Written in January 20, 2022
Celsius Network Tokenomics
Brief Overview
The Celsius Network is a Financial Technology leveraging the blockchain nature that offers lending, borrowing, and payments with digital or fiat currencies. Contrary to traditional financial institutions, Celsius has no minimum value deposited to borrow or lend, no lock up period, no penalty for failing to maintain a minimum amount, and being able to withdraw funds anytime. Being in the Blockchain, Celsius executes loans in minutes compared to conventional banking systems in days or weeks. 80% of the revenue generated to the company would be given to depositors and 20% of the revenue is for the network’s growth. Proof-of-Community is a method that Celsius uses to verify the rewards distribution to users.
The main concern for Celsius Network is regulation issues. Earning rewards are not yet available in the US. Celsius is not yet registered by the SEC, however it has complied with FinCEN since June 2021. Furthermore, retailers are required to pay interest but institutions may write it off. There is a high chance of liquidation since cryptocurrency is a volatile asset compared to fiat currencies. Users need to give up custody of crypto (private keys) to the platform.
The Celsius Network currently has $21.9 billion in AUM, 1.5 million users, $745 million in yield and rewards paid, and 109 thousand BTC in the network. The platform accepts more than 35 tokens; The APY would reflect the token’s market performance (demand). The project only offers over-collateralized loans: 25%, 35%, or 50% of the asset to mitigate market volatility losses. Contrary to general DeFi landing platforms, whatever funds users lend would be aggregated into a single large pool instead of a unique liquidity pair.
The token of Celsius Network is used to be integrated with smart contract functionality: execute orders in an instant with minimal fees, transparency, consensus to give out loans by members holding tokens, global footprints to enable lending-borrowing regardless of base currency or local regulations.
In-Depth Token
Released in June 2018, the Celsius Network’s native token CEL facilitates the earnings, reward, and the ecosystem. As a utility token, CEL could be compared to the likes of BNB, ETH, BAT, and more. The ICO successfully raised $50 million in crowdsales and presale with releasing 325 million tokens. The token distribution since the Token Genesis Event (TGE) is as follows: 50% goes to public token sales (crowdsale and presale), 27% goes to treasury, 19% for the team, 2% for the partners, and 2% for advisors of Celsius Network. 50 million of the total supply would go into the smart contract. 20 million would be allocated to the project’s treasury, which would only be released when the token price has reached 5x and 10x from crowdsale – $1.50 and $3.00 respectively. The treasury is used to provide liquidity, provide collateral, and expansion purposes.
Token Distribution TGE
The Celsius Network employs a unique token burning mechanism that would both benefit the ecosystem and users. Based on the AMA in early October, CEL announced that they would purchase 110% of the token required each week. 100% would be distributed to the depositors as profit and 10% would be burned for good.
Top 5 Token Holders Wallet
Similar to E = mc2 (E: Ethereum, m: members of Celsius, c: Celsius credit/deposits), as more people join the network and actively deposit, the more everyone reaps the reward. The utility of the CEL token mainly revolves around discount and network benefits. Earners/depositors would be able to earn up to 25% more rewards if the payout is in CEL. Borrowers paying in CEL token would receive a discount up to 25% for interest payments, same goes for institutions. Both the rewards and discounts would be decided by tiers based on the amount of CEL token held in the wallet.
Celsius Network Tiers
On a revenue stream standpoint, Celsius presents a flow that is particularly unique than any other DeFi lending-borrowing platforms. The company essentially merges the depositors and shareholders into one entity. 80% of the total revenue made would be distributed to depositor interest payments and 20% for the network’s business operation (growth, team, debt payments, etc). In simple terms, retailers or institutional-alike that lend money would also receive profits from the company. Furthermore, the Celsius Network operates an almost never-ending economic flywheel: users buy CEL token → CEL holders earn yield from interest payments → lender CEL balance would increase → collect interest payments from borrower → repeat.
Celsius Network Stream
The chart below shows the Number of Depositors (Red), Price of CEL (Blue), and Market Cap (Green). This could indicate that the number of depositors does not have that much of an impact on the price or market capitalization of CEL itself. Another explanation for this, most of the depositors in the network are retailers with low amounts of deposits value to the network. This expresses that institutional money needs to be circulated more in the network.
Depositor (Red) vs Price of CEL (Blue) vs Market Cap (Green)