The initial coin offering (ICO) craze of 2017 and early 2018 helped generate billions of dollars for blockchain startups throughout the world. However, many ICO projects were scams or did not lead to the development of useful products.
London-based Celsius is among the very few firms that raised capital via an ICO, and used it to create legitimate products and services. Launched in May 2018, Celsius’ fundraising campaign generated $50 million in cryptocurrency funds.
The company’s CEO Alex Mashinsky revealed recently that 10,415 Celsius customers have been issued fiat loans by locking up their crypto assets as collateral. The consumer lending firm’s mobile app takes payments in Bitcoin (BTC), stablecoin DAI, and 18 other digital assets. Loan volume has been increasing steadily, the company’s management noted.
Digital currency custodian BitGo told CoinDesk that it received over $1 billion in crypto asset deposits from Celsius in the past year.
Explaining his firm’s business strategy, Mashinksy notes:
“Our job is to maximize the return as much as possible, the yield, and we do that by lending out the [deposited] coins.”
He also mentions that half of the company’s business dealings are with digital asset exchanges and the other half involves hedge funds that use Celsius’ platform to open new markets and find arbitrage opportunities.
Going on to share the names of his firm’s business partners, Mashinsky reveals that San Francisco-based venture capital firm Polychain Capital, and crypto exchange Bitfinex and Binance have been working with Celsius.
However, the blockchain entrepreneur acknowledges that loans are overcollateralized to a certain extent, rather than being fixed at 150% (according to the company’s website).
Elaborating on how Celsius issues loans, Mashinsky says:
“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.”
Mashinsky also addresses concerns about why his firm doesn’t disclose details regarding its loan issuance process. He notes that sharing information about loans made to external parties could pose security and business risks.
He also mentions that the average user deposit on the lending platform is $33,048, with 30% of clients preferring to receive interest payments in Celsius’ native CEL tokens.
“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.”
Celsius currently has 52 employees, and the company’s burn rate is estimated at $15 million per year, with a net monthly revenue of $1 million.