It is said that money makes the world go round or in the words of 1970s pop group Abba, ‘Ah, all the things I could do If I had a little money’.
Over the past 20 years, obtaining a little money has been relatively easy. Credit card providers were happy to offer people the world, often on the back of lazy credit checks and to people who were young enough to pay it back.
This system created a culture of ‘buy now, pay later’, something that came to a grinding halt with the financial crash of 2008. Suddenly, credit was not so easy to come by and the world stopped turning.
Of all disruptions often mentioned in the tech world, the financial crisis was the greatest of them all. Legacy systems were rocked to their core and millennials began to look elsewhere for currencies. Wall Street financial institutions could no longer be trusted.
Almost a decade later, the way we view money has been transformed. Cash is dying out, digital money and remittances have been completely disrupted and even credit card providers are losing business.
Alternative technologies such as Bitcoin and Ethereum were once laughed at, but as their values have soared, so has interest from John Millennial Doe. Why use a traditional credit card when there are other ‘modern’ alternatives?
So, step forward, Celsius, an ethereum-member based lending platform that wants to disrupt the consumer credit industry by enabling quick and easy peer-to-peer loans.
These loans will pay higher interest to lenders and charge lower interest to borrowers by splitting the bank profits between the members of the community.
– The Celsius founders want to change the world for millennials –
The idea is simple. Millennials in the US are the generation encumbered with highest amount of student and consumer debt, a trap that can be impossible to escape. This has been exacerbated by historically low interest rate on savings because the Federal Reserve had to bail legacy financial institutions by lowering interest rates to zero.
In the US, an astonishing $ 1 trillion, more than 50% of all the consumer credit issued worldwide,is currently controlled by six of the largest US banks. Centralized financial institutions like to offer credit to many of their richest clients – those who have well-established and pristine credit histories, but ignore ‘riskier’ millennials.
This trend means that younger customers are often not approved for consumer credit and general purpose loans because they have limited credit scores, are in debt from student loans or are spending most of their income on rent in major cities.
Celsius’ team of 25 blockchain developers and marketing experts are building the protocols governing the future of consumer credit by migrating credit scores and legacy data to the blockchain and incentivizing millennials.
They can build a new digital identity and credit score that promises to rely heavily on their social and digital footprint as a more accurate representation of their income and ability to repay.
This process leverages the fast growing global digital currency movement and the creation of a community of lenders and borrowers with lower loss factors and higher on-time payments, enabling greater credit limits at lower interest rates.
These benefits translate into higher interest paid to lenders and lower interest charged to borrowers taking away the banks profits and distributing them to the membership — the 21st Century version of Robin Hood.
Celsius allows its members to lend to other members and earn five to ten times more than what their bank is willing to pay for such US dollar deposits.
Members can also borrow money from their peers, whether it be for a short-term loan, to help pay off existing credit cards or student loans at much lower rates than existing credit cards..
A borrower shares with the community his hash representing his credit score based on information in his/her digital profile to obtain the loan; however, the more information one provides, the lower the interest rate and higher the credit they will obtain.
In addition, Celsius incentivizes on-time payments by continually lowering interest rates for good borrowers, unlike the big banks, which offer higher interest and larger monthly payments when a payment is late.
The more on-time payments a user has, the more members want to lend — which lowers his/her interest rates and increases their credit limit is automatically through the Celsius Protocols.
“The banking industry fails to offer any real solutions to the low saving rate pandemic they have contributed to, not to mention the current consumer credit and high-interest student debt crisis they fuelled. Banks have no incentive to fix the problem, as the majority of their profits come from these loans,” said Alex Mashinsky, founder of the Celsius Foundation.
Celsius appears to be putting its money where its mouth is with the founders contributing seven figures in seed capital. It will hold its Token Generation Event (TGE) for its Degree token in January, 2018, but the company has already initiated its pre-sale of $30 million from accredited investors.
During the TGE, users will be able to join the membership and use the platform with a small purchase of Degree tokens. The money collected in the TGE will be used to form a general pool of money, with other funds coming from accredited investors to cover development costs and create a base of capital lending for the organization.
After the TGE, Celsius will be able to tap the same low cost capital sources banks use to raise additional capital to leverage its base of capital to increase the loans issued to its members.
The token will be used as a utility or membership token, rather than for security or trade. Upon joining, members applying for loans or willing to lend will use the token to activate the Celsius smart contract with the credit limit approved by Celsius and a low interest rate scored by the Celsius Protocol within minutes of applying.
Celsius is raising the temperature when it comes to offering millennials an opportunity to earn real interest and use new ways to deal with old money. It will be interesting to see whether its strategies, both for P2P lending and an TGE, prove to be successful.