Banks and traditional financial institutions are notorious for charging really high interest rates, while paying depositors relatively minuscule interest rates on that money that they are loaning out. On top of this, there are various other different ways like maintenance fees, over draft fees, check printing fees, etc that also add to their profit margin.
We have seen some challenge to this status quo by so-called challenger banks, like SoFi Money, Chime, and many others (referral links) offer little to no fees, or higher interest, by operating totally online and not having the overhead of physical locations.
Celsius and its founder would like to take this thought of financial disruption to the next level. Though not a bank, Celsius looks to capitalize on the idea of digital money or digital assets (think Bitcoin and Ethereum, and stable coins pegged to traditional fiat currency). These assets enable people anywhere that have access to the internet to transact with each other, and to use their phone to access financial services.)
In my opinion, there is something still to be said and a place to be had by the institution of banks, like the investment they make in the financial security of the deposits, as well as legal responsibility and oversight that they are subject to that give depositors more peace of mind (not to mention FDIC insurance and its equivalents around the world. (Earlier this year some Celsius users were victims of a phishing scheme that sent an email to them that had an uncanny similarity to the official Celius communications.
They were taken to a url that one could assume was under the control of Celsius, as the email purported to announce the launch of a Celsius web wallet interface to access accounts on desktop - oddly enough, Celsius actually seems to have rolled out with this feature, weeks after the phishing scheme. When victims were taken to the fake page, in order to receive the $500 in CEL token that the false email and site offered them for linking their wallet to the purported Celsius web interface, they clicked on a button to connect commonly known Ethereum wallets, like Metamask.
When this was chosen, instead of a successful web3-like message of connection to the aformentioned wallet, users were told there was an error, and needed to input their seed phrase for that wallet - something never to be done - and that the real Celsius reiterated as something they would never ask users to do. Unfortunately some Celsius users fell prey to the crime. Once someone knows the seed phrase to a crytographic digital wallet, they can access the funds, sending them wherever they please. It should be noted that the funds on the Celsius network do not actually require a seed phrase, as Celius effectively is custodian over them, and has practices in place for the safegaurding of the private keys.
This all being said, one could imagine a bank's customers being subjected to such a scheme, and one can still see the vision of what Mashinksy wants to do with Celsius, which, it can be said, boils down to this: to offer an alternative that gives more value back to the consumers, and take a more reasonable part of the business. In this sense, traditional banks who are charging 23% + interest on credit cards and paying 0.01% interest on checking accounts are totally ripe to be disrupted.
Alex Mashinsky, who is associated with the early development of Voice Over IP (VOIP), is the man behind Celsius Network. Mashinsky is originally from Israel. He is an intelligent person who seems sincere in his mission, especially when he goes online to hold live AMA's (Ask Me Anything), he seems to be an accessible helper more than a lofty CEO. The transparency he expresses when talking about Celsius's business is refreshing.
As Celsius states on its homepage,
"Celsius Network was founded on the belief that we can do well after we do good for our community. Users pay the lowest interest on loans while feeling good that up to 80% of Celsius’ revenues are shared with our depositors, not our shareholders."
Mashinsky has used the term MOIP (Money Over IP) before, which expresses the way he sees digital assets being a way for people to exchange value anywhere around the world with each other, just as we transmit information. I believe he would like to position Celsius to play the valuable role financial institutions play in loaning out money, but in a way that pays more value in the equation back to the depositor and borrower, and not just the institution itself.
Users can deposit a large number of tokens and stable coins to their Celsius wallets, and simply start earning interest on them. Every Monday, interest is paid to depositors, either in the coin (interest in-kind) or in Celsius's native CEL token. Earning interest in the CEL token is currently not available on coins other than the CEL token for US persons.
The process of getting a loan is one that relies on one's holdings of digital assets as collateral. Celsius gives personal and business loans, with some jurisdictional exlusions. The lower the percentage of money borrowed compared to the amount of assets chosen to be collatoralized, the lower the rate. Borrowers can pay their loans with the CEL token for an even lower rate. Loan terms can be as long as 36 months, at time of writing.
Deposit rates are updated each week, just as interest is paid each week. For stable coins, interest could range from 7 or 8% in kind (paid in the same token deposited), up towards 12.30% interest paid in CEL tokens. Interest paid on Celsius is now compounding. This can offer up opportunities for users to gain more yield for their assets.
For instance, US customers can purchase USDC one for one without a fee with an ACH bank transfer from Coinbase (referral link), then once they are available to send (usually a few business days for ACH transfers), they can send them to their Celsius USDC wallet deposit address while only paying the Ethereum network fees for the transaction.
It is important to note that this should not be considered the same as a bank account, and it is not FDIC insured. Celsius does state it has insurance policies on the digital assets its holds, but this is different from a governmental insurance policy, as the insurer is a for-profit business.
Coinbase and Centre, the consortium partly started by Coinbase that mints the USDC coins, says that it has $1USD held for every 1 USDC in circulation. Coinbase also offers the 1 for 1 exchange of USDC and real US Dollars without fees (ACH transfers).
What is the CEL Token?
The CEL ($CEL) token is an ERC-20 token that is the native token for Celsius and its network. Celsius uses this token to pay out interest and bonuses, as well as to lower the rate of interest on loans for borrowers that pay their loan in the native token.
According to Mashinsky, Celsius goes to real exchanges and purchases CEL tokens to distribute to its community. Celsius and Mashinsky refer to users (think depositors and those who take out loans) as community. This creates a feeling totally different from that of a traditional financial institution.
This, potentially, leads to more demand on the market for the token the more it is used on the network, which in theory could see the value of the token rise with higher network usage and adoption, Celsius has described this as creating a flywheel effect. Again, Celsius incentivizes the use of the token by paying a higher rate of interest on the deposits weekly if paid in CEL token, instead of in-kind - for non-US users, that is, US users will be paid interest in the coin they have held in Celsius.
CelPay is another feature that allows users to send various coins to friends easily and without a fee. This is probably using Celsius's own infrastructure, and not necessarily a blockchain, to complete transfers between users. Celius offers its services for holders of many different coins, of various different blockchain protocols.
Celsius seems to take compliance and regulation seriously, which is refreshing as well. Because of this, users should consult their local jurisdictions and/or Celsius support to know which services are available to them. As far as I am aware, Celsius services are available in a large number of countries, with certain well known sanctioned countries excluded. Please consult Celsius with the jurisdictions and functionalities for each one available.
Join Celsius now and receive a first-time bonus when certain actions are completed. (Referral link, subject to terms and change).
Please note this is not financial or banking advice, and one should consult the regulations of the jurisdictions they are subject to.
The author possessed digital assets mentioned above at the time of publishing (CEL, Bitcoin, Ethereum, USDC).
Keevo, Next Generation Hardware Wallet For Bitcoin (BSV, BTC, BCH), Ethereum, and ERC-20 Tokens.