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It was a phenomenal year for the VoIP pioneer and Celsius Network creator Alex Mashinsky: he successfully launched a blockchain project that has a clear plan, is compliant and has a well-defined use case, has participated in some of the most important debates in the industry, and has developed its business and also influences in the middle of a destructive bear market.
Based on these considerations, it was very sensible to invite the Ukrainian entrepreneur to discuss the most important developments and phenomena in the growing blockchain sector. During this exclusive interview with Crypto Insider, he talked about some of the most important events he witnessed in 2018, as well as his vision of Celsius.
Attached you will find the first part of the interview both in video and in written form. The second part contains a more in-depth analysis of the Celsius Network app, with practical examples provided during a process in which Vlad deposits some coins in the ecosystem.
Complete transcription:
Vlad Costea: Hello and welcome to another interview with Crypto Insider! I'm Vlad and today I talk to Alex Mashinsky, who is the creator of the Celsius network and an innovator in the field of TCP / IP. Hi, Mr. Mashinsky!
Alex Mashinsky: Hello, Vlad. Thank you for having us.
Vlad Costea: So it's VOIP not TCP / IP, right?
Alex Mashinsky: It's VOIP, but it uses TCP / IP so yes, it's part of the protocol.
Vlad Costea: All right. So … I have so many questions to ask you now, I'm not sure what I should start with. But let's talk about the way I discovered about you and your business. And it was during the debate of the Milken Institute, which I found fascinating. You discussed a representative from the United States reserve. I think his name was Macintosh.
Alex Mashinsky: Yes, there were … there was the founder of Abra who is a portfolio company. Yes, and Nouriel Roubini and we had a Federal Reserve representative.
[1:16]Vlad Costea: Ok, I noticed during the debate that you're practically the first socialist crypt I've ever discovered. Talk about politics – talk about all these problems with the wealth of the world and talk about where this redistribution hides through cryptocurrencies and that for me it was a real revelation.
Alex Mashinsky: Well, so I was born in Ukraine – so, born in communism. Raised in socialism in Israel. We have spent 30 years in the United States. I've tried all three systems, you know the economic systems we have. And each of them has its own set of problems.
Obviously, communism does not work for most people, but the system has sought to create equality for all. Socialism is basically saying that we must have a safety net for everyone, right? So we will capture anyone who falls into the system – you know, he has health problems or something.
And capitalism is a very good system for 1%, but not so good for 99%. So, really, humanity is struggling to find an inclusive system that can act in the best interests of the 7 1/2 billion people living on this planet.
And I see the blockchain fueled by cryptic currencies as the 4th system. So it's not like I'm a socialist crypto, it's more than I think we can get the best ideas from the other 3 systems and create something that is for people from people against people like me who have come to immigrate to the US and do different things start-ups and be successful enjoying all the benefits, but most people on the planet do not have access to these opportunities.
[3:20]Vlad Costea: Do you find any ideological common ground with Nick Szabo about social scalability?
Alex Mashinsky: Nick is a good friend. He is also based here in New York. I think he is a purist – in the sense that he believes Bitcoin is the solution for everything. And, my opinions – I agree with him at a high level on the ideas, but I think the app killer or the blockchain that will allow everything I just talked about has not been invented yet.
Vlad Costea: Oh alright. But it was much more the idea that there are about 8 billion people living on this planet and the resources are very limited. He believes that blockchain and Bitcoin will allow a more equitable and intelligent distribution of resources.
Alex Mashinsky: Well, a fairer and more intelligent distribution is definitely the right thing. That, I would not say we have limited resources. Just to give us an idea, in the United States, we throw away 1/3 of all the food we produce each year. Just throw it away because of the expiration date because it was not consumed on time, or because it was not eaten completely or anything else. The modern waste that the West generates, particularly the United States, is simply colossal. We can feed the entire planet with the only waste that the United States produces.
[5:04]Vlad Costea: I saw you discussing Nouriel Roubini, who is perhaps the most vocal critic of cryptocurrencies and I saw you as you took him during the debate at the Milken Institute and later during the Blockchain Supershow, which was maybe 2 months ago. And I found it fascinating that his opinions have evolved over time. It is not as if he had these fixed ideas that he maintains. He still says it's all a scam and it's a Ponzi and it's going to collapse at some point. But he has refined his arguments over time, do you think you have contributed to this evolution?
Alex Mashinsky: Well, Nouriel is a very experienced economist, and I think he's a very smart person. But it lives in this cocoon created by the Western world where we basically all live in an inflationary system. You know, all the currencies issued by the government are designed to be inflationary. And by doing so they force people to make money to put that money at work. And that money must be placed in real estate or put on the stock market – because if you put money in a bank you lose 2, 3 or 5 percent just for inflation.
And the piece that does not understand is that bitcoin and other cryptocurrencies are deflationary: they are designed to do the opposite of what the dollar, the yen or the euro have been designed. So, all these arguments are comparing the bitcoin with an inflationary currency. Which is … he's comparing apples and oranges, right? So … I've always teased Nouriel saying that he should first buy his first ether or bitcoin and then tell us how it works. Because someone who has never used it for business or never invested in it sitting there and says how bad it is or how it will not do what it should do, is not the best person to educate or explain to us why it is a scam or it's the best thing on the planet.
So I think the opportunity here, like all the rest of the planet, everything can be used for good or bad – and the question is: what are we using these crypto currencies for? And today, unfortunately, and I've been saying it for several years, we do not have a killer app either for Bitcoin or for Ethereum. And without a killer app like Voice over IP, such as a killer app for the Internet, you can not have a ladder, you can not add the billion, two billion, three billion people who use things like this every day. conversation we & # 39; to have been completely like a dream, 20 or 25 years ago. It would cost several dollars a minute to make transactions – to create a video conversation with voice over any type of data line and the idea that this could be done for free at great distances and billions of people could do it at the same time it was completely foreigner.
So I think that people with very limited imagination are always inclined to defend the systems they know. For example, I can tell you that if you look back at history and look at all the coins that have been issued, many of them have become the reserve currency of the planet and then disappeared. And a great example is the US dollar. The US dollar began as an illegal currency coined by six colonies against the powers of the United Kingdom. Right? It was illegal. That's why the British sent an army to the United States to fight the locals and basically stop and tax – and what they wanted to continue to tax them. So this illegal currency became the reserve currency of the planet. And this was completely inconceivable. Likewise, this new illegal currency, which we call Bitcoin or Ethereum, or any other crypto currency, in many countries are illegal, as in China, could become the next reserve currency of the planet.
[9:21]Vlad Costea: I think something we do not really think about in terms of stories of origin, because at some point in our past many of the inventions we take for granted and which we established as part of our system were illegal and it took some time for people to embrace and adopt them as … in the case of money as a means of exchange or memorization of value. But back to Nouriel Roubini because I remember during the debate you offered me to give him some coins and she refused, but I'm not sure what happened next if he gave up and said "Okay, send me some coins so I can see how they work ".
Alex Mashinsky: Look, Nouriel gets paid to make his speeches, so he does not care much about the industry. You get paid to show up and say bad things about crypts and you make a living well, right? So, I do not think he is interested or inclined to investigate the validity or feasibility of any of these coins.
Vlad Costea: Ok, this is the diplomatic answer. Well, I'm going to ask you about the current bear market and if you think there's a logical correlation with the fact that we're having a far more widespread financial adoption. We hear about all these ETFs and all these sustained institutions that promise to open commercial counters. But, at the same time, there is no follow-up in terms of price increases, so we have a lot of good news in terms of developments and adoption but nothing to follow in terms of price growth.
[11:11]Alex Mashinsky: Well, the problem that is having the industry is that you've had a very rapid adoption of retail users in 2016 and 2017. Millions of people have come from a fiat land to the cryptic ground thinking they can open an account in any exchange and buy coins and become millionaires, right?
And until the others showed up and bought coins after them it was true. But when everyone tries at the same time to run towards the exits. What you are seeing are people – all with weak hands basically dumping their coins into the market, no matter what the price is and you are seeing liquidation because of the margin. How about Bitmex and other places where people buy 2 to 1, 3 to 1, 5 to 1 and basically have to sell or be liquidated because they do not.
All these people are leaving the earth crypt in fiat land with empty pockets. And, I think what you are left with are people who are true believers: people who are looking for this in the long run. And most of the institutions I talk to and you know that Celsius Network works with many institutions, most institutions did not buy a lot of coins. They may have created an account, they may have even put a few coins in their wallet, but they have not really started to accumulate resources.
And the people you're talking about, like Fidelity or New York Stock Exchange, or others announcing they're trading, all talk about 2019, not 2018. So I think it's going to be a wave of adoption and all new institutions coming soon. But, before that, we'll see a stream of all the speculators left, right?
We have three waves of adoption, so from 2008 to 2011 they were all anarchists. Then we had the second wave, from 2011 to 2015, which was mostly libertarians – people who thought they could solve all the problems in the world with Bitcoin or Ethereum.
And the last wave was of all the speculators. And the funny thing is that these three groups do not really talk to each other. They do not like one another, they do not work together. So you can not have a community. And we also have very few women in crypts: we have maybe 5%, maybe 7%, women – they are all men; that I'm not really here to make the world a better place. I'm here just to make money.
So, I think when you see … when you have more people participating for the right reasons, not for the wrong reasons. Again, it will not be the anarchists, it will not be the speculators, but the people who really want to have a financial future: people who think of it as a long-term investment. This is what will continue the rise of coins. Also, when you see some serious financial problem in the traditional world, like what you're seeing right now in Argentina, or in Turkey, or in Venezuela, or other countries … this will lead to the adoption of crypto currencies because these people in those countries do not trust the local government. They can not get their hands on dollars and the only way for them to actually create value or keep a value is the purchase of cryptocurrency. It's not like I want a financial disaster, but I think the financial disaster will be the best thing for cryptography.
[14:43]Vlad Costea: You spoke about waves of adoption and how different individuals with very different ideological views have adopted Bitcoin at different times in time – now known that there are people like Roger Ver or Eric Voorhees who more or less start selling and embracing their corporate mentality. We have seen how Shapeshift had no problems creating its own currency and becoming KYC, even though it was against their ethos from the very beginning.
And then we have Roger here who basically used all the possibilities to maximize his profits. He was an investor in many crypto startups but it turns out that his interest was not necessarily to promote Bitcoin as a technology, but to be a major stakeholder in a version of Bitcoin that he considers most valuable to his interests.
[15:44]Alex Mashinsky: Yeah, so look … you know what they say: you can make fun of some people for a while, but you can not make fun of people all the time. And I think there are many people who are heroes in the cryptic world who have updated us. Who is not really … who showed their colors. Many of them, when you delve into why they are doing what they are doing, you have discovered that they are not there for the community, they are not there to help everyone else.
Just a simple example, an example for example is an exception, right? He is a boy who has always been there for the right reasons. He always did everything for the community. So, I want to clearly differentiate from all the others we've talked about, right? But, if you're looking at the founder of Bitmex, or you're also looking at the founder of Binance, none of these people is here to help the community – they're all here just to get in line. I urge our viewers to really pay attention to make sure that what people say and what people do is the same thing, because in many cases you will see that what people contradict what they say and that they are not here long I am here just for a quick buck and go on to the next thing.
[17:10]Vlad Costea: I noticed that unlike Tone Vays, who was one of the proponents of one of the conferences you attended, you prefer and seem to like Ethereum, while Tone Vays says it's a scam: which is a pyramid scheme that is bound to collapse because he had a big pre-order since the first day and is not very decentralized. This is his argument against it. What do you like about Ethereum and what do you think of competitors: like Tezos and TRON, EOS and Cardano and so on. I think I can name another five …
[17:51]Alex Mashinsky: So look: first, Celsius Network does not choose winners and losers. Our portfolio supports a different blockchain and we are planning to support all 20 best blockchains, so we're not moving the community left or right, up or down, right? Our job is just to allow people to earn interest on their deposits, right? So allow him to make a profit on their coins and allow them to get a loan, as well as easily transfer coins to one another. These are the services we provide.
We could worry less about EOS or Bitcoin or about Ethereum. But, in the general sense of the community, in the first place there are usually more than one winner. So, I'm not sitting here and I say "Ethereum is the best thing after sliced bread, nothing else will be successful". I think there is an opportunity for more communities to exist. Today the community of Ethereum has the largest number of developers, has the most code, has the most working projects that are actually used for anything and, because of this, I see them have enough gravity to create an orbit of successful companies that surround them. So they have over a thousand projects and over ten thousand developers who are working every day to improve the Ethereum protocols and create applications on it.
So, I'm not supporting or supporting for just one project, I really like how Ethereum created a very important value for the first users: both the miners and the people who came in and bought the coins and built the projects on top of Ethereum. I think it's a model or a case study for many other projects to come later. Celsius Network has worked with Stellar and we work with EOS, so we're here to support the community. We believe that all these efforts are true and pure efforts that are promoting opportunities on the blockchain and I am focused on the public blockchain. There's a lot of effort from the banks, insurance companies and other VCs on the private blockchain who are not really focused on creating a solution for the eight billion people on the planet – they're just trying to create more profitability for IBM or for JP Morgan or for Microsoft.
[20:39]Vlad Costea: I think you took a step forward because I was going to ask you about the Celsius network. What is it and in what is different from a traditional bank?
Alex Mashinsky: Right. Well, let me answer. Because the main thing that we are different … yes, we pay interest, yes we issue low-cost loans. But the main thing that makes us different is that we take profit, which we generate through a variety of ways, and return them to the community in encryption. Almost all the other projects you know – we take Binance, for example: when Binance announced that they are going to earn a billion dollars this year, it means they are taking money out of their pocket, they are converting to fiat, and they are sending out of our community. They do not distribute it to the community in the form of additional coins, do you understand? They are like a vacuum cleaner that is taking value outside the community. The same thing with Bitmex and the same thing with most other financial projects.
Celcius is the opposite of that – Celsius is telling the community "let's get together, gather all our resources, create a" Proof of Stake "implementation, distribute these resources, and whatever comes in … most of it it comes in dollars, most of our debtors pay us dollars, so we buy the coins with them and give them to the community ". So we do the opposite of what Bitmex or Binance does or anyone else does. So it's important that your viewers understand it, because when someone says, "Oh, I'm here for the community", ask them "What are you doing for the community?". How are you helping the community grow and become more prosperous and so on?
[22:27]Vlad Costea: Ok, but would you say that Celsius is a bank for crypto currencies?
[22:39]Alex Mashinsky: We are not a bank, no. We're … in most cases, banks are … you know, let's think about what a bank does. So, a bank takes your money, right? It's just … it will only accept fiat coins; does not accept goods. Then he lends it to me, for example, right? It takes your money, you pay almost nothing for this, less than 1%. He turns, lends it to my credit card.
When I use my credit card they charge me 25%. So they keep 24% of 25%: this means that they keep more than 90% of the value just to be an intermediary. All I am is a toll collector. I'm just an intermediary in the middle, right? So when we're angry with Facebook, or we're angry at Google, they do not take 90% of the value – maybe they take 10 or 20% of the value, do you understand?
My point is that, in fact, not … many people in this world do not understand who their friend is or who their friend is and who they can trust and can not trust. So, you know, the governments of most countries have given banks a monopoly, a legal monopoly, to do what I've just described. And that's why they are some of the most profitable companies in the world. Who has the brightest and biggest buildings in every city? The banks. How can they afford to have these beautiful buildings? Whose money is they taking away? It's your money and my money.
So, what the cryptocurrencies say is something very different. The crypto currencies are saying that the value can be stored not only in the form of fiat currency, but can be stored in other forms. And, as long as we create a community that acts in the best interests of the community, the community can repay 5, 6, 7%, which would be 5 times more, and charge half: instead of charging 25%, because it does not charge them. 9%? This is what Celsius charges. So, we collect 9%, we pay 5 or 6% and everyone benefits from it. But we are not the bank.
[24:54]Vlad Costea: So, this is an alternative for people who want to store their cryptocurrencies? Can they simply keep them in their wallets and perhaps remain anonymous to a certain extent, or if they agree with KYC can they deposit their cryptocurrencies and earn interest?
Alex Mashinsky: We only want good actors. If you're not willing to do KYC, there's a reason you do not want to do KYC, so we just decided not to accept you as a member of our community. We want a community of good actors only. And, KYC is a way to understand who is a good actor and then who is a bad actor. So if we have a community of good actors and they all gather their assets, if we have a billion dollars, we can make a lot more money than if we have a million dollars.
So, what we are trying to do, just like big banks make a lot of money using the capital that is deposited with them to earn, but the earnings go to the bank, they do not return to the people who deposited the money. We use a lot of deposits to make money, just like hedge funds do or simply because institutions are not banks, but profits go to the people who gave us the money first – or the value in the first place.
Thus, it is a model that is not new: it is not that we have invented a new financial model. We take the deposit, we pay the interest, we distribute the coins, we only accept coins, we only distribute coins – so we do not touch fiat currencies, we do not touch dollars, we do not touch yen, we do not touch euro. You can not buy coins from us.
[26:32]Vlad Costea: So, now if I have, say, a Litecoin or an Ethereum, can I deposit it and earn interest? And what are the rights?
Alex Mashinsky: If you open the app, the app shows you what the rates are. So, let's do it now. And here is the Celsius app. Go to the app store and download the Celsius portfolio. And Celsius Network is the full name. And when you open it, it will show you all the different rates we pay. So, for example, at this moment Bitcoin is 3.75%. Litecoin is 4.5%. Ethereum is 4.25%. And these change every week.
The reason they change is when we earn more money: we pay more money and the rate goes up. When we earn less, the whole community earns less money and therefore the interest rate decreases. So the interest rate rises and falls based on our ability to raise capital. And we have three basic services. You can deposit and earn interest, which we have just shown. You can take a loan, so if you have assets and you have bitcoins, but if you sell them you have to pay taxes – with us you can basically take a loan against the asset without paying taxes on your earnings. And the third service is called CelPay that allows you to send coins to one of your friends. So, I can send Vlad right now, for example … do you want a Celsius Cel token or bitcoin? What do you prefer? I will be more generous with the Celcius Cel token.
[28:07]Vlad Costea: Ok, which one do you prefer. So, for the record, I downloaded the application before this interview and I created KYC and everything else and I'm …
Alex Mashinsky: So, I'll send you $ 50.
Vlad Costea: Oh, it's generous.
Alex Mashinsky: Very generous, see? Since you are recording this I am very generous. So, I do not need to know your wallet, I do not need to know if you have bitcoin or ethereum or anything else. I can simply use social media, in this case I will simply use your phone number to send you something, right? Let's see how long it takes. I'm going to press the button now, you tell me when you've got it.
Vlad Costea: I got it.
Alex Mashinsky: You got it right. Where are you physically? Where are you physically today?
Vlad Costea: I'm in Romania.
Alex Mashinsky: You are in Romania and I am in the United States. So, this is the fastest blockchain in the world. Because, unlike other solutions, where I have to call you first, you take the address of your wallet, so I have to call you again to see if you're ready for a test, here I can send it to anyone. People who are on the blockchain, people who are not on the blockchain … So, we think this cell-based service really solved the problem of adoption by allowing anyone on the planet to receive or send crypto currencies. Which, today, was not really available. Today he tries to do it with someone who is not on the blockchain.
Vlad Costea: This is … so which blockchain is you using? Is it built on Ethereum?
[29:41]Alex MashisnkySo this is using Ethereum, but if you're sending BTC, then it's using Bitcoin. And, if you're sending Ripple, use Ripple. So, today we support the 8 biggest blockchains. But the Cel-based service lets you send things instantly. Save it and give it to the receiving party when you actually register and open a wallet and then create a wallet for them on XRP, for example on BTC or whatever has been sent to them. So, now I'm sending you the Cel token, which is an ERC20 token, so when you open your wallet, or you already have it, create an ERC20 account for yourself, and then these $ 50 dollars are deposited there. And, if you do not claim them, the $ 50 dollars come back to my wallet a week later.
[30:31]Vlad Costea: And this…
Alex Mashinsky: So it's never lost.
Vlad Costea: So, what is the purpose of the ERC20 token in this ecosystem?
Alex Mashinsky: So, our … Cel token has 4 different utility functions. One of these is the exchange of value between people who accept loans and receive loans and people who make deposits. Here's how we distribute the value among them. So today, it does not yet have the functionality in the portfolio – which is coming to the end of the year. But today you can basically use most of the portfolio features I've described without the CEL token.
Vlad Costea: All right. I see I received … okay … you can do it. I can confirm that you can do it.
Alex Mashinsky: Sorry, yes.
Vlad Costea: All right. So, I received the text message, to receive the money. But, I do not think this was added to the blockchain, because my balance is still 0. So, I suppose we'll see it in a minute.
[31:45]Alex Mashinsky: I think it's because you have to finish your KYC. I think the moment you finish it …
Vlad Costea: Um … I have my confirmation.
Alex Mashinsky: Ok, so if you update your wallet you should see the balance.
Vlad Costea: Let me close it. I'll open it once again. It takes a while to load. Ok. Insert my pin Not yet been sent. So I received the text message, just for the record. He says "Congratulations Vlad, your profile …" no, not this … this. "Alex sent you $ 50 to Cel. Click here to request it on the Celsius network." Oh, so I have to claim it?
Alex Mashinsky: Yup.
Vlad Costea: Opening this link … So, this is the process, actually?
Alex Mashinsky: Yup.
Vlad Costea: I have to claim it. You did not tell me. So, I guess … I was the one who was not careful enough.
Alex Mashinsky: So, I need to make a quick call. Can we do the second part after I finish the call?
Vlad Costea: Yes. Ok, so "congratulations". I received $ 50.
Alex Mashinsky: Perfect Yes, you're a rich man now.
Vlad Costea: Oh yes.
Alex Mashinsky: All right, so we'll continue … I'll call you back in a few minutes, ok?
Vlad Costea: Ok, I'll be here.
Alex Mashinsky: Thank you. Hello.
Vlad Costea: Hello.
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