DeFi Exec Believes Crypto Community Mostly “Short-Term Thinkers”

In an interview with Cointelegraph, Alex Mashinsky, the founder of the decentralized finance app Celsius Network, took aim at the crypto community for becoming fixated on short-term profiteering and failing to drive mass adoption. Mashinsky urged the community to capitalize on the opportunity to redefine money and finance offered amid the deepening global economic crisis.

Mashinsky dismisses Bitcoin in 2010

Celsius is Mashinsky’s eighth company, with his prior seven ventures including two unicorn start-ups that raised over $1 billion combined. He holds patents for Voice over Internet Protocol from 1994, and he founded a global commodity exchange in 1996. Mashinsky stated that one of his employees showed him the Bitcoin white paper in 2010, noting that he then laughed at it and thought, this will never happen.

“I mean, this is the slowest database ever created. It's so inefficient and needs so much electricity — it’s this crazy idea.”

He added that his entire career had been about finding better, cheaper and faster solutions, and “here is something that is slower, more expensive and really cumbersome, so it totally did not appeal to me.” But one moment, in particular, struck a chord with Mashinsky:

“After Mt. Gox collapsed, seeing the resiliency of this community — imagine if Nasdaq and the New York Stock Exchange disappeared overnight and everybody just kept going as if nothing happened. That is what happened in the crypto community, basically, from 2013 to 2014. I realized that I was missing something very big and had to completely reevaluate my position on crypto assets and decentralization.”

Motivations underpinning the creation of Celsius

Despite its resilience, Mashinsky characterized the crypto space as then offering little more than “a niche playground for geeks and developers.”

Alex Mashinsky: We have to create something that will bring more utility and create less volatility because otherwise hundreds of millions of people are just not going to join. There are a bunch of us who believe that this is a replacement for doomsday. There’s a bunch of us who believe this is the technical future and a bunch of us who think that decentralization is going to take over the world. But there's not enough of these people. How do you bring in the average Joe who just hates their bank or doesn’t trust their government?

And we realized that interest income is disappearing from our planet. It's an extinct feature of the banking system. If we could just bring that back and earn people real yield, we would have billions of customers because 7 billion people need interest.

The stars have aligned for Bitcoin

When asked if the current climate of exacerbating monetary crises is creating a unique opportunity for crypto to attain widespread adoption, Mashinsky stated that there has been no previous time in which the stars have aligned so well for Bitcoin.

AM: You have the Federal Reserve printing more money in two weeks than it did in over 100 years. It's like the whole world has a giant flood, and at the same time there's like a magnitude 10 earthquake — that's the equivalent of what's happening. And on top of that, we have a global pandemic of a virus that did not exist for 4 1/2 billion years on this planet. What else can you ask for? If Bitcoin does not shine, then what is it good for?

And now the question is, what are we [the crypto community] doing right now? It’s like Churchill said, most of us stumble upon an opportunity and walk away. Here is the opportunity. It is staring us in the face.

And what is the community doing? Well, we are fighting with each other over regulation and technology — all kinds of other issues instead of getting together and convincing everybody in the world that this is the solution, this is the replacement for all of these fiat currencies that are just eating away at our savings.

Criticizing crypto adoption

When asked about the crypto community’s efforts to drive mainstream adoption of cryptocurrencies, Mashinsky stated: “If I had to rate the community, I would give us a C-minus for adoption.”

AM: We created amazing technology, we celebrate it internally, but we have not delivered to the masses out there what they need to come on board. We didn't solve their problem — we solved our problem.

We are afraid of debasement. So, great — we created Bitcoin. We want a form of payment, so we created Tether. We want a smart contract so we can geek around. Great, we created all these DeFi projects — those do not apply to 99% of the population. They couldn’t care less.

What are noncorrelated assets? How do I buy them? How do I store them or hold them? How do I create yield? These are things that apply to 100% of the population because no one is going to earn interest for the next 30 years, or even 50 years.

Crypto firms must innovate

When asked what advice he would give to developers and entrepreneurs seeking to enter the crypto sector, Mashinsky said people should innovate instead of borrowing. 

AM: The main thing that I think most people miss when they come to crypto is when they know they’ve worked in something on Wall Street or something on Main Street and they say, “Oh, my gosh. If I just take this and transport it to the blockchain, it's going to be the next big thing. All I have to do is take the best idea of how Wall Street steals money from people and deliver it on the blockchain, and I'm gonna be a billionaire.”

The main issue is that this is all about innovation. It's about inventing new business models that have never existed because the blockchain is slower and more expensive and more cumbersome than any database, than any centralized system.

Your phone runs a thousand times faster than any blockchain. Your phone can beat any blockchain in the world, no matter which one you pick. So, it's not about speed. It's about consensus. It's about open ledger. It's about delivering something that cannot be achieved by any other way. And I'm not seeing that kind of thinking.

If you look at most of the companies, even the successful ones such as Coinbase and Binance, they're just copies of Wall Street — they are all toll collectors stealing from their customers, charging them heightened fees.

And the exchanges are offering staking now, and everybody is excited saying, “Oh, my God. I don’t have to operate a node, I can just give it to Coinbase.” Well, read the fine print: They charge you 25% of the staking fees. That is worse than Wall Street.

Taking on the most powerful empire

For Mashinsky, the end goal of the crypto community should be “to create a new economic system.”

AM: You want to replace the U.S. dollar. The biggest empire that was ever created is the U.S. dollar. You want to take that thing down, and you're going to steal from all your customers? You're never going to win.

In VoIP, the company that won after 40 years was WhatsApp — which never charged any of its customers any fees. It has 2 billion customers and none of its customers have yet paid anything to WhatsApp. And we are doing the opposite of that.

Our community is not focused on growth, adoption or winning, it is focused on the short term — it is focused on “how do I extract the most value out of all these people because who knows, maybe the whole thing will disappear.” They are all short-term thinkers.

Bitcoin’s opportunity

Ultimately, Mashinsky asserts that Bitcoin affords “the opportunity to bring the future, replacing the failing capitalist system we have.”

AM: The opportunity is so clear, and yet we keep fumbling on it and walking away instead of delivering on it. I am part of “the 1%” in the United States, and I can tell you that the U.S. capitalist system is failing. It does not deliver for 99% of Americans.

The funniest thing is when the economy gets in trouble, we turn from the best capitalist system to the worst socialist system. We just put a blanket under the entire economy and bailed out the good companies and bad companies with $10 trillion worth of money we borrowed from the future.

We are supposed to take this centralized system, where one-tenth of 1% of the population — 33 families — control the entire planet, and replace it with something decentralized where the people who create the value are the ones who also benefit from it, not the people who know how to allocate capital or manage capital or have access to capital, as that is how society works today.

If you are Warren Buffet, you can just move things around and allocate capital — you are this celebrated celebrity. No one cares if you are an inventor or if you are a doctor in a hospital that saved a thousand lives — no one cares about you. Warren Buffet, he’s our hero.

This interview was edited and shortened for clarity.