Celsius Network Weekly AMA– August 14, 2020
With Alex Mashinsky and Kristen Ryan, Director of Marketing
This week’s AMA begins here with 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 following staking going live this week, several million dollars in staking coins have already been deposited within 48 hours. Celsius currently holds record-high AUM (over $1 billion) and also has record-high money lent out. Alex also discusses the current financial climate, DeFi farming, taking profit when you can, and reminds us that the desktop beta will be launching within the next week or so.
For the new staking coins, Alex explains that the rates are set by the staking networks themselves based on how much they pay out– but he does expect rates to potentially come down over time, especially for SNX and MATIC. Furthermore, even though SNX rewards are typically locked for a year, Celsius pays them out weekly because they trust that the community will largely deposit and hold SNX in their wallets. And while LINK does earn interest, it is currently low because staking is not live yet– so Celsius is only making money on LINK by lending it out.
In other news, Alex clarified that Celsius only reports interest payments to the IRS as required by law, and nothing else. Face ID is actively being tested (!) and should be out very soon. Celsius will continue to subsidize withdrawals, but with gas prices rising, Celsius may set a gas threshold they will pay and then allow users to pay extra if the current gas price is above that limit and they need their withdrawal ASAP– but this is not finalized. Alex also mentioned individuals may open LLCs in other states as a useful way to access features that you may not be able to use in your state (like earning interest on stablecoins in Texas). Additionally, Alex mentioned that multi-collateral loans are only a few weeks away, and that Celsius is always working on ways to accept other digital assets as collateral for loans and has done so in the past.
Finally, Alex discussed Celsius’ partnership with Tether. In the past, there has been some controversy around Tether, and Alex acknowledged this, but said that he trusts the team that he has worked with. Furthermore, Alex pointed out that while Tether is a great partner and a big investor in Celsius– Tether does not have any say in the direction of the company, as their equity stake did not include any company control. But they are a huge player in the crypto space (as the #4 coin/token by market cap), and having a company that large and influential on your side can do Celsius a lot of good.
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
- Millions in staking coins already deposited. Staking went live for SNX, KNC, MATIC, LINK, and LPT on Wednesday, with $3 million deposited the first day and several more million over the next 24 hours– including over a million dollars in LINK.
- The current financial climate is unprecedented. The debasement of fiat currency is accelerating (specifically the US dollar), and is another good reason to be holding non-correlated assets such as gold and/or Bitcoin. Alex recommends at least 10–20% held in assets such as these.
- The largest US banks will need assistance. The economic recession/depression that we are going through– between the slowing of the economy in the midst of a pandemic, as well as debasement of the dollar– is a looming issue. Outstanding debt worldwide is very high, banks are setting aside more money for bad debt, and the US Federal Reserve is preventing banks from buying back stock– all signs that trouble is brewing and that it may be worse than 2008.
- Borrow dollars at 1% APR! Celsius’ 1% APR loans (0.7% APR if paid in CEL) is a fantastic deal, especially if you have outstanding debt from credit cards. Instead of paying interest to the bank at a high rate, take the extra money saved and invest it in a non-correlated asset.
- Record-high AUM and institutional loans. Despite record-high assets under management (AUM), Celsius still needs more coins– they are maximally deployed! They publish weekly how much they are paying out for interest– which keeps increasing every week– and a record-high 40% of users are earning in CEL.
- Desktop app will be in beta #soon. Email Alex (alex@mashinsky.com) or Ryan (ryan@celsius.network) to sign up to test out the new Celsius desktop app.
- On new protocols, farming, and YAM. In case you missed it, this week a new, unaudited DeFi protocol set the world on fire– increasing to over $500 million TVL in the span of 24 hours, but then becoming untenable promptly after a major bug was discovered. The moral of the story– DYOR on projects or let companies like Celsius do it for you. (Editor’s note: In case you were curious, YAM will be revived after more thorough audits 🍠).
- Bull markets don’t last forever. Taking profits in a bull market is a part of smart money management– and Alex suggests that converting up to ~50% of your earnings into something more stable (like Bitcoin or gold) may not be a bad idea. If an asset has jumped in value by 10 times, as much as you may not want to, selling is not the worst idea (but, of course, not financial advice).
- Decentralization is not just DeFi. For Celsius, decentralization will be the bridge that can bring 7 billion people into crypto. Celsius is trying to bring financial independence to their users, and is focused on bringing the highest yield to their users– not just farming a new token.
Community Questions
Q: Who’s the girl?
Alex: Kristen has been with us the beginning– she came in during the ICO. I forgot to introduce her– that’s embarrassing. She joined us as an event coordinator, but rose to Director of Marketing here at Celsius– a great example of someone who did everything we could’ve asked and really rose to the occasion. She’s definitely a Celsian and we’re very happy that she’s been with us this long.
Q: Can you comment on Coinbase offering loans?
Alex: Sure, Coinbase announced that they are going to offer loans against crypto– but I think they’re about three years too late on this. They’re offering 30% LTV and 8% interest rate– but I’m pretty sure that 1% loans are better than 8% loans– so if you want to pay much higher rates than at Celsius, use Coinbase.
Q: SNX rewards are locked for a year– how can Celsius pay out weekly?
Alex: When we were planning the staking program, we could see that some coins pay out quarterly, some yearly– but we trust that most in our community are depositing these coins in good faith and will not try to game the system– and if they do, we may take steps to protect our other users. Also, we are never deploying 100% of our coins– so we can always let users withdraw with the 20% that we keep in reserve.
Q: Are these high rates on staking coins sustainable?
Alex: We have two kinds of assets. The first are those that don’t earn anything and we need to lend to earn yield, like BTC and ETH. The second are coins like EOS, DASH, and the new coins that are earning yield themselves through staking– for these, we just need to optimize the rates, but the rate is largely determined by the staking mechanism and the blockchain itself. We take a small fraction (~10%) for setting up the node and managing it– so for some of these you could earn more if you wanted to set it up on your own, but by keeping them us we simplify the process for you.
Q: Why would anyone prepay their loan interest?
Alex: I actually just took a loan from Celsius against my CEL token! So I think it’s much easier to just prepay loan interest so I don’t have to worry about it every month– it’s such a small amount (0.7% APR), I think it’s just easier to pay all at once.
Q: Is it possible to be a brand ambassador in Canada?
Alex: Yes! Go to our website here to apply to be an ambassador or read more about the program– and help support Celsius. We have over 600 ambassadors and always are looking for more– especially for ambassadors who are creating content in any language other than English!
Q: What recommendations do you have to protect against SIM swaps?
Alex: First thing, you want to avoid putting your phone number out in public– you can use a service like Google Voice that links a different phone number to your actual phone number. Your carrier is also important, and I use Google Fi because they are better at protecting you from SIM swapping than the other carriers. On top of that, always use 2FA and turn on HODL mode in the Celsius app if possible.
Q: Are you considering delisting Ethereum Classic (ETC) if they keep getting 51% attacks?
Alex: I like ETC– they have a good community, and good developers– they lost a lot of mining partners recently, and are currently rebuilding this network so hopefully it will be harder for these bad actors to overtake the network. We are still very much experimenting with blockchains in crypto– BTC and ETC are some of the few blockchains that have a set, finite supply. So I think for now we are watching this closely but don’t want to write them off yet.
Q: Can I transfer my LINK tokens from Coinbase Pro to Celsius or do I need to send them to Metamask first?
Alex: Yes, you can– but if you’re uncertain in situations like this, you should always do a test transaction first. Coinbase is one of the few competitors out there who will actually let you send transactions same day– some of our competitors make you jump through hoops to send us your coins!
Q: Why is interest for LINK at 2% but MATIC at 16%?
Alex: LINK has not yet launched staking, so we are only currently earning yield through institutional lending, while MATIC has an established staking network that is earning a high yield– for the staking coins, we don’t determine the rates. However, if there is a lot of institutional demand for LINK, you may see the rates go up.
Q: Are you planning to add multiple whitelist withdrawal addresses?
Alex: From a security standpoint, giving more options for withdrawal does give a hacker more options to send your coins out if your account is compromised– and security is priority #1 at Celsius.
Q: Can you explain more about why you trust Tether?
Alex: I’ve worked with the team for years, and I do think that they are trustworthy– meaning that when they tell me something, I can rely on them. They have had their issues in the past, and all of that is well publicized. All of you should dig to see what actually happened there. For example, when assets were stolen from Bitfinex, it’s important to look and see what actually happened here– but people just hear the headlines and may not dig deeper.
Importantly, Celsius is not at the mercy of Tether– they are a great partner, and an important investor that holds equity in Celsius– and they want the best for us. But realistically, I would be shocked if we had more than 3–4% of our deposits in Tether (USDT)– so as a percentage of our business, they’re not huge, but they’re a very important partner for us– they’re a top 5 coin, and you want someone like that on your side in the crypto space.
Q: Does Celsius report earnings and amount of crypto held to the IRS?
Alex: By law, we have to file a 1099 for the interest paid out to all US users. We’ve been compliant with all laws since day one, and you can see all of our regulatory info here. I highly recommend you all pay your taxes properly– we’re paying you enough money that you can afford to pay your taxes! However, we only report interest payment amounts– we do not report holdings, deposits, or withdrawals– we only report what we are required to by law.
Q: In efforts to massively expand Celsius to the unbanked, how will Celsius perform KYC in jurisdictions where users may not have adequate documentation?
Alex: There are many countries in the world where it is hard to get an ID– we take it for granted that everyone has a driver’s license and a passport, but that’s not the case everywhere. But there is hope– in one year, India gave digital identification to over 1 billion people. So it’s not a technological limitation– it’s just that in some of these areas, the organization is poor and the governments may not care if these people have IDs. But for Celsius, compliance is the top concern– and unfortunately we are not able to fight the battle to help get these people documentation.
Q: What type of cybersecurity controls are in place to protect private keys at Celsius?
Alex: In most companies, the keys are kept in a single safe place– meaning if you break in there, you can get the keys. But Celsius doesn’t have a place where all of the keys are kept. We use multi-party computation (MPC) to help secure all of our keys, and all wallets are multi-sig and all withdrawal addresses are whitelisted. And for the new staking coins we added, we had to confirm that they run on MPC before we added them– a lot of coins and tokens we want to add can’t run on MPC.
Kristen: And a shout-out to Nuke, who made a great video about MPC on our Celsius YouTube channel.
Q: Alex– why have you been selling CEL tokens recently?
Alex: Like everyone else, I also get a 1099 from Celsius, and need to pay taxes. So sometimes I sell because I need to pay taxes, or because I want to buy ETH (like I did recently), and sometimes I buy– when I can, I like to accumulate CEL. And just like me, all of you need to make these decisions– if you were lucky enough to get into CEL token at $0.03, and it’s now at $0.40, and it’s 90% of your net worth– you’ve made 13x! Diversification is always important, that’s the first thing a financial advisor will tell you. (Editors’ Note: Again, not financial advice).
And you can always watch my Celsius wallet balance here, and you can see the balances for the other top 100 holders as well– and watch whether they are buying or selling. Again, this is part of our effort towards total transparency– I don’t think you’ll find other projects listing their top 100 holders.
Q: With ETH gas fees so high recently, will Celsius continue to pay our withdrawal fees?
Alex: So many people don’t even realize that Celsius is paying the fee every time you need to withdraw your coins. Now, we don’t want to pay crazy high fees, so sometimes it takes a little bit longer because we will delay sending them in hopes that fees will come down. But we hear our users complaining sometimes that withdrawals aren’t as fast as they used to be– so I’ve recommended to my team that maybe up to a certain gas price Celsius pays, and if users want to move them faster, they can pay the rest of the withdrawal fee. But if you have a better solution, feel free to reach out and let us know your ideas!
Q: When will you be launching a desktop version of Celsius?
Alex: It’s in beta! And you can join the beta, email me (alex@mashinsky.com) and we can get you in on the beta.
Q: Does Celsius rehypothecate our assets?
Alex: Yes, our entire business model is based on rehypothecation of crypto assets– this is the only way to earn yield on coins that cannot be staked. Brokers have been doing this for years– when you buy Apple stock from Robinhood or Fidelity– they’re not just holding the stock for you, they’re lending it back out! So we’re simply using these same tools to help benefit our users instead of keeping the earnings for ourselves like these other companies have always done.
Q: How long can you sustain the rates on ETH?
Alex: I think the rates are going up, not down– we’ve been raising them for several weeks now. When there’s a lot of volatility in the market, we earn more on the crypto that we lend out. What’s bad for Celsius is when things drop and then stay flat– like at the end of 2018 and beginning of 2019. But we currently don’t have enough coins and need more– and if we get more coins, this could potentially help us raise our rates even more!
Q: What happens if I send crypto to one of my old Celsius addresses?
Alex: Our old addresses used to be with BitGo– they do not use MPC, and we tried to talk to them about it, but they were happy continuing without it. Because of this, we switched all of our addresses to those that were supported on MPC platforms– like Fireblocks. Do not send your crypto to your old Celsius wallet addresses– and it’s always a good practice to double-check where you’re sending your crypto every time.
Q: Is there a way for individuals to have corporate accounts?
Alex: Anyone can create a New Jersey (or any other state) LLC on LegalZoom– and this can give you a more tax-efficient way to manage your finances– because you then receive all of the special benefits and considerations that corporations receive in this country. For instance, if you’re in Texas and want to earn on stablecoins, or are in a state that can’t take loans and want to take a loan– you can create a New Jersey LLC, and then can perform those actions through the LLC. Again, this is not financial advice, but this is perfectly legal and something that many people do.
Q: Is Tether Gold real gold or an ETF?
Alex: Tether Gold is not an ETF– it is tokenized, physical gold that sits in a vault in Switzerland. Whenever we can travel again, I want to go to Switzerland and redeem my XAUT to show that you can actually do this.
Q: Can you take a loan combining different coins as collateral?
Alex: We are currently working on this– right now you do have to take a loan against only a single asset per loan– but multi-collateral loans are coming and are probably a few weeks away.
Q: Is Celsius planning to do fixed term deposits with higher interest rates?
Alex: I know some other platforms do this, but the reason why I don’t think we will do that is that we don’t want to penalize people who may not have enough capital to lock it up for longer. So really, we want to be able to treat someone who only has $10 the same as someone who has $10 million.
Q: Can you explain how rewards are compounded?
Alex: We are paying you interest every week, and each week the amount that we pay interest on increases because it also includes the amount we have already paid you in interest– this is the basic principal behind compounding interest. Celsius interest pays out and compounds weekly. Compounding interest is a very powerful tool, but it takes time– and is especially effective when your interest rate is higher.
Q: The rates for MATIC and SNX are very high– does this indicate that there is high institutional interest in them?
Alex: No, the yield on staking coins has to do with how much the network pays out. For most of them, the yield is high when there are not many nodes on the network, and as you add more and more nodes, the average yield goes down. But because these are young protocols, we do expect these high rates to go down over time as the network grows– no network can run at 20–30% interest rates forever.
It’s also worth looking at the economic activity on a network– look at the price of gas on ETH recently, because everyone is trying to use the network– so you know that Ethereum has real economic activity. But some of these other chains don’t have any real activity– they’re just paying fees to keep the network running– and sooner or later their prices are going to come down to account for this lack of real usage.
Q: Is Celsius looking to hire Project Managers?
Alex: Yes, we have three open positions for project managers, both technical and non-technical. I’m actually looking for a project manager to work with me on product development, so if you are a candidate– send me your bio and tell me why you must be a part of this team. Show us what you have that we need, and why you’ll make the company better– tell me why I need to pay attention to you.
Q: When do you foresee Celsius accepting non-crypto blockchain assets in the wallet or as collateral?
Alex: We already have! I know a few people in the company may not want me to mention our secret project, but we already do accept other digital assets– we just have haven’t announced them yet, and have even generated loans against other digital assets as well. Anything that runs on a decentralized structure, that we can use to generate yield, is something that we are interested in. If you guys have ideas or want for us to look into new assets– write me and let me know!
Q: When are we getting Face ID in the app?
Alex: I think it’s right around the corner– we are testing it and it will be here very, very soon. But this is extremely annoying for me as well– to need to login every time, and do the 2FA– it’s painful. For us, security is the highest priority– compromising on this is just not worth it to us, and we think the people who will survive in this industry are the people who don’t get hacked. And that’s our ultimate goal– to never get hacked.
Q: Will the compounding period ever change from daily to weekly?
Alex: We pay out our interest weekly, so that’s why the compounding is weekly. You really don’t lose much compounding weekly vs daily (it’s true, go check the math), so I would focus more on whether our competitors are earning the interest that they are paying out. So, the issues that I think you should really be worrying about are how transparent the company is, whether you can see their loans and their interest income– and soon, with Celsius, you will be able to see all of this information. And this is coming very, very soon– we’re testing this now, and it’s going to set the bar even higher!
Q: Will Celsius support XRP’s distribution of Spark?
Kristen: We’re working with our CTO, and next week we’ll be able to answer that but we don’t have an answer right now.
Alex: And just to comment on that, there’s a lot of forks everyday– and we can’t support all of them. So if you do feel really strongly about one of them, you may need to move your coins to be able to claim them– but we’ll let you know.
Q: If there is suspected fraudulent activity on my account, is there a number I can call that is faster than email?
Alex: You can lock your account immediately from any withdrawal confirmation email that you receive. You can also enable HODL mode– and you should always have all of your withdrawal addresses whitelisted. For support, contact app@celsius.network– we’re covering several shifts, seven days a week. We are currently a little bit behind but have just doubled our customer service staff– we had a surge in tickets related to the new loans and the new staking coins as well. So I apologize that we have not been responding as quickly as we have in the past, but we are getting our new people trained and should get back to quick response times (within 24 hours) shortly.
Q: What happens to stablecoins if the value of the US dollar drops?
Alex: They’re pegged to the value of the USD, so they will always be worth 100 cents– but what you can buy with that stablecoin will be much less in this situation. Stablecoins are always earning yield, but inflation can eat away at the actual value of the underlying fiat currency.
Q: Any comments on Vitalik (founder of Ethereum) being skeptical about DeFi?
Alex: I don’t blame him! I’m not skeptical of the technology or of the viability of DeFi– but I think he’s seeing his creation hijacked by things that are gamifying the financial system and not creating real financial activity or value. We don’t want for Ethereum to be taken over by bad projects or scams when we look back in two or three years. When we look back at 2017– we see all of the bad ICOs, and we don’t want the same thing to be happening again on DeFi. There are so many developers working on great technologies for Ethereum 2.0, but many of these implementations today are short-term and focused on gamification of the system.
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 (Tariq2e7d)
- Deposit $200 of crypto or stablecoins
You will earn $20 in BTC once you hold your deposit for 30 days
