Alex Mashinsky talks to BlockLeaders about a fascinating life journey that saw him emigrate from Ukraine to Israel with his family, before finally settling in the United States. Alex soon became a well-known and respected figure in New York after bringing free wireless to millions of New Yorkers using the city's subway system, to the chagrin of the big telecommunications players. Alex is now CEO and founder of Celsius Network, a blockchain project that promotes the idea of 'unbanking yourself.'
Fighting the monopolies which dominate our lives is not a new game for Alex Mashinsky, As an immigrant to the US, he decided to take on AT&T which was the most profitable company in the US back then. Almost all of its profit came from international voice call settlements. Mashinsky proposed to replace the decade-old practice of charging users $3 a minute to call relatives abroad with a free internet-based service he called Voice Over Internet Protocol. Few believed such service could even work, as the entire internet was a slow and cumbersome dial-up system that used the phone network as its backbone. Mashinsky persevered though, and today over 3.bn people all over the world freely use the technology he helped pioneer.
Fast forward to the present day. Spending hours each day commuting to work is an inescapable and daily reality for millions of people every day. Some commuters use a bus, their own private car, or maybe the ever-crowded subway.
Let's take the city of New York, for instance. That vast, cosmopolitan enclave is home to almost 9m souls who live, work, travel, and sleep under the shadow of totemic skyscrapers.
Another world exists beneath the surface of New York City. A network of subterranean tunnels that connect hundreds of stations across the sprawling metropolis. New York's subway system is among the oldest in the world. The first subway service opened soon after the turn of the century, on October 27th, 1904. On that very first day, 150,000 passengers used the trains, giving those in charge a clear and unmistakable sign of the usefulness and future viability of the subway. The rest, as they say, is history.
For over 110 years after its first launch, the NYC subway system did not allow any wireless or WiFi connectivity underground even though other systems like the Metro in Paris had GSM service since the 1980s.
Today, the New York subway system is the largest in the world by the number of stations (472 in total). On average, 5.7m people use the subway every single day. And commuters in today's always connected world can finally enjoy free 4G Cellular and free Wi-Fi access across the network thanks to one man: Alex Mashinsky, who got the carriers to pay for it.
A Ukrainian native and a very determined man, Alex single-handedly made sure that millions of commuters can enjoy internet access during their daily commute and use it in case of emergency.
And after winning these two battles, Mashinsky has his sights on the largest, most profitable and best-defended monopoly out there: The banks. He wants to replace big banks with a Public Blockchain platform that will always act in our best interests as depositors. Kind of the opposite of what banks do to their customers today.
The big change: On being born in a communist state and moving to Israel and America
Alex started life in Ukraine, a communist state at the time. Then, family and life took him on a journey to Israel, where he did his studies and military service, before moving to America in 1988.
His life journey enabled Alex to experience vastly different societal and financial ecosystems.
He said that "I tried all three financial systems man has invented, communism, socialism, and capitalism. And you know, my favorite system is one that is yet to be invented, a decentralized public blockchain! Think of blockchain as something that is a potential normaliser and equalizer that can work better than the three systems we use today. It enables things that the internet was meant to do. The internet was supposed to be an equalising system, but it did not turn out that way, as the internet today is dominated by just five or six companies. Facebook is over half of the internet, for instance. Because of this, the internet became a largely centralized network."
"So I think that a public blockchain gives us a second chance to reinvent all this centralization, through decentralized solutions. Right now, there are between two to three thousand ongoing blockchain projects. Most of them will fail, as most of the internet experiments failed in the early days."
"I really think we have an opportunity to reclaim what's good for the people."
On the importance of blockchain
Blockchain is an emerging technology that is slowly spreading across all sectors of industry and finance. Alex understood this technology early on and has been advocating for it ever since.
Alex said that "that is a very good question actually. A lot of people are calling themselves 'blockchain companies', but they are not really. I always say that if you can remove the coin, token, or even the blockchain, and the company continues to run in the same way, then you're not really a blockchain company."
"The blockchain itself is a very slow and expensive database, which you can only use it effectively for very few things. So if you try to inject blockchain into existing healthcare, or banking companies, for example, you're not going to have great success." He continues, "you need to reinvent the process and ensure that the consensus and open ledger are at the center of the solution for your community of users."
"I've been working with technology for about 30 years, and looking at blockchain for the last 10 or so. I'm fascinated by all these different solutions, as networks grow and technology evolves, things that may not have worked back in the 90's or early 2000's suddenly become possible. That's really the beauty of technology. A 30-year-old idea such as blockchain is suddenly the hottest thing because its time has come."
"But to be honest, I was somewhat skeptical about the blockchain at first. One of my employees sent me the Bitcoin Whitepaper back in 2009, I looked at it and thought that it was a good idea in principle, but too slow and expensive to scale. There would not be enough electricity on the planet to support Bitcoin's Proof-of-Work consensus as a scalable solution for 7bn people, for example."
"But as an experiment, as initial implementation of the concept, it was a breakthrough. Now, we need to build on it. We need to take the best ideas and build a system that is scalable globally and that acts in the best interest of the community of users, not the few who run such networks today."
Blockchain as disruptive power
The issue of disrupting the status quo that banking institutions have enjoyed for far too long is a crucial one. Blockchain has the power to tip the balance in favor of the community that actually provides banks with deposits which give Banks all the power they have. The days when a bank can pay us nothing for monetary deposits are numbered. Banks have had it easy for a long time.
"Do you ever wonder why banks own these beautiful buildings downtown, who pays for all that wealth? It's because they overcharge us and keep all the profit from our hard earned cash," Alex says. "Most don’t know how banks work or that banks make 90% of the value on your deposits. What I mean by this is the following: When I get my paycheck, that money is wired directly into an account controlled by the bank. And the majority of these accounts pay little to no interest. So on average, a bank pays less than one percent on all the money we give it. Then we have credit cards. The average outstanding balance on credit cards in American banks is 24.7%. So they collect this absurdly high rate of 24.7% per year on lending you my money and give me back less than 1%. That equals to the bank keeping more than 90% of the total value created with my money. It's pretty much daylight robbery."
"So that's why we are creating an independent, trusted institution called Celsius Network with a consensus and open ledger, we can take the money you give banks, pay you 5% and charge users 7% then re-allocate it to the people who actually made the deposits on equal terms. Our system distributes up to 80% of the value back to the community of DEPOSITORS, not the Bank executives or their shareholders. Wow, what a novel idea, how come no one else tried it until now ?"
On bringing wireless access to the New York subway
Alex Mashinsky has achieved a lot during his outstanding career, no doubt about that. But one of his crowning achievements was the introduction of FREE wireless access to millions of daily commuters using the subway system in New York.
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He was the founder of Transit Wireless, an enterprise that enabled high-speed wireless coverage around the vast subway network in the city that never sleeps.
It is a fascinating story.
"New York was one of the last few cities in the world with no wireless access in the subway. This was a crazy situation to me. To put it in perspective, I had used GSM technology in the French subway back in the late 80s, for instance."
"There was both a very frustrating and a huge opportunity there, so I spoke to city representatives about it. It took several years actually, to convince the Metropolitan Transportation Authority (MTA) to do it."
"So they opened a tender for it, and over 400 companies submitted bids. It's a funny story actually. I partnered with another company for my bid, and we sent our documentation and heard nothing for a while. Then one day my wife showed me the NY Times newspaper, and there I was, on the front page. The article said that Transit Wireless had offered $46m for the franchise to build the wireless network and that three other carriers, Verizon, AT&T, Sprint, and T-Mobile had come together and offered $4. $4! So I thought that this must have been a mistake and that the writer had fudged the figures."
"But indeed, when I cleared it up, the figures were accurate. Transit Wireless had offered $46m, and the four major carriers were offering $4. One buck per carrier, they were sure the MTA will not award such a lucrative contract to an immigrant. Still, Transit Wireless won the bid because we offered the best solution for the MTA and the people of NYC. The key to winning I think was that we offered to build the network with the least amount of disruption to subway traffic. So for instance, when you need to cross the rails to lay fiber, trains must stop. And when trains stop, hundreds of thousands of people are disrupted on the line."
"Because of the way we built the network, we only required about 1/10th of the crossings that other bidders did. Still, it wasn't an easy win. Keep in mind that Transit Wireless was basically a tiny start-up with no history going against well-established players. So it was a David v Goliath situation."
I could see how proud Alex was about this, and with good reason. Transit Wireless won the tender for a franchise that would benefit millions of people every day, something that would make a positive impact on all these lives. And the company did it while fighting off fierce competition from global companies. Something definitely to be proud of.
"The thing I'm most proud of is that everyone travelling in the subway gets to use the system, and uses it for free. We could have charged $2 bucks a day, or $5 bucks. But I was determined to provide the service for free and have the carriers pay for it. That was the ultimate revenge."
Few people on the planet can say they picked a fight with the world’s largest telecom carriers and won it not once but twice. Mashinsky first won it with VOIP and then with Transit Wireless. Can this David win the next and biggest battle of his life with the banks?
Alex's latest start-up is Celsius, a project that promises to reverse 700 years of Banking and give most income back into the community that makes all the deposits, a concept unheard of in traditional banking.
"What Celsius Network is trying to do is reinvent the bank. In fact, our slogan is 'unbank yourself'. I tell you, banks are not your friends and they really not serving the people or the community that puts its trust in them through bank deposits. There probably isn't a single person out there who can say the bank always acts in the depositors best interests and that they implicitly trust their bank, that they know where their money actually is."
"And that's the main problem really, isn't it. Banks make mistakes, endanger our deposits and cause our economy to crash every 10 or 15 years, and we are called to save them via bailouts and reflation of our currency, having to reflate the entire economy with over 70tn dollars like we did in 2008. The poor people don’t even understand they will have to pay for it. People then forget about these events and move on to give more money to the same banks. But the inherent problem remains.
"Celsius Network' goal is very simple. To pay high interest on deposits, rather than ripping people off like banks do and charge half on loans. Other crypto projects allow you to hold coins or tokens in cold storage or in exchanges. Neither option allows any income or interest to accrue."
"Celsius Network is the first, and so far, the only solution that pays a weekly interest on 15 different coin deposits. The reason we can do this is that even though we charge less than 9% on loans we give most of that back to the community as weekly coin distribution, we do everything in the best interest of the community, that is our mission."
"The main application of the Celsius blockchain is to deposit cryptocurrencies, of which our wallet supports 15 different ones. We also enable people to earn interest, which is quite unique. No other method currently exists that allows efficient distribution of interest to millions of people all over the planet. You can use Visa, Mastercard, bank wire, etc., but these methods are slow and carry immense fees, which in most cases are actually higher than the interest itself. Using blockchain, however, you can send fractional cryptos to millions of people and they get most of the benefit."
"That's one side of it. The second, and more important side is transparency. All our transactions are written onto the blockchain, and those transactions reflect all the data we produce. How many deposits we receive, how much money we loan, how much was earned and distributed back to the community, and so on. No bank today is willing to share any such information with their depositors."
"Our core mission is to work in the best interest of the depositor community, and that's the issue here, use transparency to create adoption of the blockchain and cryptocurrencies."
On being a visionary
Alex Mashinsky has been referred to as a visionary. What the word means and what it implies may be up for debate, but I was by now aware that Alex has proved his worth time and time again. So I probed on his visionary concept.
"You know, the distance between a lunatic and a visionary is just a few inches, so being called "visionary" is not always a compliment."
"I'm lucky enough to have these ideas that pop in my head every now and then. I have lots of ideas, so it's hard to know which ones are good and which ones are just a lunatic whispering in my ear. I was in France for a while, and when you're young and you tell people about these ideas that you have, they look at you and say that you're crazy. If you don't have a famous surname in Europe, people tend to dismiss you."
"But I was lucky enough to come to the States, here, it doesn't matter who you are. There's a huge willingness to take risks, the willingness of people to work together and experiment. They don't look at your heritage or where you studied. If they think you've got a great idea, they will work with you."
"Celsius is my eighth start-up here in the United States, you know. I think this a great example of why the United States is such a magnet for talent."
"Still, being a visionary is not enough. Your timing has to be right, the people or companies you partner with, your execution etc. There's a lot of components to success. One quote from the genius Thomas Edison summarizes visionaries best: “One percent Inspiration 99 percent perspiration.”