Alex Mashinsky, Celsius Network CEO
You may not recognize the name, but Alex Mashinsky has most likely affected your life in some way, shape, or form without you knowing it. He brought cell service and free WiFi to the New York City subways, partnered with Gogo Inflight Internet to provide WiFi to US flights, and most notably, invented Voice over IP (VoIP).
Now, Alex is moving on from VoIP to MoIP (Money over IP) with his new blockchain startup, Celsius Network. Celsius is a membership-based, peer-to-peer lending platform in which you can take out reduced-rate loans putting up your crypto as collateral. On the other end, you receive five percent interest when loaning out your crypto through the platform.
In this interview, CoinCentral’s Steven Buchko chatted with Alex about his passion for non-profit services, the importance of women in blockchain, and the impending wave of decentralization.
SB: Would you mind giving our readers the two-minute movie trailer of your life? How did you get started working on Celsius?
AM: I’m an immigrant. I was born in Ukraine and I grew up in Israel. I came to the U.S. 30 years ago and founded seven startups in which I’ve raised over a billion dollars in venture capital.
I built Arbinet, which was the first company to build Voice over IP (VoIP). I also wrote the original VoIP patents and protocols.
Now, we’re moving from Voice over IP to Money over IP. The Celsius Network is trying to disrupt the banks and global financial institutions.
We’re targeting what we take for granted in the United States, access to credit and interest income, and making it fungible across the planet so anybody can start a business. We take the American dream and make it available worldwide.
Throughout your career, you’ve taken on ventures to provide services that were once expensive for free to the public. For example, you were instrumental in bringing free WiFi to the New York City subway stations. Could you explain your motivation behind that?
My best friend died on September 11th. There were thousands of people stuck in the subways during the collapse of the towers, and many of them died. I wanted to make sure that never happens again.
If we had better communications, we would not have experienced this disaster in which no one knew what to do. Everyone stayed in their trains because that’s what they were instructed to do. It’s horrible.
The systems in New York, up until two years back, did not have any wireless communications. The minute you went down the steps, it wasn’t just the WiFi that was missing, your cell phone didn’t work either. There was no reception at all.
I went to the MTA [Metropolitan Transportation Authority] and pitched them for several years about putting wireless in the subways. Their response was always, “No, we don’t have to.” New York was one of the last cities in the world to get wireless in the subway stations. It took a long time, more than 11 years, to convince them to pull the project together and build it.
There were a lot of ups and downs, but we persevered and today, eight million people use it every day. I’m proud of that achievement. Just like I’m proud of VoIP, a free communication service that a billion people use every day.
You can do good and you can do well at the same time. This is something that’s important to me.
Speaking of doing well, you’ve had two out of the top ten largest exits in New York history. What do you contribute that success to and how are you using what you’ve learned with those two companies in order to build out Celsius in the best way possible?
Obviously, you need a good idea, you need funding, and you need to make less mistakes than your competitors.
But a lot of it also comes down to timing. If your timing is right, then you’ll become successful. If your timing is off, it doesn’t work so well.
One secret that I probably should talk more about is hiring more women than men. In all of these successful companies, I had more women than men. And, we’re continuing that with Celsius. Most of the team are women, and I’m proud of that.
It’s funny because our ICO (Initial Coin Offering) raised over $50 million. Yet, 95 percent of the participants were men because most of the blockchain communities are predominantly men.
We’re going to change the world but exclude half of the population? That’s just not going to happen. We need to represent the entire planet, not just half. Sometimes it’s the most obvious stuff that people don’t pay any attention to.
Women do their homework better than men, and they take their time. Really, the crypto community has not done anything to accommodate their needs. Unless you’re a video game player geek, it’s hard to understand what this is all about.
Part of Celsius’ mission in bringing the next hundred million people [into crypto] is to make sure that we represent and accommodate all the needs of the half of the population that may not be playing video games all day long.
I’ve heard you talk about it a few times now – 100 million people. Why that number?
When I built VoIP and showed it to AT&T, I was excited about 100 million people using it. It was a goal that we never thought we’d achieve. Now, over a billion people use it every day.
When the Internet was about 10 years old, it had just over 500 million users. Bitcoin was created 10 years ago, and it only has about 50 million users. We’re at 1/10th of the adoption rate that the Internet was 20 years ago.
Why is that? Why is there such a gap? The lack of women in the space, the complexity of opening a wallet, the cumbersome way in which you have to buy coins – those are all issues that we’re trying to address and make it easier and simpler for people to join the crypto revolution.
Tell me about Celsius in your own words. It’s a platform for peer-to-peer lending, but it seems like your vision is much bigger than that.
You can think of us like another version of Costco or your community bank. We represent the best interests of all of our members.
If you deposit coins with us, you can do two basic things today.
The first of which is getting a loan at a nine percent rate against your crypto. We don’t do a credit check. We’re don’t care about your history. It’s an asset-backed loan, so it should be a cheap loan.
At the same time, if you’re a coin holder and you don’t need the loan, you can earn interest on your coins. Out of the nine percent, we take five percent and give it back to the coin holders.
Those two things seem small, but they’re actually the foundation of any economy. In analyzing most economies, you look at the levels of saving and lending. One of the reasons the United States is the most powerful nation in the world is that half of all the credit in the world is issued here. People who come here have a much better opportunity to start and/or grow a business.
We believe that using blockchain to take this opportunity and make it available worldwide is something that is of great importance. Not just for the success of the crypto community, but also to bring the next five or six billion people on the planet into the middle class. That’s really our mission.
We don’t believe it’s going to happen with the traditional financial system because it’s all based on pyramids. The guys at the top of the pyramid are doing an excellent job making sure that the guys at the bottom of the pyramid don’t have a way to scale up.
When Satoshi Nakamoto created Bitcoin, it was all about replacing the current financial system with something new that is for the people, by the people. What we’re doing is an extension of that.
It’s an extension of what I did with VoIP, the largest distributed application on the Internet, as well. No one owns it, no one charges for it. It’s free, but it’s scalable, and it’s safe. Money over IP is a version of that.
During your presentation at The Next Web Conference, you talked about building circular companies instead of ones that are like pyramids. Can you explain that more?
This is war. This is not a little skirmish. Every day, I wake up, and I feel like a foot soldier representing the crypto community. This tsunami of a revolution is a wave of decentralization that is attacking hundreds and hundreds of years of centralization.
The pyramids are these giant monopolies that are a perfecting centralization. A bank, like JP Morgan, for example, is an expert at extracting value. They give you almost nothing for your money.
You can deposit millions with them. They’ll pay you one or one and a half percent per year. At the same time, they take that money, deploy it, and then brag about how much they make on your money and how little they give you for it.
These franchises are just the toll collector. Without your deposit, they’re worthless. If everybody withdrew their money from JP Morgan, the bank would be worth nothing. We’re empowering these monopolies, just like we empower Google and Facebook with all of our private information and Amazon with all of our transactions. But they’re all just toll collectors.
The decentralization wave is promising to replace all these toll collectors with something that is for the people, by the people.
If you look at Ethereum or Bitcoin, the creators of those projects created a lot of value even though those platforms are not for profit. They’ve generated zero revenue since they were created. But they’ve created a tremendous amount of value and almost none of that value went to the institutions or the guys at the top of the pyramid.
This is the first time in history that the average Joe with a mining node in his basement suddenly got in on the next big thing ahead of Goldman Sachs and ahead of JP Morgan. It’s a beautiful architecture, it’s a beautiful opportunity, and the community needs to continue to support the good ideas in the ecosystem.
When I came to this country 30 years ago, the gap between the average employee and the CEO was 10 to 20x. Now, it’s over 300x. It’s not like over 30 years, the CEO increased his IQ by 300x. It’s the fact that the pyramids are bigger and the ability of those pyramids to extract value has increased tremendously. They’re enabling the system to pay themselves much more.
We think that there’s no way to fix that – just like Satoshi realized there’s no way to fix the financial system. All those bubbles are going to burst in a tremendous fashion.
The only way to replace the pyramid is to create circular, flat organizations in which your value is determined by how much you contribute to society.
I saw that Forbes chose Celsius as number three on their top ten list of blockchain applications for 2018.
A lot of it has to do with our mission. Almost everybody else in this [crypto] community, unfortunately, is trying to build for profit.
We’re like, “Wait a second. Did you understand what Satoshi wrote? You should read the white paper again because you’re missing the point. You’re trying to build a pyramid inside a circle, and that’s not going to work too well.”
You talked a little bit earlier about the unbanked and the underserved populations around the world. Is that who you’re focusing on first for Celsius?
I would love to bring everybody in Africa or India or China and other places into the middle class overnight. But unfortunately, our system, like any other financial system, is based on the level of deposits.
Today, the economic activity of the bottom five billion people is just several hundred billion dollars. You cannot solve their problem by starting there. You have to start in the existing middle class, for example, the United States or Europe, and then use those platforms to leverage and provide access to everybody else.
We’ll provide the same nine percent rate to the farmer in Africa or the small business guy in Vietnam for whom the current cost of capital is anywhere between 18 and 25 percent – in some cases, over 30 percent.
Look at Africa, for example. A farmer pays over 30 percent to take loans against his crops so he can buy equipment or fertilizers to actually deliver that crop. All that could be done much more efficiently using cryptocurrencies.
Our launch is focused on the existing coin holders, which are primarily in the Western world. Then, we’ll expand that universe to people who already have assets and want to move some of their assets from dollar denomination to crypto denomination.
Finally, we’ll use that asset capital base to extend loans to the smaller guys who usually will be doing $100 or $200 capital loans.
I knew this was possible when I learned about some of the microlending NGOs (non-governmental organizations) including the guy who won the Nobel prize for running microlending in Asia. The default rate on microlending to people with no credit was lower than JP Morgan’s default rate on their credit cards.
It really tells you that 97 percent of the population are good people for whom their pride in their credibility is more important than anything else. They’ll do anything to work and return that loan.
If you marry the fact that most of us are born with good intentions with the fact that these cryptocurrencies are fungible and available across the planet, you can really do magic focusing on the community and not on profit optimization.
Is there anything else that you’d like our readers to know that we haven’t covered?
Look, this is all about the call to action. It may sound like I’m doing a commercial for Celsius, but the call to action for your readers is really about bringing people into the crypto community.
I don’t care if they open a Coinbase wallet or an Abra wallet or a Celsius wallet. The point is that they need to learn about this. They need to join, and they need to bring along their friends because the tide here lifts all boats.
If we don’t get more people involved, then this revolution is going to blow up because right now, unfortunately, we’ve run out of anarchists. We’ve run out of Libertarians and we’re running out of speculators.
The next wave of adoption that will take us from the early adopter phase into mass adoption cannot be based on speculators. It has to be based on people that need or want something like lending and borrowing. That’s why we chose this vertical. We think it is the killer app. Join us in this revolution and become foot soldiers for decentralization.
Thank you, Alex, for taking the time to talk with us. We respect what you’re doing and are looking forward to the Celsius Network launch.
If you’re interested in learning more about the Celsius Network, you should check out the official website. The first version of the app is available on Android and iOS, although loans and interest aren’t supported just yet.
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