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Celsius Network Transcript


 

Adam Chapnick:

Alex, thanks so much for joining us from New York today.

Alex Mashinsky:

Thanks for having us.

Adam Chapnick:

So, first, can you just explain the company, and maybe the problem that you're trying to solve.

Alex Mashinsky:

Sure. So, Celsius Network is a platform that enables crypto holders to get access to dollars without selling their coins. So, we have a community of both borrowers and lenders, and we implement a proof of stake implementation that allows borrowers to get access to dollars while the lenders are staking their coins as collateral.

Amy Wan:

So, your ICO has now ended. How much were you trying to raise? And, what will you be doing with the funds?

Alex Mashinsky:

So, our hard cap was $50 million. We reached that cap, and now, we're going to be using that capital to basically build the community and enable the services for our members. So, if you think about traditional banks, their job is to aggregate as much capital as possible and then generate as much profit for themselves. Our job is to aggregate as much capital as possible, but use it to enlarge the community, to create the largest community possible, and actually charge them as little as possible.

Adam Chapnick:

That's awesome. How long did it take you guys to hit your goal?

Alex Mashinsky:

We were in the presale phase for several ways, and then we were open in the public sale for one week. So, we reached the goal very quickly. And, most of it had to do with the 15,000 people who registered and joined us and wanted to help make this happen.

Amy Wan:

Wow, that's amazing. Can you tell us a little bit more about the specifics of your token. You know, what do token holders actually get? Is there a use for the token?

Alex Mashinsky:

Sure, so our token, unlike many other platforms out there, actually is used as a mechanism between the lenders and the borrowers. So, if you hold any crypto, you can deposit that crypto with us in the wallet, and then, you can borrow dollars against it. And, then, when you pay interest, that interest is converted into tokens. Our system looks to see, okay, who enabled that loan, the entire community that enabled that loan, and it distributes out payments in tokens to all the depositors that are members in our community. So, it's effectively a mechanism of exchange of value between the people that are taking the loans and the people who enable the loan.

Adam Chapnick:

Right. So, can you explain to our viewers, just at a base level, what actually is a crypto wallet and why do people use them?

Alex Mashinsky:

Sure. So, crypto wallets are effectively a piece of software that resides on your phone or a computer and it enables you to hold digital currencies. The beauty of the digital currencies like tokens, like cell token that we enable, is that it's a completely global platform where the services is fungible. So, somebody from Vietnam can get exactly the same service as somebody from New York, or somebody from Guatemala. So, the idea here is that by holding the token, you get access to this platform, access to the community, to the services provided by the crypto service that you chose.

Amy Wan:

And, what features make the Celsius wallet in particular safe to use?

Alex Mashinsky:

So, we partner with a large financial institution. So, just like when you have your app on your phone, and you have a Bank of America app, for example, the money doesn't really sit in your app, it sits in a vault and it's safe the same way we created the different solution where most wallets where the crypto actually sits in, well it's called cold storage, it's like really, really secure vault that protects your crypto much better than traditional mechanism where if somebody stole your phone or they know your password, they can get access to your coins or your tokens.

Adam Chapnick:

So, users are able to borrow the money against their Celsius wallet crypto holdings, totally clear. What do you guys do if and when someone can't pay back the loan, how does that play out?

Alex Mashinsky:

So, we provide loans only against crypto. All of our borrowers are crypto holders, and we have ample collateral that they provide. So, basically, if you give us, let's say, $1,000 worth of Ether of Bitcoin, we'll only lend you between $300 and $500. So, we always have collateral in access of the loan amounts. If you stop paying the loan, or, for any reason, you do not want to pay back the principle, we can always liquidate some of the coins, or we have this collateral and basically pay that back to the community because our job is to make sure that the community does not lose any of this capital. And, that's why our loans are usually 9% or less, which is half of what other people are charging.

Amy Wan:

Very interesting. Can you explain to our viewers how the proof of stake fees work when users deposit money into their Celsius wallets?

Alex Mashinsky:

Sure. That's a great point because it really is a first time ever anyone has implemented this. In most platforms, again when you go to a bank, the bank holds your cash, when you got to a peer-to-peer platforms, a platform matches you with an individual or a hedge fund on the other side that gives you the loan on the other end. We've done a completely different implementations. So, what we create is a pool of Bitcoin, and all the depositors are depositing their coins into a large pool. That pool, which is, again, is held in cold storage, is serving us the collateral against which dollars are being lent. It's the entire community that is creating the pool, that is creating the access to cheap lonas. And, then, the community also instruct us as the custodian effectively to issue these to the individuals that they see fit.

So, for example, we always want to do KYC AML check that these are good people, that they're good actors, and then, we want to bring more people into the crypto community. Our mission in Celsius is to bring the next 100,000,000 people into crypto, so we are actually incentivized to, through our community, incentivized to issue loans to people who are not yet in crypto, make them part of the crypto community and then, give them access to cheap loans.

Adam Chapnick:

So, what function does the token perform? How does that relate to the ability of users to accrue the interest?

Alex Mashinsky:

Right, so in a traditional bank, or in a loan that you get from a lending institution, you pay in dollars and the dollars go to that institution and all is good and done, right? Here, we have depositors, we will have depositors from over 170 countries. So, how do you distribute this small amounts that are paid every month to people all over the world, right? There was, until crypto came to be, there was no real mechanism to do that. With the cell token we can give a fraction of a cell token or multiple cell tokens to people who are members all over the world without any exorbitant costs, and without them effectively losing a big chunk of their revenues through the money transfer, or the processing of such transactions.

So, by enabling tokens to be ERC 20, so they're Ethereum-compliant, anyone with a compliant wallet can receive not just the cell tokens, but also the interest distributions worldwide and we currently offering, you know, for people who make deposits a 5% interest, which is, in most cases, five times greater than what banks offer depositors.

Amy Wan:

So, where does Celsius get their money to loan to users?

Alex Mashinsky:

That's a great question. So, we found several large financial institutions that said no crypto because these were small amounts. When we came to them and said, "Look, what if we raise several billion dollars worth of crypto and put that on deposit with you? Would you lend us several billion dollars?" And, of course, with those size deposits people are much more excited about working with you. So, against the billion dollar deposit, financial institutions are willing to lend you a hundreds of millions of dollars and that's really the source of our capital.

Adam Chapnick:

Wow. So, how about interest rates? How did that get determined for these crypto loans? And, what about the loan periods also?

Alex Mashinsky:

Right, so our job is to do the best by the community, which means charge the least amount possible, in this case, we're charging 9% to the borrower, and pay as much as possible to the community. So, in this case we're paying 5% out of the 9% back to the community, back to the people who gave us the crypto. And, we scale, as we add millions of members hopefully, we plan for that gap to shrink meaning our loans will probably charge 8% and we'll be paying 6 or 7% to the community because our job is to distribute all of the profits, all of the proceeds that are not used for salaries or development back to the community so we can grow the loans right? The less we charge, the more people with join, the more we pay in interest, the more members will join the Celsius community and the crypto community, so it's a win win win for our membership, it's a lose lose lose for all the other institutions that are overcharging us every day.

Amy Wan:

Can you explain to us how Celsius is involved in the shorting market, and how this can benefit Celsius users?

Alex Mashinsky:

So, today many of your viewers or crypto holders don't even know that when they deposit coins on exchanges, the exchanges lend these coins out to hedge funds and other institutions that's short crypto. And, you see this huge generations, a lot of it having to do with crypto shorting that is done by exchanges. Our process is the opposite. Our process basically we move coins from exchanges because when we offer you 5% interest, you're going to take your coins from the exchange and move them to Celsius to cold storage. By removing those coins, we're disabling the ability of exchanges to short, and then, the same institutions that use exchanges, same hedge funds, can come to us and pay us 15 to 20% to borrow these coins. We will take those 15 and 20% and distribute them to the community. So, every deposit that comes in off exchanges helps us create more value and more interest outcome interest distribution for our membership.

Adam Chapnick:

That's a really interesting pressure you have going on the market to countervail some of the forces that are going on. That's super interesting. How about on the hardware side, what sets Celsius wallet apart from the other crypto wallets?

Alex Mashinsky:

So, we don't use any proprietary hardware, we work either on Android or the App Store. The Android app is out, the App Store app is waiting for approval, which waiting for Apple to say, "Yes." And, again, this is for the people by the people, right? So, everything we do, the construct of the wallet, the construct of the algorithms, the protocols, everything we use every day, is for the people by the people. It's in your best interest, which you can't really say even though about many projects in the crypto world because they're still trying to generate the most profit possible.

So, our mission is not maximization of profit, our mission is, again, the maximization of the membership. We think that if we bring the next 100,000,000 people into crypto, then the chances that crypto has is a decentralized movement to really change the world and make it a better place is going to come to be because right now there's an epic battel between centralized banks and centralized companies that are looking at this as a threat to really bring down crypto, disable, lower the community. For example, the three largest banks in the U.S. just blocked you from using your credit card to buy coins. So, these are actions that are taken to disable and stop the growth of the crypto community, and we have to fight against that.

So, I'm urging every one of your viewers to really go out there and recruit new people to join the community, download a wallet, and really start using some of these services that are there for you because all the power that the banks have is because we give them the deposit. We allow them to take our money and pay us 1%, they turn around, give it to our neighbors, and they charge them 25% on their credit card. And, they keep all the profit for that. So, let's take all that back and give it back to the people.

Amy Wan:

Very revolutionary. Tell us a little bit more about the importance of block chain to Celsius.

Alex Mashinsky:

So, block chain is an inherent feature of the crypto, right, the community? And, even when you look at what J. P. Morgan has done when they basically copied the Ethereum block chain and implemented it as a private chain aside their platform, so they could save costs. And, you know, the block chain is a very important piece of this service. The question is really, is it going to be a public block chain, which is Celsius and Ethereum and Bitcoin are, or is it going to be a private block chain? Because the banks and other institutions are trying to basically hijack the idea and just use it as a profit generation engine to increase their profits, so they would make even more money as if they don't make enough today. So, our job, as a community, is really to enable the public block chain to thrive, and support projects like Ethereum, Bitcoin, and all those.

Amy Wan:

Fantastic. Wow. Finally, who did work on your ICO? Were there notable PR agencies or law firms?

Alex Mashinsky:

Yeah, we have plenty of vendors. To do a $50 million raise you need, we traveled all over the world, we had teams all over the world, we had great partners both on the legal side, on the marketing side. We had teams all over the world that attended conferences and went to meet with investors who are all crypto enthusiasts, and we convinced a lot of people that this is good for them because if you're a Ether holder or you're a Bitcoin holder, when you see what Celsius does, you understand that that adds to the value right? If Celsius successful, Ether will increase in value. If Celsius is successful, Bitcoin will increase in value. So, it's a win/win for many investors who are currently big.

Adam Chapnick:

Well, Alex Mashinsky, founder and CEO of Celsius Network, thanks so much for talking with us today.

Alex Mashinsky:

Thanks for having us.

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