Celsius Network - Lack of Reports from Borrowers?

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Celsius Network

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  mskeggs on 28/08/2021 - 22:15

  I’m very sceptical of blockchain as an investment, so take my comment with a grain of salt, but maybe the lack of the recommendations etc. your are seeing is because the area is both comparatively new, and full of scammers.
  I don’t disagree there have been people getting in early, taking risks, who have made lots of money.
  There have also been people getting in early, taking risks, and losing lots of money.

  If you are most comfortable with proven investments, I’d suggest accessing blockchain via established investment companies, even though they are going to be lagging behind the cutting edge. One of the reasons they lag a bit behind is because they check out whether stuff is dodgy.

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  idjces on 28/08/2021 - 23:50

  Saw this comment, but it was in relation to blockfi. Really, the same principle holds true for any custodial service, like Celcius, or any exchange. How do you verify the company has the assets to back what they claim your account shows? We have no way to prove the business does not fudge the books and pull a Bernie Madoff

  "as long as we're talking about BlockFi, it's worth pointing out that they mistakenly gave away hundreds of bitcoin earlier this year, then throttled withdrawal rates. There's a good chance they're not solvent and trying to just keep it going as long as they can. If anyone here has assets locked up with them, I'd get them back into your own wallet ASAP."

  The business model of lending funds at 1%, and paying 8% on deposited stablecoins, also raises some questions.

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  rektrading on 29/08/2021 - 00:24

  +2

  It's clear that most people don't know how DLT works.

  Every asset that these lending platforms hold is recorded on a public, permissionless and immutable ledger. Every Tx can be verified using a block explorer.

  This is in contrast to traditional banks where all the assets are on permissioned, hidden and mutable ledgers. Anyone that has access to the ledgers can change the data.

  The phrase 'follow the money' works 100% with DLT. This link shows the first block that was ever mined and every Tx that came after that can be traced.
  https://www.blockchain.com/btc/block/00000000839a8e6886ab595…

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    idjces on 29/08/2021 - 00:36

    You can verify the assets relating to an address/key.

    You can't verify the sum total of all 'assets' each customer has been told they hold at a custodian.

    You're putting faith in the custodian not fractionalizing their own records. Easy to keep afloat, until the bank run on the custodians real underlying assets.

    I suppose you can view celcius's public address, and search for how people have been utilizing these loans on offer.

    • 

      rektrading on 29/08/2021 - 01:13

      +1

      Every asset can be verified.

      Companies like Chainalysis and Horizen Labs have tools that can do on-chain audits. All they need is for the platform to provide them with an API for the user accounts. They can then pull all the data including balances, trades, in and out Tx.
      https://chainbulletin.com/celsius-crosses-20-billion-in-netw…

      You're putting faith in the custodian not fractionalizing their own records.

      I don't understand what you mean with 'fractionalizing their own records'.

      It doesn't matter what the platform does with its internal ledger. They can't change public ledger. E.g. A user deposits 1 BTC onto the platform which is recorded on the public ledger. The platform can then based on their lending policy lend out a maximum of 1 BTC or up to the LTV threshold.

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        idjces on 29/08/2021 - 01:28

        I don't understand what you mean with 'fractionalizing their own records'.

        Ok, for a random example

        Adam Bob and Charlie each deposit 1BTC, which can be seen on the bitcoin blockchain.

        Some time later, either through accrued interest, trading, or some other method, Celcius now tells each of Adam Bob and Charlie that they now own 1.1BTC each.

        Adam thinks great, I own 1.1 BTC and clearly from the public blockchain record I can safely assume my 1.1BTC is sitting somewhere amongst the millions of transactions flowing into and out of celcius's bitcoin address.

        However, on Celcius internal systems, they owe 3.3BTC, but they only have 3BTC held on their bitcoin address.

        We have no way of verifying that Celcius's internal systems correctly account with the bitcoin blockchain. Celcius, or any other custodian/exchange obviously won't give out full access to their internal systems. We can only put faith in a single party holding true to their word and any records they willingly give.

        Adam, Bob or Charlie can happily withdraw their 1.1BTC, as long as all 3 of them never do it simultaneously.

        There is a lot of inherent risk in these custodial situations.

        • 

          rektrading on 29/08/2021 - 01:59

          +1

          @idjces: I understand now.

          What you just described is called a bank run. It's happening right now in Kabul and a few months before that in Turkey. Nobody is going to do an audit during a bank run.

          This is Kraken. I don't have any BTC on Kraken, but if I did then I would trust that they have enough to cover the withdrawal.
          https://bitinfocharts.com/bitcoin/address/3KTQYXvjteNoMECi62…

          Name a traditional bank that is this transparent with its assets. A bank that I can verify online that they've what they say they've at any time I want.