use addresses or private keys. We have taken all the mystery of blockchain and worked it all out in our program to drive a seamless experience of using crypto for the end user. You should try it to believe it.
And I have been in the space of disruptions long enough to know that the value is in the size of the network, and that is why I believe that anyone who is working on the private blockchain is really wasting their time. A public blockchain is where all the revolution will happen.
Cryptotapas: How has Celsius changed you as a person both personally and professionally?
Alex Mashinsky: You know, in crypto you cannot say something and do something else. If you see our technical whitepaper from 2017 – we have delivered everything we said we would and more.
It becomes more important when you say you are working for the community; you have to stick to your word. Otherwise, people will call you out. More importantly, if you cannot stick to what you say you will do – you should go do something else.
In that sense, Celsius has kept me true to my words and promises we made to the community. We will continue to deliver for the community.
Cryptotapas: Do you have an exit plan or are you committed to Celsius?
Alex Mashinsky: I will work on this until I die and hopefully if we make the progress we hope to, generations to come will appreciate what we created. The bigger we become, the more resilient a company we will be – as long as we stick to the principles of putting our community first.
Cryptotapas: Talk to us about your personal life. What specific actions do you take to find work-life balance, stay away from digital noise and stay healthy? Any tips for our audience?
Alex Mashinsky: I do not take breaks. I am a workaholic. I am not one of the crazy Twitter or Facebook addicts and I don’t jump on every new idea either. I wait until I have something of value to say. For instance, I waited to explain the whole crypto market crash with the four-man relay race analogy. Do you know what that is?
First the Anarchist grabbed the Bitcoin baton from Satoshi and they wanted to use it for nefarious activities like drug dealings, buy things to blow up, damage the society and other illegal activities. Dreamers of Dystopia. They could not scale and gave up after less than 1m people joined their group worldwide.
Then, Libertarians took the same baton and said we will use this to create an idealistic world, for the betterment of humanity and to change Wall Street. These were dreamers of Utopia. They managed to bring another 3m user to bitcoin and got the price up to $2,000
Then came the Speculators around 2016. They ridiculed the previous two groups as wrong and as amateurs and grabbed the baton to take it upon themselves to play the space and to milk billions. They made a lot of money in the beginning by bringing over 20m new users to the Bitcoin and getting the price to $20,000. Their plan was to pass the baton to the institutions who would take it to new highs.
Institutions never miss an opportunity to make money, but this time, they were last to the party and not ready. They wanted to take this far beyond what Anarchists, Liberals, and Speculators could. However, they found out that the regulation, the scalability and the security of these networks were not ready for prime time so…
They dropped the baton and prices plunged 90% as all the other three growls started running to the exits and selling all their coins.
That is where we are currently coasting. Once Institutions find the way to make legal and regulatory concerns cleared – and believe me they will – this space is going to recover and become so big that everyone will be caught by surprise and wish they did not sell.
This crypto winter is helping institutions place themselves well to benefit from the next wave.
Cryptotapas: What excites you about what you do? What keeps you going?
Alex Mashinsky: If Jeff Bezos is spending every minute of his 24 hours thinking about doing more for his users and bringing new customers, I will be spending every minute of my waking life to making this community bigger and better so that we become self-sustainable.
Once people see the value, we will grow much bigger than where we are today and that will bring much more stability to space.
This revolution is much bigger than any other revolution we have seen before. It touches all the money in the world which is much bigger than the Internet. This gives us an opportunity to change the game for the better.
Cryptotapas: It was an absolute pleasure speaking with you Alex. We really appreciate you taking time out of your busy schedule to enlighten us with these insights. Until we catch up again on a future success story, THANK YOU!
*Due to a technical glitch, our interview recording was corrupted. This edited transcript was reconstructed based on the notes made during the interview and has been verified with Alex.
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About the author
RK Reddy holds two Masters degrees, one in Accounting and another in Business Administration with over 15 years of experience in the financial services industry.
RK Reddy is an ardent fan of Blockchain and Cryptocurrencies. You can see the excitement about this new technology in every article on Cryptotapas.com. Sometimes this excitement leads to an overly optimistic view. Guilty as charged. RK Reddy says “what may seem like an ‘overly optimistic expectation’ today may become an everyday norm in 5-10 years; look at the history of cars or airplanes, Blockchain and Cryptocurrencies belong to a similar frame of reference.” Of course, that is just his opinion.