Hi investors, Dan (@tradealert) and Dean (@deanliu) are back and today we’re looking at an intriguing project called Celsius.
In a Nutshell.
Celsius is a decentralized lending and borrowing platform built on the Ethereum blockchain and powered by its own native currency: the CEL token.
The basic idea behind Celsius is to allow retail users to deposit coins in wallets provided on the platform to gain access to two major services:
- at launch users will be able to apply for dollar loans (at discounted interest) with cryptocurrencies as collateral;
- in the future users will be able to lend cryptocurrencies to short traders in order to gain interest (up to 9%/tx annually) paid in CEL tokens;
In that regard, the project is somewhat similar to other crypto lending platform such as SALT and aims at competing against banks and credit institutions to provide banking services to the “unbanked” and the “badly-banked”
The other, less glamour purpose of the project is to provide liquidity for institutional traders to short the crypto market. In this podcast, Alex Mashinsky, the CEO of Celsius admits that large crypto exchanges commonly lend their users’ funds to large institutional traders (hedge funds, ETFs,etc.) for a fee. These institutions then use those funds to short crypto either to manipulate the price or to hedge their positions in a bear market.
Celsius aims at taking advantage of this dynamic by offering a deal that would benefits wallet users by re-distributing lending fees to them.
It’s a neat idea which, if the platform proves successful, could give birth to a brand new class of derivatives.
The project is doing a pre-sale on March 15.
I- The good.
The project has a great team (a), a functional working product (b) and is rumored to already have a partnership with a financial institution (c).
a-The Team.
The project is headed by Alex Mashinsky, an israelo-american entrepreneur and inventor with a proven track record of successful business ventures.
Here’s Alex talking about the project on the Hidden Forces podcast:
https://www.youtube.com/watch?v=YImrcZKqtLU
Most importantly, the Chief Technology Officer of the project, Syed Fazli, is a Bloomberg lead engineer with plenty of experience in leading large scales projects.
Overall, the team looks plenty capable of dealing with the technical aspects of the project.
b-A Working Product.
The project already offers a working product for Android which we recommend you download from Google’s Play Store and try out yourself.
We hope that in the future Celsius will also release a desktop application so to allow users to manage their funds directly from the comfort of their computer.
c- The Rumor.
It is rumored that the project has already concluded an important partnership with “a financial institution“ to provide liquidity to their platform but our inquiries about this fell on deaf ears.
If true, a large partnership would certainly give the project an edge over other blockchain platforms offering the same service like SALT.
The Risks.
Going through the whitepaper, we found a few problems with the project.
First and foremost, the project seems to assume that institutional traders will simply flock to the platform to borrow crypto assets without providing actual evidence that Celsius possess a competitive edge over traditional, more liquid solutions for shorting like the CME futures for example.
Second, as with most Ethereum-based projects, we believe that Celsius does not fundamentally need a token to power its platform and, despite the teams’ efforts to justify its existence…
…it remains to be seen:
- how the token’s volatility will impact the economy of the platform;
- how the token will impact the overall user experience.
Third, there is some concern regarding the custody of the funds that will be deposited in Celsius wallets. Obviously Celsius does not exercise custody of the funds directly in the wallets (a third party custodian will control the funds in cold storage wallets), however the centralization of deposited assets with a single entity creates a single point of failure and could potentially expose the funds to hacks.
Finally, it must be pointed out that if the broader crypto market continues on its bear trajectory, there is a real chance that investing in ICOs will result in a loss of money.
Overall though, the project is still worth a look and possibly a (small) investment although we recommend you manage your position carefully.
If you’d like to know more about the project we recommend you read their whitepaper, visit the Celsius website and Telegram channel.
So readers, what do you think about this project?
That’s it for today and we sure hope you’ve learned something new. Don’t forget to re-steem, upvote and follow @tradealert and @deanliu if you like our featured content.
Cheers,
Dan & Dean.
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