Alex Mashinsky on DeFi: Just Circulating Everything Inside the System Is not Going to Make Bitcoin Go to 100,000
How much more do banks earn from investments than their clients? Do they screw poor people over? Is DeFi a viable alternative system for banking? How can we entice more users to join DeFi systems? What business models allow private funds working with DeFi to become a bridge to the world of cryptocurrencies for the mass user.
To answer those questions ForkLog talked to a veteran tech entrepreneur and CEO of Celsius Network Alex Mashinsky.
ForkLog: It’s not that people from the scary corporate world are our regular guests, but I have read a couple of good things about you. I have to ask you first: what are your thoughts on Bitcoin?
Alex: To answer your question, I’m a big believer in Bitcoin. I think Bitcoin is the best non-correlated asset in this crazy economy that we are all part of, where governments are printing money like there’s no tomorrow, and the rich people are the ones who are making all that money. The people that just have a job, that try to pay for their family, can’t save anything, and even if they do save anything, their money cannot make money.
Bitcoin has outperformed any other asset class in the last 10 years, in the last 5 years, no matter how much you measure, it has done better than the stock market and the bond market and so on. I think for young people, for people who don’t believe in the corporate or the government systems supporting Bitcoin or investing in Bitcoin is probably the best way
FL: Could you tell our audience a little bit more about the industry landscape? Like DeFi and decentralized or semi-decentralized lending, so we can understand a little bit more?
Alex: DeFi stands for decentralized finance. It is a term that basically says: we don’t need a bank, we don’t need a middleman, we don’t need the toll collector. We can transact with each other. We can put assets in and we can either create deals or we can create loans. Basically, the smart contract has the rules by which stuff happens, so we don’t need the bank to do it for us. We can use a smart contract, and it’s basically free.
So we’re replacing the toll collectors with somebody who’s actually acting in our best interest, the smart contract. But as we’ve seen recently there were several hacks and exploits of smart contracts and DeFi projects. Because these are such young projects, they still have bugs and they still have areas, where you can just go in and basically steal money from the community. And because of that, we need to be careful to make sure that we don’t lose users.
If we bring a lot of new users and they lose all their money or part of their money, we’ll lose them forever, they’re never gonna come back and use DeFi. So what Celsius did is we put an envelope around it. We support DAI, we support many many other DeFi projects, but we put an envelope around it where we basically are saying to people: look, you don’t have to even understand what this is. We will make sure that we only put this in safe places, we will make sure that whatever you earn on DeFi, you’re actually gonna get it. We work very closely with a lot of these projects, also with insurance companies and with custodians to guarantee that we deliver the value to the owner of the asset.
FL: It looks like you don’t like banks.
Alex: No. Look, I use banks all the time in all my businesses, but I can tell you that banks are definitely not my friends, and they’re not your friends either. So, banks are here only for one purpose, and that is to pull as much money as possible out of as many people as possible. That’s their job. Their job is to take the profit and deliver it to the richest people in America. For example, Warren Buffett, the second or the third richest person in America is the largest shareholder of Wells Fargo, of Bank of America, of Citigroup. He collects dividends every quarter. Where did that money come from? Wells Fargo opened 3 million fake bank accounts and they got a huge penalty because they got caught. But most of the time they don’t get caught.
The four largest banks in the United States charged the 120 million poorest Americans 34 billion dollars last year just in overdraft fees. That’s just one fee that they charge the poorest Americans. Then they take that money, 34 billion, and they give it to Warren Buffett. Warren Buffett is sitting on 120 billion in cash. Forget about all the stuff he owns, just cash. Where did he get that money from? He got it from the poorest Americans.
And the same story is true in every country. It doesn’t matter if you go to Russia, if you go to China, you will see exactly the same thing happen. The poorest people are giving their money to the richest people because we don’t have an alternative, we don’t have a system that is acting in our best interest.
But Celsius is fully transparent. We publish all of our data every day, every hour, you can go and look at the blockchain or look in our app and see how many deposits we have, how many loans do we have, how much interest, how much Bitcoin did we buy, how much did we distribute. We can’t lie, because if we lie, you can catch us in a second because everything is on a blockchain. That’s the whole purpose of the blockchains, to be fully transparent. You will never see that from a bank, I bet they’ll never show you. Go to your bank and say: here’s my $100, I want to know who you lending it to, at what interest rate, what do you do with the profit? They will laugh at you, they’ll call the security guy and kick you out of the bank and close your bank account, because you were asking too many questions.
FL: So, what they say when you tell them about this?
Alex: They hate me. Look, no one in history has given 80% back to the depositor. No, there’s never been a bank or financial institution that gave back money to the people. Now, for rich people like me, if I go to Blackstone or I go to any big investment firm and say: I have 10 million dollars, I’m gonna give it to you. They say: of course, Alex, we will keep 20% and you, Alex, keep 80%.
That is the deal between rich people and investment companies. All we did was we took the same deal and we gave it to 7 billion people on the planet. We said: hey, do you want to make the same money that rich people do? We copied what Wall Street does for rich people.
FL: So you plan to involve many people from outside the crypto into cryptocurrency via some centralized or semi-centralized service that helps people to get involved?
Alex: If you want to bring in hundreds of billions of dollars into the blockchain, how are you going to do it if you don’t build bridges between the two systems? Just circulating everything inside the system (that’s what DeFi does) is not going to make Bitcoin go to 100,000, it’s not going to make Ethereum go to $2,000.
The only way that happens is if you bring new people and then new people bring new dollars. You have to build a bridge, you have to have one leg in the centralized world and go with the vacuum cleaner and suck all the value from there, bring all the dollars from there, so people can buy stablecoins and Bitcoin and Ethereum and everything else.
Now, after all the money moves, you can kill the bridge, you can shut down the bridge and say: okay, all of you can die over there, we don’t care about you, centralized banks and centralized systems, we’re cutting you off, that’s it. But cutting it off when you only have a hundred thousand or a million users is just stupid.
FL: There is a lot happening with Libra, Telegram Open Network, etc. Could you summarize what you think about these projects and the involvement of corporate players and VCs in crypto?
Alex: Sure. Firstly, Facebook has 2.5 billion customers. It’s very easy for them to add new services and become a dominant player. But you have to remember that these are the people that brought you fake friends and fake news and a fake president, and now they’re going to bring you fake money. The only thing Facebook does not have is your financial information. They already know everything else. They know who you talk to when you wake up in the morning, how often do you talk to your parents, they know everything. The piece they don’t know is where do you spend your money, where do you keep your money, and by enabling Libra, they will get all that information and kill all the banks.
So, if you hate the banks, do you really want to move that to Facebook and have Facebook own all of that? Or do you want it to be safe, secure and private on a public blockchain that no one controls? And these are the options that each person has to decide.
You use your credit card—you’re voting for the banks. You use Libra—you’re voting for Facebook and for corporate centralized monopolies. You use companies like Celsius or DeFi—you’re voting for the blockchain, you’re voting for decentralization, you’re voting for your children.
Watch the full interview on ForkLog Live YouTube channel.
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