The initial coin offering (ICO) craze of 2017 generated billions of dollars for many blockchain startups. However, many of the projects were either scams or never managed to develop any useful products.
But New York-based startup Celsius, which raised $50 million in cryptocurrency in May 2018 during its ICO, appears to be doing quite well. The Celsius project sold CEL tokens that can be earned by borrowers as interest payments.
Celsius CEO Alex Mashinsky revealed recently that since the project’s ICO campaign, 10.415 platform users have been issued fiat-based loans by locking cryptocurrency as collateral. The company’s mobile app takes Bitcoin (BTC), DAI, and 18 other digital assets. Loan volume has increased significantly.
Maximizing Returns “As Much As Possible”
Palo Alto-based Bitcoin security firm BitGo told CoinDesk that Celsius made over $1 billion in crypto asset deposits to its custody accounts during the past year.
Commenting on Celsius’ business strategy, Mashinsky remarked:
“Our job is to maximize the return as much as possible, the yield, and we do that by lending out the [deposited] coins. Half of our business is with exchanges and the other half is with hedge funds that use them to create markets, arbitrage or different purposes.”
Mashinsky also noted that San Francisco-based venture capital firm Polychain Capital and Bitfinex are among Celsius’ partners.
Malta-headquartered Binance is also Celsius’ loan partner, even though the crypto exchange has its own loan products. However, Mashinsky acknowledged that these types of loans are overcollateralized to a certain extent, instead of being strictly at 150% (according to the company’s website).
Celsius Doesn’t Disclose Full Details Regarding Its Loans
Mashinsky, the founder of Israeli-American venture fund Governing Dynamics, explained:
“We lend to different institutions based on different rates. The rate at which we lend out has to do with the quality of the institution.”
Celsius’ management has been criticized for not disclosing the full details regarding its loans to external parties. According to Mashinsky, the company does not share this information due to potential business and security risks.
The Celsius CEO added that regardless of where the funds go after they’ve been deposited with the firm, most platform users deposit over $33,048, and around 30% of clients prefer to receive interest payments in CEL tokens.
Mashinsky also mentioned:
“Our mission is to take as much of the profits as we can and give it back to our users. If you read our white paper, you’ll see we’re doing exactly what we promised two years ago. We didn’t pivot.”