Celsius Foundation plans to launch a peer-to-peer lending platform on Ethereum that connects borrowers and lenders while removing banks from the equation. The company targets millennials and genX—demo
Celsius Foundation plans to launch a peer-to-peer lending platform on Ethereum that connects borrowers and lenders while removing banks from the equation. The company targets millennials and genX—demographics Mashinsky believes have been poorly served by traditional banking.
Alex Mashinsky founded Celsius after spotting a gap in the credit market. "All existing peer-to-peer platforms are centralized solutions that are not solving the credit limit and interest rate cost issues, or are blockchain-based platforms which only serve as exchanges to connect credit starved millennials to the same large financial institutions who will not lend to them in the first place," Mashinsky told MiningPool.
Before Celsius, Mashinsky founded GroundLink, Transit Wireless, Elematics, and Arbinet. He holds over 30 patents and has raised $1 billion in capital, with exits totaling $3 billion. His team at Celsius includes S. Daniel Leon as President and COO and David Brill as General Counsel and Corporate Strategy head.
Mashinsky sees the credit system as broken. "The banking industry as it is currently formulated fails to offer any real solutions to the current consumer credit and high-interest student debt crisis," he said. "Banks have no incentive to fix the problem, as the majority of their profits come from these loans."
His motivation is personal. "I have six kids and I am very concerned about their ability to succeed in the world where financial credit is harder and harder to get and the costs are growing higher and higher."
On Celsius, users build digital identities on the blockchain. The system incorporates social networks, transaction history, FICO scores, and purchase records from Amazon and eBay. Each person receives a credit score based on this digital identity and any data they provide.
Lenders deposit crypto and earn interest in dollars. Borrowers obtain dollar loans at lower rates than banks charge. A borrower who shares more information from their digital profile can secure lower interest rates and higher credit limits.
The system creates a community with better repayment dynamics. Lenders and borrowers showing lower losses and on-time payments gain access to higher credit limits and better rates. When borrowers default, Celsius refunds the lender and pursues recovery.
Mashinsky frames Celsius as part of a larger movement. "Celsius is joining the Bitcoin and Ethereum movements which represent social change and the rejection of centralized institutions as the arbitrators who take our money and then decide what credit and what interest rates we should pay for the capital they borrowed from us while paying us almost nothing for it," he said.
Every peer-to-peer lender that came before has hit the same wall. They either centralized operations to manage regulatory demands, or they partnered with large banks and ended up being acquired. Neither path delivered the peer-to-peer solution their users expected.
Mashinsky insists his approach is different. "All existing solutions are not membership based (think of Amazon Prime or Costco) and have ended up partnering or being bought by these monopolies and have not provided the promised peer-to-peer solutions millennials need," he said.
The platform tackles multiple problems at once. Crypto holders want to earn returns while holding their ETH or BTC. They want dollar returns while maintaining exposure to crypto upside. Borrowers want access to dollars from an institution that values their creditworthiness and social connections, not just credit scores.
The bigger adoption question interests Mashinsky. "We are also addressing one of the largest problems the crypto community has which is where are the next 100 million adopters are going to come from," he said.
Celsius will release a prototype next month, with a fully working version arriving next year.
