Celsius Crypto Lending Blockchain Is Paying Thousands of Users Interest on Millions in Bitcoin
Celsius, a cryptocurrency lending startup, led by Alex Mashinsky–a pioneer of Voice over Internet Protocol (VOIP), the technology that allows phone calls via cyberspace, has announced that it's paying thousands of user interest for depositing bitcoin and ether with its wallet app.
Celsius said it has recorded over 10,000 active users of its mobile app since launch with an average deposit of 0.5 bitcoin or 5.5 ether earning up to 6.7 percent on an annualized basis. Celsius pays out the interest from lending fiat and crypto. So far the company has seen crypto deposits worth several million dollars.
According to Alex, “when we make interest income we pay a chunk of that back to the people who gave us BTC,”
How Celsius Started
At launch, Celsius sold digital token CEL in an ICO that raised $50 million – taking a plung into the pool where crypto and lending don’t seem to mix well.
Although Celsius requires collateral for all its loans and it operates more like a bank than a P2P platform. There have been several companies with similar models that eventual wound up. For example, BTCJam and BitLendingClub, two peer-to-peer lending platforms, both wound down in 2016, citing regulatory issue.
The instability of crypto prices further exacerbates the risk inherent in lending money. consultant Angus Champion de Crespigny said to be able to consistently provide that return in assets that are so volatile is always going to be hard.
Celsius boasts gravitas: In addition to telecom veteran Mashinsky, it counts academic cryptographer Scott Stornetta, who was cited multiple times in the original bitcoin white paper, as an advisor.
The Celsius Grand Vision
Beyond its current lending model, Celsius has a grand vision of putting its activities on its own blockchain.
Mashinsky said Celsius' custodial crypto wallet, offered through a partnership with the qualified custodian BitGo, resembles a bank account in that users earn interest on their deposits every Monday.
Even as they do so, Celsius wallet users can withdraw their deposits at any time to a non-custodial wallet, or one where they control the private keys. In this way, the wallet resembles an interest-bearing checking account (though to be clear, there's no federal deposit insurance here).
In addition to these crypto wallet deposits, “we have U.S. lenders who say ‘show us you have capital and then we will lend you dollars cheaply,'” Mashinksy said.
Celsius has generated a dozen fiat loans totaling roughly $11 million, with repayment periods ranging from 30 days to three years. The startup is finalizing a $10 million loan in XRP.
Celsius COO Daniel Leon argued that the startup could attract new users away from such institutions by consistently offering better returns to depositors and cheaper loans to borrowers without credit checks. He said:
“We believe if we pay them [users] a little more, if we charge them a bit less, then we're going to win.”
“We're building our own blockchain that is going to provide total transparency on all our banking activities like no other service out there,” Leon said. “That's our commitment to do this on a distributed ledger rather than a private server.”