Nexo

What is Nexo (NEXO)?

Nexo is a regulated, blockchain-based digital asset company that issues instant cryptocurrency-backed loans.

Nexo provides fiat on-ramps for over 40 cryptocurrencies. It also pays platform users daily interest on cryptocurrencies stored on the platform.

With a stated mission of maximizing the value and utility of cryptocurrencies, Nexo serves over 4 million customers in over 200 different jurisdictions. Client assets are stored in individually assigned multi-signature wallets in cold storage with Ledger Vault, Bakkt, and BitGo.

These custodians carry a collective $775 million in insurance protection for digital assets held on the Nexo platform.

The NEXO token, meanwhile, is the native token of this platform and gives users various benefits. These include discounts on interest on loans, higher interest on deposited funds, and dividends based on Nexo’s profits.

When Was Nexo Launched?

Nexo was launched in April 2018 following the first announcement of the project four months prior.

This launch was significant for the crypto community. Nexo was the first platform to offer instant crypto-backed loans, allowing clients to leverage their cryptocurrency holdings without needing to sell.

The NEXO token was launched in 2018. Still, while the company had planned a public pre-sale and token offering, they canceled these due to “increased institutional support.”

According to Nexo, the private pre-sale was oversubscribed by a factor of 5, and applications for the public pre-sale whitelist by a factor of 11. These whitelist participants were compensated with 100 NEXO tokens after the company canceled the public pre-sale.

This decision by Nexo put over half of the total NEXO supply into the hands of institutional investors, with private sales made at a fixed price of $0.10 per NEXO token.

Who are the Founders of Nexo?

Nexo was incubated by Credissimo, a leading European FinTech group established in 2007. It was founded by Kosta Kantchev, Kalin Metodiev, and Antony Trenchev.

Kantchev is Nexo’s Executive Chairman, while Metodiev and Trenchev work as Managing Partners. However, it is Trenchev who tends to act as the public face of Nexo’s leadership.

Trenchev is a blockchain advocate, and he was a member of parliament in Bulgaria’s National Assembly between 2015 and 2017. While in office, Trenchev promoted the implementation of blockchain solutions for e-government services. He also commentated on crypto and finance-related events on major mainstream media channels.

In addition to being a co-founder of Nexo, Kosta Kantchev is also a co-founder of Credissimo and sits on the group’s board.

How Does Nexo Work?

Many crypto holders who don’t feel confident taking custody of their cryptocurrency and managing their own wallets use third-party custodians. This tends to be a cryptocurrency exchange much of the time, but the Nexo platform is also considered a good place to “hodl.”

While Nexo is not alone in the crypto lending or custody business, it has a relatively clean track record. It also has historically handled volatility well compared to direct competitors like BlockFi, especially the embattled Celsius.

As such, Nexo is simply a platform for many to hold crypto and earn a daily interest rate, like a crypto savings account.

What Makes Nexo Unique?

Despite the prevalent use of Nexo as simply a custodian, its bread and butter is instant crypto-collateralized loans.

Users can deposit crypto assets to Nexo as collateral, and Nexo will immediately provide an instant credit line. How much the user can borrow is displayed on the platform immediately. You can take a loan with a single click, without credit checks or manual authorization.

Users can transfer money from the loan to a bank account, withdraw it in the form of a stablecoin, or spend it using the Nexo card.

Users that go through identity verification and upgrade their status by holding NEXO tokens can borrow more. This way, they can avail themselves of even more favorable rates for their loans.

Users are categorized by the Nexo Loyalty program into four tiers: base, silver, gold, and platinum.

Rather than flat NEXO holding thresholds, users can reach higher levels based on what percentage of their portfolio on Nexo is made up of NEXO tokens. Base users have no NEXO, Silver users have a 1%—5% NEXO portfolio, and Platinum users have a portfolio of at least 10% NEXO.

How is the Nexo Network Secured?

The NEXO token is an ERC-20 standard token, and the Ethereum blockchain secures any transactions that use it.

Ethereum shifted to a proof-of-stake (PoS) consensus model in September 2022, having previously been proof-of-work. PoS blockchains use a system of economic incentives and disincentives to ensure that nodes behave according to the protocol.

Validators must lock, or stake, ETH in the protocol, and validating blocks is rewarded based on how much ETH has been staked. Meanwhile, misbehavior is punished via slashing, where a validator has their stake confiscated.

NEXO tokens are also present on the Binance Beacon Chain as BEP-2 tokens. Balances and transactions are secured by the Binance Beacon Chain’s proof-of-stake Tendermint BFT consensus mechanism.

Nexo secures its user funds with three different custodians:

• BitGo. A leader in digital asset financial services, BitGo has a long-standing arrangement with Nexo. BitGo provides cold storage wallets and bank-grade Class III vaults through their SOC2 Type 2-certified custodianship program. They also furnish Nexo with a $100 million insurance package via Lloyd’s of London.
• Ledger Vault. Providing cloud-based digital asset custody infrastructure. This allows clients to securely control crypto assets with multi-authorization self-custody management solutions. Ledger Vault also provides $150 million in insurance backed by Arch and Marsh.
• Bakkt. The Bakkt Warehouse is a regulated custodian comprising both online (hot) and air-gapped (cold) digital asset storage for Bitcoin and Ethereum. Bakkt uses multi-zone physical security, including bank-grade vaults, and is regulated by the New York Department of Financial Services. It has a $125 million insurance package.

Nexo also works with a firm called Armanino to conduct a Proof of Reserves assessment. This sets it apart from many centralized institutions in the cryptocurrency industry by providing real-time attestations.

What is the Use of NEXO?

The NEXO token is used on the Nexo platform for a variety of benefits. Since Nexo is primarily a lending platform, one of the main use cases of the NEXO token is for discounts on borrow rates.

Gold or Platinum clients of Nexo who hold certain amounts of NEXO tokens can borrow at rates as low as 0%—1.9%.

Holding NEXO tokens can also give users better interest rates on tokens held on the platform. Nexo dividends are also distributed to holders of NEXO as loyalty rewards.

Holders of multiple NEXO tokens can also make more free crypto withdrawals from the Nexo platform every month.

Who Controls Nexo?

Nexo is a for-profit entity by itself, although it was incubated by Credissimo and has significant levels of institutional investment. It was co-founded and is led by Executive Chairman Kosta Kantchev and Managing Partners Kalin Metodiev and Antony Trenchev.

How Much Is NEXO In Circulation?

NEXO has a circulating supply of exactly 1 billion NEXO tokens, issued on Ethereum and the Binance Beacon Chain.

Issued in 2018, 525 million NEXO tokens were sold to institutional investors during its private pre-sale for $0.10.

250 million NEXO were allocated towards Nexo’s overdraft funding reserves subject to a 12-month vesting period. 112.5 million NEXO went to the founders and team subject to a 48-month vesting schedule, and 52.5 million NEXO went towards advisors, legal costs, and marketing.

Finally, 60 million NEXO were allocated toward community building and airdrop campaigns, with an 18-month vesting period.

In late 2020, Nexo announced a buyback program whereupon the company would repurchase up to $12 million worth of NEXO tokens from the open market. This decision came as part of the Nexonomics program seeking to bolster the value of the NEXO token.

How Do You Buy NEXO?

If you’re already a user of the Nexo platform, the easiest way to buy NEXO tokens might be using Nexo Exchange, a tool that is part of the platform whether you’re using the web or a mobile app.

On the Nexo Exchange, you can swap your cryptocurrency for NEXO or buy NEXO using fiat. You can also buy NEXO tokens from a variety of major exchange platforms as well as decentralized exchanges such as Binance DEX.

Is It Possible to Buy Nexo Instantly?

You can purchase NEXO almost instantly, irrespective of where or how you buy it. Using the Nexo platform or another centralized exchange is certainly instant. Buying it on the Binance DEX will also be fast as long as there’s sufficient liquidity.

Buying NEXO tokens on Uniswap might be the slowest option depending on prevailing conditions like liquidity or network congestion. Whether you’re transacting on main layer Ethereum or a layer 2 scaling network may also be one of the deciding factors.

All in all, most options for buying NEXO are quite fast. However, if you’re planning to purchase it on a different centralized exchange and then transfer it to Nexo, there could be delays. This happens because many exchanges take a while to clear outgoing transactions.

How Do You Store NEXO?

Storing cryptocurrency with centralized custodians isn’t always the best option for your tokens. Still, in NEXO’s case, it’s hard to go wrong with the Nexo platform. While that does mean you’ll be trusting Nexo with your tokens, most–if not all–of the benefits of the NEXO token can only be realized on the platform.

If you want discounted rates on loans, greater returns from holding tokens, or a share of Nexo’s dividends, you’ll have to keep them in Nexo’s custody.

Of course, if all you want to do is hold the NEXO token and hope for appreciation, you can store it in an Ethereum or Binance Beacon Chain compatible private wallet. Just make sure not to send BEP-2 NEXO to your Ethereum wallet address or ERC-20 NEXO to your Binance-compatible wallet!

Nexo Energy Consumption

Nexo does not operate its own blockchain, and the NEXO token resides on two blockchains: the Binance Beacon Chain and Ethereum.

Both blockchains are secured by proof-of-stake consensus, which is widely accepted as an extremely energy-efficient form of blockchain consensus.

As such, it’s almost impossible to suggest that Nexo is responsible for any sort of meaningful energy consumption. Besides the cost of operating a business with multiple locations and many employees, Nexo’s crypto infrastructure doesn’t consume much power at all.

Is NEXO a Good Investment?

Nexo is a well-known and highly respected entity in the blockchain industry. Their reputation continues to grow even as the crypto downturn of 2022 culls some of the industry’s chaff.

The rapid demise of Terra (LUNA token and UST stablecoin), one of blockchain’s stars, caused the high-profile meltdown of a hedge fund called Three Arrows Capital (3AC). According to a report by The Verge, 3AC’s holdings went from$500 million to just $604 in the aftermath of the Luna crash.

3AC had splurged on risky investments. One way to do this was to borrow from crypto lenders using similar models to Nexo.

In a letter to customers, BlockFi said that their loans to 3AC had been overcollateralized, but they still experienced an $80 million loss. They have been embattled since and received a capital injection from Sam Bankman-Fried’s FTX. 3AC also took down Voyager Digital, owing the platform some $350 million plus over 15,000 BTC.

Meanwhile, Celsius plunged into bankruptcy on the back of the crypto downturn and risky investments. It also suffered losses tied to “misplaced wallet keys” with StakeHound and the BadgerDAO hack. Blockworks reported that Celsius was also struck by 3AC’s default, $40 million in the red on a $75 million loan.

In this backdrop, Nexo’s stability and lack of controversy emerge as a significant strength. Furthermore, the ability for NEXO holders to take home a share of the company’s dividends is indeed an exciting prospect.