Celsius Issues Users Crypto-Based Interest on All Deposits
A growing startup providing crypto-based loans called Celsius now offers users the benefit of interest for all deposits of BTC and ETH. According to CoinDesk, the company’s initial app launch this June attracted over 10,000 users. The average user deposited 0.5 BTC equivalent to 5.5 ETH which holds an earning percentage of 6.7 annually.
Alex Mashinsky, the startup’s Chief Executive Officer, stated that the funds gained from interest are paid back to users who deposited funds in bitcoin. Raising $50 million from a 2017 ICO for their native token CEL, the loaning platform has since received digital asset deposits valued at millions of USD. According to official announcements by Celcius, September reeled in hundreds of new customers on a weekly basis.
As the crypto market continues to struggle, offering interest to users has welcomed long-term users both new and experienced in a tactic beginning to dominate the crypto sphere. CoinDesk revealed that Compound, a competitor of Celcius, now offers users the ability to take part in crypto-based pool investing much like that of a market fund.
However, the notion of loans based on crypto has a significant risk concerning fluctuating digital asset market values due to its volatility and possibility of becoming obsolete. As stated by Angus Champion de Crespingy, a blockchain expert, maintaining consistency for returns on digital assets will never be easy.
As a result, Celsius has required users to provide collateral for all lending agreements, performing more like a traditional fiat bank than a peer to peer network. Taking pride in professionalism and trust, Celcius places a significant level of value on members of the team including Mashinsky and Scott Stornetta as their advisor, a cryptographer renowned for playing a role in the first white paper submitted for bitcoin. The network continues to pursue goals of operating all transactions a blockchain platform of their own.
Following Traditional Banking Structures
In contrast to strict crypto-based loans offered by Compound, Celsius predominantly issues loans in traditional currencies, where digital assets are used instead as a form of collateral. As reported by CoinDesk, Mashinsky noted that the startup’s digital wallet provided by a collaboration alongside BitGo, performs more like a traditional bank account providing individuals with the ability to gain weekly interest on deposited funds.
Celsius users have the ability to transfer funds to a digital wallet in which they possess control over private keys. In this sense, it behaves more like a checking account that offers interest. However, this structure lacks the protection of federal insurance provided by traditional banking systems.
Additionally, the company resembles traditional banking in that loans are derived from digital funds users deposit into their crypto-based wallets. In return, those receiving loans supply USD or a variety of accepted cryptocurrencies as collateral, paying interest in BTC. Mashinsky noted that besides digital asset funds deposited, the company has partnerships with lenders in the United States who can offer additional funds based on capital raised by Celsius.
Celsius managed to generate twelve loans in fiat currencies worth $11 million so far, with payment plans that range from one month to up to three years. Currently, an XRP loan worth $10 million is in the process of being finalized. Another major achievement involves securing a collaboration with the UN, managing the UN’s Fifth Element digital asset fund received from global donors, in which the organization will utilize to fund a variety of sustainability projects.
The Future of Celsius is Blockchain
Despite significant characteristics differentiating Celsius from competitors, the startup is keen to stand entirely alone in the crypto industry with the launch of their own blockchain network expected next year. According to their Chief Operating Officer Daniel Leon, Celsius is in the process of developing its own blockchain platform in order to improve transparency across all activity, setting them apart from any service in the crypto sphere. He noted that the company is committed to using DLT and not private servers for their blockchain platform.
As a means to establishing the Ether token’s use value, Celsius aims to accept ETC for payment despite the initial form of currency used for a loan. Mashinsky explained that the user has the choice to pay back funds in fiat or cryptos. As soon as their CEL based blockchain network is up and running, users will have the ability to view each transaction throughout their platform apart from private information regarding user identity.
This very notion is what attracted renowned cryptographer, Stornetta, to become an official advisor of the company, an expert who tended to steer clear of all crypto startup initiatives previously. In a statement to CoinDesk, Stornetta explained that he decided to join Celsius as a one-time exception due to his belief in their upcoming success and the overall positive impact it will have on the blockchain industry.