Celsius Network Weekly AMA– September 4, 2020
With Alex Mashinsky and Zach Wildes, Community Manager
This week’s AMA begins with some updates from Alex, followed by community questions. As always, the timestamp from YouTube is hyperlinked to each question below.
Summary: Alex starts with some updates, including the news that the previously announced scheduled maintenance will be postponed from September 5th to September 12th. Since the app will be unaccessible for up to seven hours, and there has been a recent market downturn– Celsius didn’t want users to not be able to access their funds if the downturn continued. Pushing out the maintenance one week should allow users plenty of time to remove their funds beforehand if they want to trade with them during this window. Importantly, some major changes will be coming to both the app and the website at the conclusion of this maintenance period– so it’s definitely something to look forward to!
In other exciting news, Alex announced that Celsius continues to see high returns on their institutional lending– leading to more increases in rates, this time on ETH. Looking to the future, the desktop app beta should be rolling out in the next week, and Celsius will soon allow users to pay the difference if they need a withdrawal urgently and Ethereum gas prices are above Celsius’ predefined limit for free withdrawals. Furthermore, Proof of Community continues to move closer to being a reality, and borrowing against your total asset value will be coming soon, as well as higher LTV loans with this update.
Lastly, Alex mentioned that while Celsius is currently a good option for the unbanked (no bank account or credit check required), soon Celsius will enable users to hold up to $3,000 in their account with only a cell phone number as identity verification– lowering the barrier of entry further for those who need Celsius’ services the most. As always, Celsius is constantly looking for ways to support their community by offering sustainable interest that they earn every week, and to always do good before doing well.
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.
Celsius Updates
- A volatile week in crypto. Markets do not only go in one direction! Even though it may seem like things will be bullish forever, eventually enough holders will capitulate and markets will correct downward. The herd is moving in one direction, thinking prices will keep going up– and then enough people get nervous that everyone runs back the other direction! $12,000 has been a key level for BTC, as well as $10,000– and this will likely continue moving forward.
- A key event in crypto history. There are several events in the past that represent breakthroughs for BTC or ETH prices. One of those things just happened recently– with the US OCC allowing banks to custody crypto. Furthermore, Steve Mnuchin, the United States Secretary of the Treasury, appointed Brian Brooks, the previous Chief Legal Officer at Coinbase to the second-most powerful position at the OCC. Clearly, the US Government’s stance on cryptocurrencies is rapidly changing.
- Warren Buffet backs gold and the yen. This week, we found out that Warren Buffet reduced banking holdings in favor of gold and gold mining, as well as five Japanese trading companies. Effectively, Buffet is moving from dollars and those who make money in dollars to those who make money in other assets (gold and Japanese yen). Again, more support for holding assets in assets that are non-correlated to the US dollar.
- Inflation is no bueno. The United States Federal Reserve announced that they will allow inflation to rise higher than the standard 2%. Make no mistake– inflation is not good for those people holding the dollars– and all roads lead to decentralization and non-correlated assets.
- Maintenance period postponed. Although we had previously planned app maintenance for September 5th, because of the uncertainty in the market we have decided to postpone it until September 12th. We didn’t want for users to be locked out of their account without more notice if the market was moving downward. But we will be launching something nice and new with this maintenance!
- Higher rates on ETH. DeFi boom and other opportunities are helping Celsius earn more, so Celsius can pay more. Even though we’re currently paying the highest rates– when we earn more, we still have to raise our rates! Rates go into effect on Friday, and will be published on Monday. And don’t forget, US users can still earn 6.2% APY on their first 5 BTC!
- XRP Flare support is tricky. Celsius’ job is to lend out coins to earn yield. However, there is a an airdrop coming in December that will distribute Spark to all XRP holders. To support this, Celsius would need to recall all loans and be holding the XRP at the time of the snapshot. There have also been instances of new forks that do not work as intended– so Celsius wants to verify that users will not be negatively affected if we support this fork.
Community Questions
Q: Does Celsius allow small businesses or family offices to deposit their coins to earn interest or take loans?
Alex: Yes, we have onboarded probably 400 of these small companies– there’s a link on our website for corporate onboarding. We just need to do a few extra steps to verify your company and the jurisdiction that you are registered and operate in. And different states or jurisdictions can offer you different protections or benefits– so it’s important to research if opening an LLC in a different jurisdiction could potentially benefit you.
Q: My bank charged me $30 to use the in-app ACH, what should I do?
Alex: We didn’t charge you! As a farewell, the banks charged you a nice $30 fee, because they know they’re never going to see that money again. Our provider charges 0.1% for ACH transfers in the US (plus network gas fees). However, these fees the bank charges you are the same for small or large transfers, so it makes sense to do a few large transactions instead of many small ones!
Q: Is there a release date for the new website and mobile app coming soon?
Alex: There is– I can’t tell you yet because my marketing team will kill me, but it’s coming very soon. It’s ready, it’s tested, and it improves a lot of stuff– I hope you like the colors!
Q: How are you able to pay such high rates on stablecoins?
Alex: We earn more, we pay more. As you can see again and again, Celsius sets the bar for the entire industry. We mostly deploy funds in the crypto world– and for many of these exchanges who provide leveraged trading to their users, we are the one providing the dollars for these leveraged trades through the exchange and earn interest on them. And when there is a lot of demand for leverage trading, then we can lend out at higher rates.
Q: Korean exchange Bithumb was just raided by authorities– does Celsius work with them and will this affect business in any way?
Alex: No, we do not work with them– and that raid might have been one thing that contributed to the flash crash on BTC, ETH, and everything else. The Korean community is a very active crypto community– something like 80% of people 35 or younger hold some crypto. But just like I mentioned earlier, when the herd gets nervous (like when a big exchange gets raided) people will dump their coins– and this in turn makes other people dump their coins as well, and causes a chain reaction.
And these chains reactions of coins dumping– it causes lots of liquidations in the DeFi space. Celsius did not have a single liquidation, and has still not had a single event where an institution could not cover their margin call– and not many people can say that.
Q: How can I contact you for an interview?
Alex: Just send me an email! Alex@mashinsky.com.
Q: Some DeFi projects are charging fees when they issue tokens– does Celsius plan to start charging any of these fees?
Alex: No– no fees from Celsius. It’s a great question, because there’s a difference between the gas fee you pay miners on the Ethereum blockchain, and some of the fees that these contracts have embedded into the protocol. For example– with SUSHI, 10% of your harvests go to the protocol– effectively serving as a tax on farmers. But there are ways to write these contracts without fees– like with Uniswap, the only 0.3% fee on swaps goes to the liquidity providers and stays with the community.
Q: What’s the next innovation for Celsius’ ecosystem?
Alex: We don’t want to tell our competitors what we’re doing ahead of time, but we are happy for others to copy what we are doing. Proof of Community (PoC, previously described in the AMA on August 21st) is a huge innovation that will be coming soon. When it’s out– it will force all of our competitors to be more transparent as well. And we want for our community members to be careful– there are so many new projects and smart contracts coming out every day for people to farm– and there’s no way to know whether you can trust these guys or not unless you read the smart contracts! So that’s why it’s easiest and safest to store your coins with Celsius and let us earn yield for you.
Q: Can you explain how market volatility helps Celsius earn more when lending to institutions?
Alex: Yes– so when the waters are calm– and prices aren’t moving much– no one needs to borrow from us. But when the waters are stormy, then institutions want to borrow from us to hedge their position, or borrow to arbitrage on price differences between big exchanges that can occur during these big moves. It’s not about shorting– it’s about market-making and arbitrage. And the beauty is– because so many of you are earning in CEL, we still have to go to the market every week and buy more CEL!
In DeFi, volatility leads to liquidations, but for Celsius, volatility leads to record income. We decentralize and distribute profits while others centralize and distribute losses– mark those words.
Q: Will we be able to get a loan on the total assets in our wallet instead of just individual coins?
Alex: Yes, we’re working on that– it just involves a lot of testing, and we’re also going to offer a higher LTV as well. We are building this, and it will be coming soon. However, this flexibility comes with a greater need for security and risk management– and this is something we are always working on– finding the best way to keep your assets safe and growing.
Q: Can Celsius weather the next bear market? Will you still be around in 10 years and are my assets safe to hold in Celsius for a decade?
Alex: We’re creating an institution that is built to last– we’re not another fork created anonymously online. Our job is to shepherd the community through the good times and the hard times. We’ve been paying interest since 2018, so we’ve been paying interest out during what has mostly been a bear market.
The way we have designed our business is to benefit during spikes in price, and to avoid trouble during flash crashes as well. This is the big difference between Celsius and our competitors– since they lend to retail, they earn less during spikes in price because they have too many deposits, and they liquidate users during flash crashes– they’re highly correlated with the market. But since Celsius’ main business is with institutions, our business is high during both of these times– because our loans to institutions thrive during times of volatility.
Q: Any news about Celsius coming to Australia?
Alex: We’ve applied a license there, and are waiting for it to be approved. We will be opening an office there and will be hiring– so if you have crypto experience, we have 36 positions open– and we’re looking for everything. But we need for you to come and show us that you know something that we don’t– we want for you to be adding something to the team.
Q: How has COVID affected the company?
Alex: We were a distributed country before COVID– we probably had people in 12 or 13 countries already. But for our community– crypto in general saw a surge in demand and adoption from COVID. It’s sad to say that we benefitted from this, but I think businesses that deal in digital currencies and digital assets are doing much better than businesses who deal in the physical economy right now. And we believe that we are the future of the digital economy and the future of finance.
Q: With increased visibility and attention in the crypto space, how confident is Celsius that they can protect user assets from malicious attacks?
Alex: When we used to take small bites out of the competition– and this includes exchanges, because a lot of users have moved their assets from exchanges to keep them with us– it wasn’t a big deal. But now exchanges are having to offer interest income and loans just to try to keep their customers from moving their assets to Celsius. Now we are seeing some dirty tactics from our competitors in the space– but this is nothing new to me– the phone companies used to do this to me all the time when I was working on Voice over IP. Compared to them, the crypto guys seem like they’re being nice to me!
But talking about our security– we use Amazon Web Services for our cloud storage, and we with Amazon we employ a service called Amazon Shield. What this does– if an intruder is detected in the system, it immediately locks everything down. And Amazon uses this system for their customers like Netflix, who has 200 million users worldwide. We’re this tiny little company, but we attracted so much attention (and this was a year and a half ago), that Amazon came to us and asked us why we were receiving so many DDoS attacks. And these are sophisticated attackers– this is not one guy on a sofa in his mother’s basement.
But my point is we went through all of this in the beginning of Celsius, and that has forced us to perfect our security over the past few years. Security is not a simple thing– it’s not just a checkmark that “yes you have security.” The foundation of your business must be built from the ground up with security in mind– or else you will get hacked.
Q: How can developers get access to the integration API?
Alex: Our API is open– go to our developers page and apply to be a partner. To get an API key, you can integrate as an assisted or unassisted partner. If you just want to test out the API or don’t have many users yet, then you will be an unassisted partner– because we don’t have the resources to guide everyone through setting up the API. If you’re on the assisted track, we will work with you to help you launch the API integration– like how we’ve done with companies like LINE. These companies occupy most of our time, so if you’re applying for an assisted partner position you need to convince us that it will be worth our time to help you set up the integration.
Q: Will Celsius offer storage of non-fungible tokens (NFTs) in the wallet?
Alex: We’ve discussed opening the platform for all tokens, even if we don’t pay interest on them– so our users could keep all of their assets in one place. But it’s really a question of having the resources to support all of these tokens, and all of the customer service or withdrawal issues that may come when adding new coins and tokens. So while we could do this, it would increase our costs, which would mean that we are paying out less money to our users on the coins that are actually generating yield.
Q: Do you have any concerns about quantum computing attacking the blockchain?
Alex: I’m not so worried about the blockchain being hacked– a lot of the newer blockchains and upgrades are resistant to quantum computing. And quantum computing can’t solve everything– it’s not like it’s a magic AI machine that has an answer to every question. The main issue is that users with quantum computers may be able to mine faster, and this could then consolidate power with a few groups who have access to these types of machines and make blockchains more susceptible to attacks such as 51% attacks.
But the main answer is that this industry is so new that no one really knows what quantum computers will be able to do– and we’ve done a very poor job in the past at predicting what computers will be able to do in the future.
Q: What do you think triggered stocks and crypto to drop so hard yesterday?
Alex: I would say the Bithumb raid, but obviously stocks aren’t affected by that so it’s a few things coming together. I think we stretched the string too much, and the forces for the markets to retract got to be too much. Between the DeFi craze and tech stocks (like Apple and Tesla) constantly going up– it had to pull back at some point.
Q: I heard there have been difficulties with withdrawals at times. Will there be an option to expedite my withdrawals?
Alex: So there haven’t been any difficulties with withdrawals– it’s not like we’re intentionally holding onto people’s coins– we’ve actually increased the size limits for single and daily withdrawals. But because the gas fees on Ethereum are so unpredictable and have been extremely high recently, it can cost more to withdraw your coins than they are worth! When gas prices go crazy, we like to wait an hour to two to give them time to come back down before sending the transactions.
We are planning to allow you to push transactions through– even when gas fees are very high– as long as you agree to pay the transaction fee at that time. This is a new issue for us, because gas has never been this high– so we’ve never had an issue paying for our users’ withdrawals.
Q: If assets continue to grow, do you foresee a time when supply of capital will exceed the demand?
Alex: Great question– and we’ve proved exactly the opposite. As our company and our assets under management (AUM) have grown– our rates continued to increase, and the rates we pay today are the highest we’ve ever paid. So I think the big question is really not is the model scalable– but it’s if we are earning the interest we pay or if we are just subsidizing it. Soon, Celsius will have Proof of Community– and our users will be able to sign, confirm, and verify that we hold and pay what we say we do.
Q: Is there a way for the unbanked in the US to make deposits into Celsius?
Alex: Yeah, we do not require a bank account or a credit check or any of the things a bank will ask you– all you need is an ID. And soon, the future versions of the Celsius app will allow you to verify with just a cell phone number if you’re depositing less than $3,000. We are continuously lowering the barrier to entry to allow users to participate– and extending this earning ability to the people who are most at need. Celsius is not focused on bringing more whales– the number of users is increasing, and the average deposit is decreasing. At one point our average user had around $23,000 deposited– and now it’s around $4,000. We love to see that more average people are starting to use Celsius– and not just those with $100,000 already in crypto.
Q: Where would I find the best material to teach my friend and family more about what Celsius does?
Alex: We have tons of videos and articles about us on YouTube and out on the internet– and many of them are made by the community. And the community is who you should be listening to! We recently crossed 100,000 followers on Twitter– and just last week someone posted on Twitter asking for feedback on user experience with Celsius, and over 80 people replied to him about how much they loved the platform– you can’t fake that!
Q: Are there any updates on the desktop application?
Alex: It’s coming soon! Ryan is working on the beta, and this should be coming any day now. You’ll need to sign an NDA first, and then you’ll have access. But there is still a new website and app coming as well– this desktop app is separate from that.
Q: Does Celsius have public financial statements?
Alex: Yes, Celsius files with authorities in the UK– and you can see our report from 2018–2019 here. We are finishing up our audit from the 2019–2020 year currently, and that should be published soon as well.
Q: What does it take to be a Celsius ambassador?
Alex: It takes passion, it takes commitment– Zach, you run the ambassador program, why don’t you tell them?
Zach: Yeah, it takes studying what we’re doing and why we’re doing it– being able to share that Celsius is truly working in the best interest of their community. And if you’re able to communicate that message effectively– then that makes you a great fit as a Celsius ambassador.
Alex: Yeah, I think so many people have jobs that they don’t like– and you look at your bosses, and you know that they don’t care about anyone! So it’s very rare that you can combine what you’re passionate about and find an institution that thinks like you– and we’re looking for people who care about others, who put others first. So if you have all of those ingredients, then you should be a Celsius ambassador! And you can do it on your own schedule– and because of the way Celsius’ referral system works, if you are able to reach more users then you will earn more money.
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
