The rising adoption of blockchain is much attributed to its ability to disintermediate traditionally centralized processes. A major area of traditional finance that blockchain is increasingly disintermediating is the lending and borrowing space, where the technology has enabled companies to provide interest-bearing accounts and lending programs to investors and consumers with favorable rates, while reducing the need for third party gatekeepers.
While we work to onboard the world into the revolutionary utility of the crypto ecosystem, we need institutions who have harnessed the power of blockchain to lead the way for their counterparts. Celsius has emerged as a pioneer in the effort to bridge the gap between centralized (CeFi) and decentralized finance (DeFi) by creating avenues for users to earn passive income on their crypto holdings through lending and borrowing. By offering interest-bearing accounts for crypto holders, the Celsius Network provides additional utility for those assets beyond price action and payments. Through its vast network, Celsius connects lenders and borrowers willing to receive and pay interest for exchanging crypto assets, a first of its kind for the crypto industry.
As its utility is broadly realized, Celsius’ eagerness to evolve the relationship between traditional and decentralized finance has resulted in the introduction of CelsiusX, the DeFi wing of Celsius Network.
The purpose of CelsiusX is to make financial institutions’ involvement in decentralized finance more seamless. Celsius plans to empower institutional involvement in DeFi through offering a number of new features within CelsiusX, including a wrapped token platform, cross-chain liquidity bridges, an actively managed stablecoin, and proof of community through audits, bug bounties, and code transparency.
Wrapped Token Platform
Celsius’ Wrapped Token Platform creates functionality for crypto assets to be traded across blockchains they are not native to. Wrapping consists of creating tokenized versions of cryptocurrencies wrapped by the token standard of alternative blockchains (such as Ethereum’s ERC20, Avalanche’s ARC20, or Solana’s SPL), giving these tokens new utility across blockchain ecosystems. An example of this is Wrapped Bitcoin, which is an ERC20 token that tracks the price of Bitcoin on the Ethereum blockchain. Similarly, creating wrapped versions of Ethereum can give Ether utility on Solana, Avalanche, and other layer 1 blockchains. CelsiusX seeks to make wrapped crypto assets more easily available in order to encourage greater participation in DeFi from traditional financial institutions, without the stress of wrapping tokens on their own or relying on potentially untrusted third parties.
For more on wrapping tokens, check out this video from Celsius, here.
Cross-Chain Liquidity Bridge
Wrapping tokens is valuable at an institutional level because it creates a more fluid rate of exchange, dependable liquidity, and interoperability between blockchains. The liquidity needed to achieve more fluid rates of exchange across blockchains is powered by Celsius’s cross-chain liquidity bridge. Now, institutions can rely on Celsius to bootstrap the cross-chain liquidity required to engage in DeFi activities large and small, with trust that the wrapped tokens will be transferable 1-to-1 with the original coin at any time.
To illustrate this process, instead of converting your Bitcoin to Ethereum, you can just bridge your Bitcoin to an ERC20 token on the Ethereum blockchain, creating Wrapped Bitcoin (wBTC) through Celsius’ wrapped token platform, saving users valued time, reducing frustration, and giving Bitcoin additional utility across the crypto ecosystem. The original Bitcoin will be securely locked up in a smart contract vault managed by Celsius for storage and assurance that the original Bitcoin won’t be double-spent. When users want to bridge the wBTC back to their original Bitcoin, they can rely on Celsius’ cross-chain liquidity bridge to unlock their stored Bitcoin and burn the Wrapped Bitcoin. Easily accessible and trustworthy cross-chain liquidity bridges will facilitate greater institutional participation in the development of decentralized finance.
CelsiusX is also spearheading cutting-edge approaches to stablecoin issuance and management with the launch of cxUSD, an actively managed stablecoin that merges the dichotomy of algorithmic and fully-backed stablecoins in a hybrid model. Instead of fully decentralized algorithmic (RAI, OHM) or fully-backed centralized stablecoins (USDC), cxUSD uses transparent, auditable vaults containing overcollateralized crypto assets to mint cxUSD. cxUSD will complement existing stablecoins in the crypto ecosystem, but with auditability, greater transparency and efficiency.
Proof of Community
Two core pillars of CelsiusX are the transparency of their code and the prioritization of security audits, which work together to create a strong proof of community and ensure trust amongst users. CelsiusX’s audit was performed by Halborn with a goal of attaining transparency and security throughout the platform to keep network functionality fluid.
CelsiusX seeks to continue the assurance of platform reliability and security with their bug bounty launched in conjunction with ImmuneFi, which incentivizes white hat hackers to find bugs in the CelsiusX code and report them for monetary rewards. Bug bounties work to ensure that good actors can serve before bad actors can take advantage of any potential vulnerabilities.
Bringing the Crypto Industry to New Heights
Celsius’ unique role in uniting the interests of CeFi and DeFi holds critical importance when considering the decade-long disagreements between crypto and traditional finance – ‘Crypto is too clunky, hard to use, and unsafe’ traditional critics have always touted. Rather, Celsius’ natural progression has always leaned toward making the crypto industry more compatible and practical for broad institutional adoption.
Click here for a deeper dive into Celsius Network
Celsius remains a steward to the new and evolving utilities for crypto in institutional operations, and as it looks to add new solutions to DeFi, CelsiusX is grasping the next frontier of traditional financial adoption. As a similarly-inspired institution with a vested interest in strengthening the relationship between crypto and Wall Street, Sarson Funds believes that industry leaders like Celsius will be imperative for future waves of institutional crypto adoption and closing the gap between financial systems new and old.
By Liam McDonald and Colm McDonald