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Few people know disruption as well as Alex Mashinsky (LinkedIn, Twitter). Alex was one of the inventors of voice over IP, a technology that many people use every single day without a second thought to a time before when making calls was difficult, expensive and worked only inconsistently. With that experience in his back pocket — as well as many years and investments in a number of successful start-ups — Alex is at it again, and this time he’s hoping to disrupt the banking industry.
His new company, Celsius Network, works on the blockchain and helps users grow their wealth with cryptocurrency. On this episode of IT Visionaries, Alex and Ian dive into how Celsius is working to build a world without banks, what advantages there are working on the blockchain, and how the future might look different thanks to this technology.
Best Advice for C-Level Execs: “It’s a very difficult job. It’s a lonely job and a job where you question yourself all the time, It’s easy when you’re right, but when you’re swimming against the tide, no one has the answers for you. There is no book or person you can call on who can give you all the answers. But always raise more money than you need and hire smart people. Know your weak points and when you hire people, they have to cover the weak points five times better than you can.”
What Celsius Network is Building — (2:00)
The slogan for Celsius is un-bank yourself. Alex feels that the banks have become monopolistic institutions that only care for shareholders. The banks, he says, are extracting way too much from all of us and giving the returns to the few people who are major shareholders in institutions.
Why disrupt them now?
According to Alex, for every technology, there is a right time to disrupt. He believes now is the right time for blockchain and crypto to turn the banking industry on its head. There are 7.5 billion people who want to earn more with their money and pay less for their loans, but that opportunity is never going to come from the banks. What Celsius does is charge a third of what the bank charges in loans and then gives 80% of what Celsius earns with your money back to you without you having to do anything. Celsius will automatically pay you the highest interest rates and you can check that every step of the way thanks to the transparency of the blockchain.
Essentially the opportunity Celsius promotes is that anyone on the planet can convert their currency to a stable coin, deposit it with Celsius and make 8x more than if they deposited it with a traditional bank. And Celsius promises to work as a good actor and work as responsible citizens in regards to transparency, taking out the appropriate taxes and reporting income to all the proper agencies, wherever you live.
“Tenacity and doing the right things it does pay off. The next thing after taking down the phone companies is taking down the banks. We’ll all be better off when we create things in our own best interest.”
“We model ourselves after Costco and Amazon, companies that do everything for thier customers.”
“Blockchain is like a new set of rails that is disrupting the banking and the money supply.”
“All of us should have our money work for us, not just have us work for our money. The time has come for people to take the power back.”
Having a modern mindset — (12:00)
Alex did seven start-ups before Celsius, so he doesn’t have a big-company mindset. People are looking at blockchain as decentralization but that thinking is upside down. As Alex explains, there is more to blockchain than just deciding to use it and then being off to the races. The mistake people are making is taking old businesses and trying to inject blockchain into it when in reality you have to totally reinvent the way you do things and build your business.
“Blockchain is not a vitamin you inject into your body,” Alex says. “You have to completely reinvent what you do.”
Competing with the banks — (19:00)
Convincing people to unbank themselves is no easy task. It’s not simple in the way moving people to VoIP was simple. People saw that making calls, especially long distance, was costing money. So when a new solution was offered that took that cost away, the switch was simple. Most people don’t know or feel the inflation on their money, and they don’t see how much the banks are making on their money. Those are invisible forces, so it’s difficult to convince people that you, as a new start-up, are a trusted institution that will do what it says and provide a system that works better.
Alex has lived in socialist, communist and capitalist systems. He believes that decentralization is the fourth system, but it can only be the fourth system if all of us stop giving our money for free to institutions not working in our best interest. You have to create a whole new business model and that’s what Celsius is doing for the banking system. But building trust is the hardest part. However, the more people are abused by banks, and the more they realize that they are not making the money they could be, the more they are willing to do something different with their money.
The question of security — (30:00)
You think banks are safe, but there are always risks involved no matter where you put your money. The safest bank is leveraged 10-to-one, and they have more loans than deposits. That means that if they lose even just a small percentage of assets, they can be out of business overnight. What Celsius tried to do is create negative leverage, so they always have more deposits than loans. And they use blockchain technology to achieve full transparency to make sure people can see and audit what Celsius is doing. And, everyone who banks with Celsius is treated exactly the same way with the same benefits, access to the highest interest rates, and all other advantages.
“The beauty of the blockchain is it’s fully transparent. You can’t hide anything.”
“What we are replacing is the attitude the banks have where they feel like they have a God-given monopoly to take your money and give you nothing for it.”
“We treat the little guy and the big guy the same way.”
“We’re only successful if many people join and people only join when other people spread the message.”
“We want MoIP to work the same way as VoIP. You use it every day but you don’t necessarily know how or why it works.”
Creating a good user experience — (38:00)
The first few years of the internet was a terrible experience, but eventually, you find a better way. When you live through that several times that way Alex has, you viscerally know what is a good experience and what isn’t. So the Celsius team made it a priority not to release anything that wasn’t a good experience for every single person whether you know everything about blockchain and cryptocurrency or nothing at all.
Part of it that is making adoption easy and finding ways that vendors and partners can cooperate. The ultimate goal is to remove certain pain points in order to eventually make things a one-click transaction.
The question he never gets asked: No one calls me out on his intentions. They don’t want to know why he’s doing it.
The answer: “I managed to find ways where I could do well only after my community did well. We did good and then we did well. Celsius is another way I’ve found to do goo, and then we can do well after that.”