Celsius

About Celsius

Celsius Network was founded in 2017 by Alex Mashinsky as a platform designed to provide cryptocurrency users with solutions to earn yield on their digital assets. The company is based in London, UK, though it operates globally. Celsius aimed to build a new financial system based on decentralized protocols and blockchain technology that empowers users to earn, borrow and pay on their own terms.

Key Features of the Celsius Platform

The core service provided by Celsius is allowing users to earn yield on deposited cryptocurrencies. Users transfer their crypto to Celsius, which then lends it out and shares 80% or more of the returns with depositors. This “earn” feature is accessible for 40+ cryptocurrencies including Bitcoin, Ethereum, stablecoins and Celsius’ native token, CEL.

Celsius also enables borrowing against crypto collateral at competitive interest rates. Users can borrow cash or stablecoins and keep their crypto exposure. There are no credit checks or paperwork involved.

Additionally, Celsius facilitates payments through their crypto-backed Visa card. It allows users to convert crypto holdings to fiat and spend it anywhere Visa is accepted. The platform also has in-app swaps between currencies.

How Celsius Generates Yield for Users

The yield Celsius provides to users comes primarily from rehypothecation of deposited funds. Celsius lends out assets to institutional borrowers, decentralized finance protocols, and over-the-counter trading desks. The interest earned is split with depositors.

Celsius also generates yield through staking rewards, exchange arbitrage, mining, and lending activity. The various sources of yield allow Celsius to offer some of the most competitive earn rates in the industry, often over 10% APY on stablecoins.

Celsius Token (CEL) and Tokenomics

CEL is an ERC-20 utility token used within the Celsius platform. CEL provides holders with benefits including up to 30% extra weekly rewards, preferential loan rates, lower fees, and advanced features.

The token has a fixed supply of 695,658,161 CEL. It is issued weekly as rewards based on the amount of assets lent by Celsius. This aligns network growth with CEL rewards. Celsius also buys back CEL from exchanges using interest earned on loans.

Celsius Wallets and Supported Currencies

Celsius offers web-based, iOS and Android wallets to users. These self-custody wallets allow depositing, withdrawing and managing crypto assets on the platform. Celsius wallets currently support over 40 cryptocurrencies including BTC, ETH, stablecoins, altcoins and CEL.

Users retain ownership of keys for assets held by Celsius. However, once deposited, they cannot access or transact with assets until withdrawing them back to an external wallet. Celsius wallets provide an easy on-ramp for users to earn yields on holdings.

The Celsius Bankruptcy Filing and Fallout

Celsius faced a liquidity crunch in June 2022 as crypto markets declined. They halted withdrawals citing extreme market conditions. Shortly after, Celsius filed for bankruptcy protection in New York.

The bankruptcy filing cited a $1.19 billion deficit on their balance sheet. Many customers and investors are unlikely to fully recover deposited funds. The entire episode damaged trust in crypto yield products.

Celsius had over 1.7 million users and $8 billion in assets under management at its peak. Its failure underscores risks from decentralized finance’s lack of transparency and regulation. It raises concerns regarding the long-term viability of crypto’s existing business models.

Overall, the Celsius crisis highlights why prudent regulation is necessary to protect consumers as cryptocurrency adoption grows. Users should exercise caution and skepticism before trusting unaudited yield offerings. For crypto to reach its vast potential, prioritizing fair outcomes for regular users is paramount.