Podcast Exclusive: Alex Mashinsky on the Future of Digital Currency
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It's the new year and time for the new you. You've thought about running for political office, but don't know where to start. Before you start any planning, you need to secure your name online with a yourname.vote web domain. This means your constituents will know they are learning about the real you when they surf the web. Secure your domain from godaddy.com today. Welcome to Broken Potholes. Folks, if you didn't hear our intro music, there's a reason for that.

Chuck and I like Joe Rogan too much to continue using that clip in our opening. So there's going to be new music next week. For this week, you're just going to have to get by with the nasally sound of my voice. Welcome to Broken Potholes with Chuck Warren and Sam Stone.

Our first guest today, and I want to thank him so much for joining us. I'm very excited for this interview. I know Chuck is. Alex Mashinsky, founder and CEO of Celsius Network. You know what? I'm just going to go straight to the best line of your bio. Born into communism, reared under socialism, and currently thriving under capitalism. He is the creator of the VoIP, Voice Over Internet Protocol, which is used for so much of our communication today. And now he's doing something I find fascinating.

equally disruptive and fascinating. MoIP. I want to talk about that a little bit. Is that money over internet protocol, Alex? You're ahead of the curve. VoIP to MoIP. So this is one of those things that I think is really relevant to our society today because one of the big issues in recent years has been

And some of the problems that banks are creating for just average everyday people, they're not a really – well, the institutions don't do a lot for the average folks, do they? Yeah.

they don't they uh banks are not your friends my my that's that's my uh kind of main motor in life and uh you definitely need to unbank yourself if you want to have any chance at financial freedom you know so uh so what i really focused on is is helping people

achieve that and and most people think it's very hard because you know they think that only banks can manage your finances and you must use banks for your financial activities but the beauty just like with voice over IP when the internet was born we all decided that we don't have to use MCI or AT&T all these companies that were basically our long distance companies who charged us

you know, 50 cents for domestic calls and $3 to call overseas. And we replace it with something that is free. Right now we're using voice of IP on Zoom and it's free. So in people, I'm sorry to cut you off, but people forget, Alex, at the time, these big telecoms, people said you can never get rid of them. You can never get around them. There's no way to defeat them, if you will. They're going to charge high prices and you just got to pay it.

Exactly. And we all pay 20 to 25% on our credit card when we basically borrow money from the banks. And we think that that is normal. But if you think about it, the banks only pay you 0.1%. So how can they charge you 24% if they pay you only 0.1%? And that's what people don't understand, that that gap is...

is where banks are making all their profits, right? And they take all that profit and they give it to their shareholders. So why can't they take, let's say, take half of that profit and give it to the people who actually gave them the money, the people who gave them the deposits?

and if they did that they would pay you five six seven percent interest instead of 0.1 so it's just simple things like that when you dig into them you'll understand that really this is not a fair system and it's not acting in your best interest what why is there a debate around digital currency right now what is the fear that is causing people

So, you know, banks are one of the largest lobbyists in Washington. Banks around the world are extracting 3% of global GDP every year. It goes into the banking system as profits, right? So they have an amazing franchise. They just get, you know, the hourglass with the sand in it that goes from one side to the other. Banks are in the chokehold. No matter where money moves, it doesn't matter if it moves up or down, they get to grab 3% of it

And it doesn't matter if it's Visa or MasterCard or if it's JP Morgan, right? So the debate is whether do we keep the old system because banks are fighting very hard to make sure that nothing changes, that their franchise is not at risk, just like AT&T fought really hard in the 90s to kill anything internet.

And, you know, or are we going to allow this new innovation called digital currencies and crypto and the blockchain to replace that system? Are we going to allow VoIP equivalent MoIP to basically help us with our finances? Are we going to continue relying on banks? So the debate is really over. Should we keep the past or should we leap into the future?

With that said, what do you think about central banks issuing digital currency? Do you see that happening? And if that happens, how does that impact the U.S. dollars being sort of the de facto currency in the world? Right. It's a great question. So first, today, over 90 percent of transactions in the U.S. dollar are digital.

So it's not like we're all using $100 bills to transact, right? But we're going to move from digital dollars that are managed by centralized institutions like banks to a decentralized system, right, where the digital dollar runs on a blockchain or on some kind of an open ledger.

And really, it's a three-car race. If you think about this, it's like a Daytona 500 with three cars in it. And unfortunately, again, the Chinese car is way ahead of everybody else because they already launched. They didn't even wait for the start signal. They already...

leaped into the future and launched the digital yuan. And right now, China has more people using the digital yuan than all the crypto people put together, just so people understand that, how much ahead they are already. The second car is the crypto car, right? So that's the car that's like chasing. Obviously, we're all cheering for it because it is open. It acts in our best interest. It's decentralized.

it's not issued by any government and the third card is the us dollar it hasn't even turned on we don't even know who the driver is so so we really need to figure out a

what is it going to look like? Is it going to be friendly? Is it going to be a team player with the crypto car? Or are these three cars really competing with each other and only one of them is going to win the race? You know, I mean, I think that's a fantastic analogy and it shows the importance of cryptocurrency and take decentralizing currency from the world powers because China...

They're not doing this out of the good of their heart. They're doing this to gain further control over the world economy when the U.S. moves in that direction. Yeah, yeah. No, I want to emphasize what you just said, because there is no doubt that they want to replace the U.S. dollar in the reserve currency of the world.

there's no question about it like they're not even hiding it right so so we the power of the united states of america is the fact that the reserve currency of the planet happens to be the currency we issue that's the only reason the united states fed can print 10 trillion dollars which what we did in the last two years and the dollar didn't even lose and it basically gets strengthened over that period of time the only reason we can do that is because close to um

90% of the transactions in the world are denominated in dollars, right? All the oil transaction, all international trade and so on. So we get to benefit from all of that. If China takes that away from us, we will have the greatest recession in American history. Yeah, I think Americans don't understand that if we lose our status as the world's reserve currency, a part of their material wealth disappears overnight.

Yes. Right. I totally agree with you. You know, one of the things I love about what you're doing, I think Bernie Sanders is crazy for the most part. I think he is a nut job. But I think he pointed out some really significant flaws in our system and the flaws around banking in particular. I think he's right about. So tell us about Celsius. You've created this great company and it seems to be catching quite a bit of momentum building assets. Tell us about

what Celsius does, how it compares, how it operates versus a bank for someone who wants to invest in Celsius versus someone who wants to put money in a savings account at a local bank. Right. So first, we're not a bank. We're not FDIC insured. We're not trying to be

compared to those institutions, right? So we are what Celsius and we cannot take dollar deposits. We're not a deposit. We're not a financial institution that is allowed to touch dollars. So the only thing Celsius does is helps you manage your digital assets. So if you have Bitcoin, Ethereum or stable coins that are dollar denominated, you can park them with Celsius and you can earn yield

And you can also take a loan. So instead of selling them when you need to pay a credit card, you can take a margin loan against the Bitcoin, keep your Bitcoin and pay off that 24% credit card. But the beauty here is that the loans are 1% per year, right? So you are paying off a 24% loan with a 1% loan.

And the yield on your dollars, on your stable coins is 8.5%. So again, going back to the analogy we talked about before where banks charge 24% and give you 0.1, Celsius says, wait a second, we can do the same loans that credit card companies do or banks do to financial institutions, but we're going to give you most of that back, right, in the form of

weekly distribution in the denomination that you gave us. If you gave us USDC, which is a stablecoin issued by Circle that is backed 100% by US dollars, we will give you 8.5% in USDC. You can withdraw it anytime. You can send it to us in the morning, change your mind in the afternoon, take it out. There's no fees. There's just yield.

So if you think about the blockchain, the blockchain gave us two amazing things. One is Bitcoin, which is the store of value. It's the best performing asset in the last decade by far, by two orders of magnitude compared to Tesla, which is the best performing stock on the Nasdaq, right? So Bitcoin did not 10 times better, 100 times better than Tesla, right? Wow. So...

So as a store of value, it is a killer app. And the question was, okay, what is the second killer app for the blockchain? And that's what Celsius really invented. We created a yield on the blockchain by just changing the business model, shifting the business model, instead of paying shareholders,

to paying your customers. How did you come up with this idea about the yield? I mean, was it on back of a napkin at a local restaurant? You said, you know what, I have this idea. And you wrote it down in a napkin. How did you come up with it? So, you know, like you guys said in the beginning, I was born in communism, grew up in socialism, tried capitalism for the last 35 years. And really, like this idea is a combination of all three systems. I know some of us hate capitalism.

communism, but treating all your customers equally is a form of communism, right? It's not a bad thing. It's a good thing if you apply it properly. So here we're combining capitalism, right? Capitalism is how you create yield. How do you create income? And then we apply the rules that are just unthought of by the banking system, right?

I'm a rich guy. I don't pay any fees to any bank, right? They give me a free credit card. They take me to lunches. They give me free tickets to shows. But they don't treat a guy who has $1,000 the same way. So what Celsius decided to do is say it's 8.5% for everybody. It doesn't matter if you have $100 or $100 million. So I really built the service for myself.

And then a million and a half people showed up and said, hey, is there more room on that bus? Can we sit right next to you and earn exactly the same yield? So again, if you think of Costco or other companies that kind of treat their customers as their main priority, and then they basically give them equal access, right? It doesn't matter if you're buying one jag of orange juice or you're buying 20 of them at Costco, you get the same price. We kind of did the same thing for finance, right?

- Democratizing the banking system essentially, or at least the... - Exactly. - And the blockchain is what allows you to distribute that worldwide. I mean, our customers are in 175 countries

so so just like voice of ip allowed you to talk to anybody on the world doesn't matter if we're talking to each other you could be in manhattan right next to me or you can be in vietnam and we'll have the same conversation the same with with finance the blockchain open ledger allows for the entire village a global village 8 billion people to benefit from the same system and currently celsius has

almost 20 billion in assets and a million and a half customers. And we've been paying yield now for four and a half years. We paid a billion dollars in yield to our community, which is more than most American banks have paid their customers in the last few years. Yeah, I heard you say something about that on another podcast. And I wanted to get into that a little bit because

You have returned a huge amount of money to your customers that no bank would have returned. They're managing assets far, far in excess of Celsius, and yet probably their actual returns are far lower.

Right. So again, banks are very bureaucratic, slow moving organizations and their business is almost not to do loans, not to take, right? If you take a risk in a bank, you're going to be thrown out. You're going to be fired. Correct. So Celsius only does asset-backed lending, meaning I'm talking about the retail side, right? So if you're a retail user,

I will only lend you if you have Bitcoin or Ethereum. So if you have $10,000 of Bitcoin, I can only lend you up to $5,000. And the rate is very low because we don't take much risk, right? We have excess collateral and we basically charge you our cost plus to be able to borrow against your assets. What are the best uses for digital finance right now for people? I mean, I think for a lot of people, they see it and like, okay, it's...

monopoly money or it's like Rortle? I mean, what is the best uses for digital finance right now? And how about other blockchain uses like that? Yeah, that's a great question because really the main use case today, again, is store of value, but it's also a doomsday insurance policy. So if you are worried about the discussion we had about China fighting with the United States dollar and so on,

all your assets are dollar-denominated, right? So your pension fund, your home, your income, everything is dollar-denominated, right? So what happens if China wins, right? So basically what crypto is saying to the rest of the world is, look, you should have anywhere between 1% and 10% of your assets in a non-dollar-denominated bucket that hopefully will not behave the same way if China

the US dollar loses this race, right? And if you go to any insurance agents, they'll say, hey, here's a chance that you will die in the next 20 years. Here, buy an insurance policy. It will cost you 1%.

of your income or your assets, but your family will be protected. This is the same thing. This is buying an insurance policy for 1% of your assets that will be there in case something bad happens. Now, it happens that this insurance policy appreciated 10 million percent over the last 13 years.

Right. That doesn't exist. You cannot normally you pay a premium and it disappears at the end of the year. The premium goes up every year. It's worth more and more and more. So so it's really a very unique product that exists because of the uncertainty, because of the risk.

that we have in this planet. Now, on top of it, on top of the Bitcoin and the yield that we talked about, there are now all these experiments going on. I call it Cambrian invention, Cambrian explosion of innovation, fintech innovation, right?

So if you think of the banks, the last thing they invented was the ATM machine, 1975. Nothing much, no news since then. Here you have DeFi and you have CeFi and you have NFTs and you have gaming like Axie Infinity and others. So there is real explosion and the best minds in the world are leaving. Look at Jack Dorsey, right? Leaving.

uh uh twitter to focus a hundred percent on bitcoin and and financial innovation right so so and the same thing with elon musk and many many other people right michael saylor for microstrategy i can give you some of the most uh uh again brilliant minds in in in the united states

are focusing on this because they understand the opportunity. And you don't have to be a millionaire or a billionaire to follow them using Celsius, right? You can start with 25 bucks or 100 bucks, whatever it is.

Right. There's no minimum. And some people, it's very hard for them because they say, well, wait a second, it's funny money. Well, the United States dollar is funny money. Since 1971, when we went off the gold standard, fiat currencies are not backed by anything, just like Bitcoin. They're also not backed by anything. Hopes and dreams.

right but it's a belief system right so the world believes that the dollar is worth what it represents and that's why everybody's using it the same way right now there's about 250 million people around the world that believe that bitcoin represents something or ethereum represents something and that's why they're holding it so this is not i i can't sit here and uh tell you that uh there's no risk there of course there's risk involved in these digital currencies

But again, you can take an asset that is dollar denominated, right? If you don't want the insurance policy we talked about, you can take stable coins that are backed 100% by U.S. dollars and just transact with them and earn this yield that you can't get anywhere else. Let me ask you a public policy question. As you know, there's lots of talk about election integrity. Do you think blockchain can be used to allow safe, secure and secret mobile voting?

No doubt in my mind, right? So, and some of it is already happening, right? For example, India contracted with Tata to give all of their citizens, 1.25 billion people, digital identity, digital identity, not a passport or a driving license.

and they got implemented in 10 months, right? So I think we can definitely, if we decided that we want integrity in elections or if we want full transparency or real-time results, implement one of many different blockchains that specialize in that. There's people that just do that, right? They just do it. So I don't think, this is not a technical or a,

philosophical obstacle. This is just us have to decide that to move to the future, we have to leave the past behind and stop processing paper when we do elections. Well, it's sort of the old George H. Walker Bush quote. If you're continually looking behind driving, you're going to get in a car wreck.

Yes. And that's sort of where we're at now. I think, though, there's an educational element. There's a huge educational one because it just sounds so confusing. I mean, Alex, we hope you'll come out to the Phoenix area sometime and we can take you to dinner. And if you and I just start asking everybody in the restaurant about blockchain, we're going to get a lot of glazed eyes.

You know, and so there is a real education component to this to get people comfortable with it so they understand the benefits of it. Well, you know what blockchain is, right? It's everything you don't know about computers combined with everything you don't know about money. So that I love that description. Let me let's let's let's have a mystery hour here. Let me ask you this. Who do you think the anonymous creator of Bitcoin really is?

I know you thought about it originally, but who is this gentleman that usurped your idea? Or people? Is it a group of people or is it one person? What do you think it is? So obviously we don't know. It's a he or a she. I don't think it's a they because when you look at the code, when you look at the commenting, the transaction...

I think it looks like one person, one creator, right? And you have to understand, it's not like Satoshi, whoever they are, he or she is, invented everything. Satoshi took, I would say, a dozen different links in a chain and then added the last one that was missing, which was, again, the proof of work or the right incentives for the different people in the system. So,

The blockchain itself was invented in the early 90s, right? So a team out of Bellcore created the Merkle tree and basically used that to... So it's not a new invention. It's not like Bitcoin, the creator of Bitcoin invented the blockchain. The creator of Bitcoin put an amazing use case

for the blockchain and now you have again hundreds of thousands of people working on the second, third, fifth use case that builds on top of that and again we're all just standing on the shoulders of giants that invented these things ahead of us. So you're, lack of a better term, a serial entrepreneur. You've had many successes, many failures.

I imagine your mind moves a million miles an hour. How does your better half handle it? Does she just tap you on the head sometimes and say, yes, dear, yes, dear, and just let you go on your way? I mean, how does this work there? Because she has to be a wonderfully supportive and patient woman. And your mind, I just, you know, you probably have a million ideas every day. And she's just like, yes, honey. Yes, go ahead. Let's let's do that. What does she do? She's not one of those. First, we have six kids.

We have six kids at home. So, and she has her own startup. She's very successful executive. She was basically one of the top executive in a public company. Fantastic. And now she has her own startup, usastrong.io, which focuses on helping people buy American-made products. You know, right? I mean...

You know, so we are definitely a very high-octane duo. And she does the opposite. She tells me how half of my ideas are bad ideas. And she's right usually about which ones of them are winners and which ones of them are losers. As most spouses are. I listen to her very carefully.

Yes. You talk about in your bios and some of the articles I've read about you that you've had numerous successes and you had numerous failures. What have you learned from your failures? Well, first, I learned that you don't really learn anything from success. You only learn you really learn lessons from failures. So so I.

I think a lot of it has to do with focusing on what you're really good at versus trying to become average at everything else. And I think our educational system does not allow you to do that. Our educational system, high school, college, and so on, is trying to broaden your knowledge and get you to be average at 100 different things.

instead of figuring out, because each one of us is a unique experiment. Each one of us is a genetic experiment that will never repeat itself again. And we are the best in the world at one thing. We just don't know what it is, right? So instead of finding that nugget and polishing it and showing everybody that you are the best,

we are really striving for mediocrity in our educational system. So I luckily, I learned that early and I figured out what I'm good at, right? So I can kind of leap into the future and imagine the future better than most people. And then I try to build it. Sometimes there

the rest of the world shows up like voice of IP and sometimes no one shows up. And I'm like, Hey, this is the future. And people say, no, it's not, you know, and they go somewhere else. So, so I learned, I learned also selecting people that cover my blind spots that cover my weaknesses. So again, when you know what you're good at and what you're bad at, then you can hire the right people instead of hiring people who already do what you do well.

And I learned that I don't know enough, right? So I failed to invest in companies like Google and others very early on. I told Sergey Brin who needs another search engine, you know, when he was just looking for his first investment check. So you also have to have humility, right? So if you want to be successful, I think understanding your limitations and, you

you know understanding that you're going to make mistakes and and not taking it personally understanding that's part of the process knowing where to go sometimes involves getting stuck in in the wrong direction having to reverse and then changing course right and if you have a big success early on you get this notion that you're special and it's going to happen to you again and again

And we all know that that's not how the world operates. Ask any politician who won the first election, right? They're all immediately the most special human beings in the world. Let me ask you this. What, what is a book or a person that most influenced your life? So, so I'm a big fan of, uh, uh, Nikola Tesla who invented the alternating current and, and many other inventions, including a wireless, uh, communications before Marconi. Most people think Marconi invented it, but,

He really didn't. And Einstein, right? So Albert Einstein, who obviously could project himself and see the entire universe, which is, you know, obviously very difficult for most of us. But it kind of like when I'm challenged, I always think about how much further he went than me. And so to allow myself to kind of explore further. What do you do as you're talking about

Learning from your failures. But I think one of the big faults in our system is that people are not taught to embrace failure and to be able to come back and be resilient. So many people don't do what you're talking about where they fail and then they retreat. How do you push people to move beyond that?

Right. So I totally agree with you, but I do want to give the United States is unique in that form, meaning in most of the world, if you fail, you're doomed for life. Like people just remember that you failed here. It's almost a badge of honor, right? To go to Silicon Valley and show people your failures.

As an example, the founder of Uber, Travis Kalanick, failed 10 times in a row. He failed in 10 ventures, one after the next, lost all the money for all of his investors before creating the company that got to $60 billion faster than anybody else.

In the United States, we do give credit for that. I agree with you that we need to train people not to take it personally and take risk and try to innovate. But frankly, I think it has to do with personalities as well, meaning for some people, it's just very, very difficult. It's too stressful. They don't perform well. I perform very well under pressure. Some of my best ideas come when I'm pinned against the wall and I have to make a very quick decision.

So most people freeze or don't operate well. So you have to understand your personality and make sure that it matches to what you're trying to do. You cannot change who you are and just become successful serial failure guy if you're not a...

And Chuck, that's actually one of the things that I thought for a number of years is wrong with our government. It's the one area of American society where failure gets you cut off. Your growth stops. It gets rid of any sort of risk taking or innovation. Right.

Yeah, look, I think if you compare our political system to China, for example, right, not that I'm a big China fan, but they do have something right. They created this idea that graduating from the top universities and going into government is the highest honor. And in our system, the best graduate, the people who have the best minds go into banking or consulting or into tech education.

They don't necessarily go to government. So I think we need to think about how do we incentivize these bright minds to do good first and then do well. Right. So so so I just think that that is something that we all need to work on. Yeah. When I was at the city of Phoenix, they tried to hire a woman out of my office who had a degree in fashion to become one of the heads of the I.T. department.

Her IT skill was Googling problems. Well, at least she knew how to Google. I mean, let's give her some credit there. But that tells you how badly they are hurting in some of those key areas. We definitely don't have enough skilled workers, especially on the tech side.

And again, China now graduates 10 times as many engineers as the United States. And we have the best universities in the world, right? Right. So instead of stamping, every person who gets an advanced degree or a PhD should be immediately stamped with a visa for life or a green card or whatever because...

We need them in our society. We need them to create the GDP that the Fed and the government are looking for, right?

So instead, these people go back to India, to China, to to to wherever they came from, and they build the value over there instead of the building the value over here. We're educating the people that are kicking our butts. Alex, as we wrap up here, how can people find you online through social media? How can they find you and follow what you're doing?

Yeah, so follow me on Twitter @Mashinsky, my last name, Mash in Sky is the spelling. I'm also on YouTube. I do AMA every Friday at 1:00, so I'm due on stage in a few minutes. So you can watch, you can come and ask questions and anything about financial freedom and financial independence. Also,

I have a website, machineski.com, and you can see all my failures are listed there proudly. So you can try to learn from my experience and also hopefully get encouragement for creating a brighter future for yourself. Well, we sure appreciate you coming on. We'll hope you'll join us sometime in the future. You've been fantastic and hope you have a great day and good luck with your YouTube segment here shortly.

Thank you, guys. And again, I want to give you guys a lot of credit for basically educating the American people and exposing the truth in an unbiased way and in a continuous way. So definitely we need more of that. And thank you for having me on your show. Thank you, my friend. We look forward to talking to you soon. Have a great day. Take care.

Chuck, that was one of the best segments I think we have had on this program. Oh, he's wonderful. We need to have him back on. Brilliant. Absolutely brilliant. But it is interesting. On the blockchain and digital currency, we definitely need to do – there needs to be an education policy because it does –

When you talk to people about it, it's just sort of like their eyes glaze over. Well, I think the world is moving so fast right now that schools are just totally out of their depth and trying to keep up. And the type of education we're getting is essentially a 19th century industrial education still. Well, I think one thing you're going to have and as we end this segment is I think you're going to see more and more homeschooling and private schooling.

I think people are going to try to find what their child's talent and skills are and put them into that so they become great at it, not average, but great. One of the things I've advocated for is after 10th grade having different, very different tracks in those last two years, right? Yeah. Find the things that you're going to be good at and let's make kids really, really build them up in those areas. I agree.

Folks, this has been a Broken Potholes podcast special. Definitely tune in. I follow Alex because he is really doing brilliant work. And, you know, these kind of folks, whether it's him or Elon Musk or any of these folks, listen and learn. No matter what you think of them or their products, listen and learn because they have a lot to teach us. Thank you. Have a great day.

It's the new year and time for a new you. You've thought about running for political office but don't know where to start. Before you start any planning, you need to secure your name online with a yourname.vote web domain. This means your constituents will know they are learning about the real you when they surf the web. Secure your domain from godaddy.com today.