Celsius Network vs Traditional Banks

What is the Celsius Network?

If you hold cryptocurrency like Bitcoin or Dogecoin, you may be surprised to learn that you do not have to keep your coins in your digital wallet. Instead of having your coins stay in one place and hoping that they give you a return on investment in two or three years, why not let them make you money? By using the Celsius Network, crypto holders can earn interest by lending their crypto or getting loans (with their coins as collateral).



The rates which the Celsius Network offers are also extremely attractive when compared to what traditional banks offer. The interest which some users have earned for lending their crypto reaches as high as 17.78%. Those who take out crypto-backed loans start with interest rates as low as 1%.

How does it work?

Celsius Network is a wealth management platform which allows users to borrow or lend cryptocurrency assets. The network is supported by its own ERC-20 token, CEL. In order to receive interest payments from the Celsius Network, you must stake CEL in your crypto portfolio. The amount which you stake drops you into four tiers: bronze, silver, gold, and platinum. The more you stake, the higher your tier. Users in higher tiers are the ones who get high interest.

With numbers like these, Celsius Network may seem too good to be true. In some ways, it is. The Celsius Network, like any other banking institution, has its share of pros and cons.

Is Celsius Network Trustworthy?

Simply put, yes. The Celsius Network CEO and founder is Alex Mashinsky (best known as the inventor of the VoIP). It is his invention which allows us to talk with friends and family through the internet rather than traditional telephone networks. Mashinsky has been open about his work on the Celsius Network and hosts weekly AMAs (Ask Me Anything) on his YouTube channel.

The rest of the team includes Harumi Urata-Thompson (CFO), Nuke Goldstein (CTO), and Daniel Leon (COO), who are all highly skilled technology and blockchain experts.

Of course, name recognition is not always enough to determine whether one should buy in. Always speak to a professional before making such major decisions.

How does the Celsius Network compare to traditional banks?

As stated earlier, Celsius leaves traditional banks in the dust when it comes to interest rates and loan discounts. Another major win that Celsius Network has over traditional banks is its lack of fees. There are no deposit or withdrawal fees, no origination fees, no default fees, and no early termination fees.

When it comes to getting a loan, the Celsius Network makes things easy. Simply click “apply for a loan” in the Celsius app, choose how much you want to borrow, and pick a coin as collateral. Taking the loan in CEL tokens will give you the lowest interest rate available, but the interest rate is so low you might not care. Most cryptos will get you a 1% APR, while a .7% APR is the usual for CEL loans.

This is in stark contrast to most traditional banks, where the lowest possible APR is 6%. Most of the time, traditional bank customers are stuck with loans of 10-12% APR.

Vs Traditional Banks on Security

The most overt difference between Celsius Network and traditional banks is security.

Traditional banks have a business model which has been shown to work for decades. They are also decently regulated, and the money which you place in their hands are federally insured. This means that if someone robs the bank, your savings will be replenished by Uncle Sam himself.

We could not find any information on whether Celsius Network was FDIC insured, but we did learn that it has a license with the Financial Crimes Enforcement Network (FinCEN) and the Securities and Exchange Commission (SEC). In addition, the company offers two-factor authentication and biometric signatures to users who consent to them. Even if you don’t, Celsius Network stores your funds with PrimeTrust and Fireblocks, who both provide insurance and wallet infrastructure. In their 3+ years of business, Celsius has never had a hack, security breach, or loss of funds- which is a praiseworthy feat in the crypto world.

Vs Traditional Banks on Stability

You may be wondering about the security of the CEL token. After all, it’s not unheard of to have a successful token plummet in value in the span of a few hours. How are interest rates determined?

Celsius Network’s interest rates are determined by three main factors:

• The Crypto Market
• Coin Demand
• Profit Generation

80% of Celsius’ profits are returned to its users via weekly interest payments. This means that the amount of interest which you earn, no matter your tier, will vary from week to week. If CEL coins are doing well in the crypto market, this certainly helps. 

This is completely different from traditional banks. For one, traditional banks would consider giving 80% of their profits to their customers to be a preposterous idea. Traditional banks do offer their customers more stability, however. They use the USD, which is a time-tested and a world-recognized currency. They also offer a consistent interest rate which does not change frequently.

In short, you know you’re getting less with a traditional bank, but you’re guaranteed to get it. With Celsius Network, you know you’re getting more than you would at a big bank, but you have no idea how that will manifest each week. As such, it is up to you to determine which tradeoff you would take!

The Elephant in the Bank

When researching Celsius Network, we found it odd that so few people addressed its Custodial Service overtly. Instead, many chose to hide this fact behind dozens of lines of jargon.

Celsius Network is a custodial service platform, which means that you must turn your cryptocurrency keys over to them. This means that your crypto is no longer private. If a thief or hacker somehow managed to get through Celsius’ security, then they would have free access to your crypto wallet. They could steal it all!

On the other hand, this is not too different from a traditional bank. In 2011, CitiGroup had $2.7 million stolen from its users. $300 million was stolen from around the world in 2015. Theft is nothing new in banking. Perhaps this may not be too much of a concern for you.

Should you check out Celsius Network or stick with Traditional Banks?

Celsius Network has become one of the most successful blockchain lending platforms. Its strong leadership and generous mission statement is a sure sign of a positive future. With increased interest from retail investors, Celsius can act as a great first step for widespread crypto integration into everyday life. Can traditional banks keep up? Only time will tell.

Have any questions on Celsius Network and cryptocurrency? Set up a free consultation with a Yoke Tax professional today. We can show you why the Biden Administration is targeting your crypto and how to pay zero crypto taxes. Simply give us a call!