Celsius Network Weekly AMA– November 13, 2020
With Alex Mashinsky, Zach Wildes, and Shiran Kleiderman, Chief Security Officer
Summary: Alex starts off with the news that Celsius’ on-chain assets have now topped $2.6 billion in AUM, and including cash on hand and CEL token in the treasury, that brings Celsius to an impressive $3.3 billion in total assets. In other big news, today is the day that 25 million employee CEL tokens unlock (CEL price above $1.50 for 10 days). As a reminder, 100% of employees committed to re-lock their tokens for a 3 year vesting schedule, 2.5 million CEL was sold OTC to cover their tax payment, employees are receiving 10% up-front as cash, and they are also allowed to borrow against their locked CEL. Translation: there’s no reason for employees to sell their tokens anytime soon.
In other news, Alex announced that Celsius would soon be adding several new assets to the wallet: COMP, DOT, and HBAR. Furthermore, Alex said they would likely be announcing support for another gold token (adding to XAUT and PAXG) as well as several other DeFi assets over the next few weeks. Celsius is also planning to support a separate ETH 2.0 staking pool within the wallet, and Alex clarified that Celsius would not be supporting the upcoming BCH hard fork. Earn-in-CEL is very close to becoming a reality for US accredited investors, and both the UK and Australia will have 0% loans available either now (UK) or very soon (Australia). Lastly, a desktop app will be launching in mid-to-late January for select retail and institutional clients, and a desktop dashboard is now in beta as well.
Finally, the big topic today was the service outage caused by a DNS issue that Celsius experienced earlier this week. Alex put it simply—“we screwed up”. You can find more details below, but to summarize: Celsius was conducting some DNS maintenance (preparing for launches of new products such as the web app and Proof of Community), and in the process of doing so triggered some of GoDaddy’s security protocols, freezing Celsius’ account. The biggest obstacle was the 18 hours it took GoDaddy to verify Celsius’ KYC info and unlock the account, followed by their slow DNS propagation. Alex, Shiran, and the rest of the team take full responsibility and have promised to learn from this (starting with leaving GoDaddy) and come out stronger and better prepared to scale Celsius moving forward. And showing that they have a sense of humor, Celsius launched a new promo code as a thank-you to customers who stuck it out—enter code DNS, deposit $200 and you will receive a $25 reward in BTC.
And if you’d like to earn interest on your crypto, gold, and stablecoins with Celsius, scroll to the end for instructions on how to get $20 in BTC when you sign up.
- $2.2 billion in AUM? Try $2.6 billion. Celsius issued a press release this past Monday listing our Assets Under Management at $2.2 billion. Today, that $2.2 billion is actually worth $2.6 billion—partially because Bitcoin went up, but also because we’ve had many more deposits in the past week. This also doesn’t include any of our cash (~$70 million) or our CEL token in the treasury (~$600 million)—this is only assets deposited by our users. Thus, Celsius holds around $3.3 billion in total assets. The only crypto fund bigger than Celsius is Grayscale—but they don’t pay you any interest, and they charge you fees!
- Fewer than expected withdrawals following DNS incident. Celsius normally sees $10-15 million of net deposits daily, and today (Friday, the first full day after Celsius resolved their DNS issue) ~$5 million was net withdrawn. We were definitely expecting more of our users to withdraw, and tell us that we had betrayed their trust since our app wasn’t available 24/7—but that’s not what’s happening. So I want to thank all of our users for sticking with us through this, and everyone on our team for working around the clock to help get this issue resolved.
- 10 days above $1.50. Since CEL token has now been above $1.50 for 10 days, 25 million CEL tokens set aside for the employees have now unlocked. 100% of Celsius’ employees committed to lock up their tokens for an additional 3 years, with 1/3 of their tokens vesting each year. 2.5 million CEL token were sold OTC to cover tax payments, and employees received a 10% bonus in cash. Furthermore, if employees need to they can take a loan against their CEL token, meaning they have absolutely no reason to sell. Read more about Celsius’ employee token distribution here.
- $1.94 million in interest payments. This is just the interest payment for one week. Ask yourself—what bank does that?
- Up to 5% discount buying OTC. If you’re looking to buy more than $25,000 of CEL, email email@example.com. Discounts up to 5% depending on how large your purchase is.
- Liquid withdrawals are now 1 CEL. Celsius has been negotiating with Liquid to bring this number down (it was originally 15 CEL), and is currently working on a method for batching withdrawal transactions together so Celsius users don’t have to pay any withdrawal fees.
- DNS problems all around the world. Liquid, Coinbase, YouTube, and Microsoft have all been having issues the past few days—but none of that is an excuse. We don’t take it lightly, and we know it can’t happen again.
- ETH 2.0 staking in Celsius. Celsius wants to celebrate and participate in the transition of Ethereum from Proof of Work (PoW) to Proof of Stake (PoS). We’re going to add a separate wallet to deposit ETH to stake in the ETH 2.0 Phase 0 staking contract. You’ll be earning whatever rate the protocol is paying, and it comes with a lockup of ~2 years. This will be a great experiment to compare the rates between ETH staking and Celsius’ normal rates that we earn through lending and DeFi.
- Three new coins coming to Celsius. Celsius is adding Polkadot (DOT), Hedera Hashgraph (HBAR), and Compound (COMP) to the Celsius wallet in the next few weeks.
- How is yield created? It’s incredibly important to understand what yield is and how it’s created. There are many different types of savings accounts, bonds, and stocks—and none of them are the same! If you don’t understand how your assets are generating yield, then there’s a good chance that you’re taking too much risk. Always remember: if you don’t know where the yield is coming from, then you are the yield.
Alex: Basically, we screwed up. We worked with GoDaddy, thinking that they were reliable, and when we had a problem, we realized we had to wait 12 hours on them to wake up and push a button for us.
We’re definitely going to switch providers. I know a lot of people gave us a hard time on Twitter and recommended a lot of new providers—we’re not going to announce who our new provider is for security reasons. But remember, the website and the app have nothing to do with the blockchain. So it doesn’t matter what happens on our website—the ledger of the blockchain is unaffected.
Zach: Internally, we grabbed all of our wallet addresses and posted them publicly so people could see that our coins weren’t moving. But the beauty of the blockchain is that they don’t have to trust us, they can verify this for themselves. (Editor’s note: If you’d ever like to check these yourself, the addresses are:
Shiran (Celsius Chief Security Officer): So I’m not on Twitter currently, but I’ll add a Twitter account—24 hours, any direct message I guarantee you’ll get an answer. And if I don’t answer, we’ll do a bug bounty on that. Transparency and communication is key here, so you’ll have your own private CSO.
First, I just want to say how much I appreciate the community voting for Celsius’ security practices and transparency every day with their funds. The key thing that we invest in 24/7 is security—the best custodians, the best key management, the best authentication, with penetration testing and bug bounties constantly ongoing—this is so important to us. We do everything we can and more to keep your assets secure.
Regarding the DNS maintenance issue, the goal was to scale up, secure better, and prepare for our next public initiatives that we are doing. This includes our web application and Proof of Community. So the goal of this maintenance was to scale from the security perspective and to deliver new products—but then we ran into several issues with GoDaddy. We currently rely on GoDaddy as well as AWS Route 53, meaning we already have scalability and business-ready capabilities. We are moving on from GoDaddy, and this is already in motion and we have a plan for how this will be done. We will be building in more redundancy and basing our operations more with AWS as well as other partners.
The lesson has been learned, and scaling our systems securely is also something that we have been planning and working on for a long time. To clarify, during our DNS maintenance, our account was blocked by GoDaddy, and this caused the outage to occur. Furthermore, this issue took a significant time to resolve due to waiting on GoDaddy’s support team to lift our account freeze.
This affected all of our public-facing frontends, but it did not have any affect on the backend that maintains our assets. Once our account on GoDaddy was frozen, since a lot of our app interactions are based on the celsius.network domain, we decided to proactively pause transactions as a safety measure. No funds were ever at risk, but based on how long it took for our account freeze to be lifted with GoDaddy, this is not the type of Service Liability Agreement (SLA) that we are looking for—we need these kinds of issues to be resolved much more quickly to limit downtime. A plan to remedy this is already in the works, so that future system maintenance will not lead to any downtime. We’re still investigating with GoDaddy, and there will be a detailed report of why our account was locked and why it took 18 hours to unlock.
Alex: And I just want to clarify—Celsius is profitable, and Shiran has an unlimited budget to buy anything he needs to improve Celsius’ security measures. We’re throwing money at him—so I just want to make sure everyone is clear that this was not because we are being cheap on our security. Additionally, once the app went live we had ~50,000 concurrent sessions, which is something we’ve never had before—so our systems survived the stress test. Also, I want everyone to remember—your coins have still been working for you to earn interest this whole week, and everyone will get full interest. Our frontend going down doesn’t affect the blockchain.
Alex: When we started Celsius, we committed to support as many forks as we could. Now that we support ~40 assets and they are deployed so broadly, we can’t pull them back as easily as we used to. So while our policy has previously been supporting all the forks, we now will announce in advance which forks we support.
For example, we announced we support the Spark airdrop/fork for XRP. So going forward, we will announce the forks that we think are valuable, and if we are not supporting a fork you believe in, then you can simply withdraw your assets before the fork and redeposit them after. So for example, we will not be supporting this Bitcoin Cash fork.
Shiran: So we have two versions coming out. One is the full web app, which is being worked on by our new development team in Israel, and this should be released for select clients on both the retail and institutional side mid-January, with a full retail product coming after.
Alex: We also have a light version of the desktop client that will be released in beta very soon; it fits in as both part of Proof of Community but also as the first step of the web app.
Alex: Yes, loans in the UK are active again. We also have a special surprise—for UK users, our loan rates for 25% LTV loans are now 0%.
Alex: Yes, we have received the final approval from our lawyers to start offering earning in CEL to our accredited investors in the US. Additionally, the rules for who is an accredited investor has been updated recently, so many more of you may qualify. So in a few weeks, once this goes live, you’ll be able to go into the app and verify with a third-party company that you are accredited and then you’ll be able to earn in CEL on all of your assets.
Alex: You’ll notice soon that both my balance and my wife’s balance of CEL token will be decreasing soon each by about $11.5 million. And if you can do it, all of you should try to do this.
Currently, a married couple can gift up to $23 million to their children and pay nothing in taxes. So before this change happens, you should move assets into a trust so that it is not a part of your estate. I’m giving an 80% chance that this benefit is repealed—the US cannot afford to keep allowing rich people to give all of this money tax-free to their children, especially based on where the economy currently is and the debt the government is facing.
But this is why you will see our accounts drop in value, and why you will see some new accounts pop up on the top 200—these will be our trust accounts that contain our tokens for our children.
Zach: It looks like we didn’t make our promo code difficult enough, and some of you brute-forced it. The promo code is DNS, and this is available to anyone (not just new users). If you enter the code and then deposit $200 in any asset you’ll receive $25 in BTC that will unlock after 30 days. Editor’s note: This reward will not show up in your app immediately, but as long as you enter the code and deposit $200 it will be activated.
Alex: Yeah, that’s a community-based initiative, so I don’t really know what those guys are working on, but we have our open API so they can integrate with it if they want to. I think that being able to swap everything in and out of CEL would be amazing and will create more utility for CEL token, but we’ll wait and see what they announce.
Alex: COMP should be added next week, while the other ones will be in the next app release. There are also other assets that are coming, including many other DeFi tokens. It’s much easier for us to add ERC20 tokens, but for other blockchains it’s a much more involved process to integrate the new blockchain. We also have another gold coin that we are adding that we will probably be announcing next week.
Alex: I like to use Google Trends to see how many people are searching for relevant terms. Back in 2017 Bitcoin had a huge spike, meaning there was huge amounts of hype. Now, we have the same price levels as back in 2017 but with very little hype—this is a very good thing and means that the growth is organic and sustainable.
Shiran: Yeah, it’s a matter of hours, really. DNS is a protocol so it’s coded into the protocol that it can take up to 48 hours for the signal to propogate. But again, we’re watching it and can see that it’s going up, and that the DNS is propagating well across the world.
Shiran: We’re using the latest technologies from Fireblocks with multi-party computation and we also have redundancy built into our multi-signature wallets so that we need 3 of 5 or 5 of 7 people to sign.
Alex: All of this that we went through in the last 12 hours—I can tell you that I didn’t push a single button, sign any transactions or move any coins. All of that is managed by several other people, and we have clear and precise protocols to manage all of that—I couldn’t move any coins even if I wanted to!
Alex: We do have loans available in many countries in Europe, but each country has their own rules. For example, in some countries we’re allowed to offer loans just like anywhere else, and in some places we can give you loans but we just can’t solicit them. So if you’re not sure whether you can take a loan or not, feel free to reach out to firstname.lastname@example.org. Things can get pretty complicated, and we have experts who can make it simple for you!
We’ve also opened up Australia for loans now, and I think we’re going to be bringing them 0% loans very soon as well.
Alex: We definitely learned some lessons, and we apologize again to our users and to our partners whose APIs might have been affected as well. We have a great community, and I’m shocked at how little was withdrawn today—we had several $100 million ready to go in case everyone wanted their money back. Everything should be back up by tomorrow for everyone, and your assets have still been earning yield this whole time. Thank you again for being the best community out there.
Want to unbank yourself with Celsius (and get a free $20)?
- Install the Celsius wallet (https://celsius.network/get-the-app/)
- Use a referral code during registration (137247d31d)
- Deposit $200 of crypto or stablecoins
You will earn $20 in BTC once you hold your deposit for 30 days