Nexo is a prominent regulated financial institution for digital assets around the globe. “This isn’t a start-up,” says the narrator. While discussing the firm, Antoni Trenchev, Nexo’s co-founder and managing partner, stated, “This is a team with a strong track record of over 12 years in FinTech and over $2+ billion handled solely with Nexo.” So, what exactly is the business behind the moniker Nexo? Continue reading to learn more.
1/ Nexo in a Nutshell: Adding Value to Crypto Assets
Nexo addresses this issue by enabling customers to borrow against their cryptocurrency rather than sell it.
Nexo’s Instant Crypto Credit Lines allow clients to take out a fiat loan by using one of the accepted cryptocurrencies as collateral in their Nexo Wallet. There are no hidden fees or taxes, and the entire process may be finished in a matter of minutes.
Nexo is unique in the blockchain sector since their Instant Crypto Credit Lines are dynamic, which means that when the value of your assets rises, so does your credit limit.
2/ Solving the Crypto Space’s Most Serious Issues
The following are the three most pressing issues in the cryptosphere:
- Asset liquidity is difficult to come by.
- Assets have a lack of utility features.
- There is a lack of openness and trust.
Asset Liquidity is difficult to come by
Accessing the liquidity of your coin may be a time-consuming procedure, which naturally presents a slew of issues for crypto owners and slows uptake. They enable their clients to obtain cash anywhere in the world, instantaneously, so they may take advantage of numerous investment possibilities by immediately unlocking the liquidity underlying their crypto with Instant Crypto Credit Lines.
Inadequate Utility Options
Cryptocurrencies now lack usefulness, and crypto investors do not have many possibilities for profiting from their holdings. They may simply borrow against their crypto with Nexo’s Instant Crypto Credit Lines without losing ownership. Nexo consumers may get the liquidity they need while still keeping their crypto’s upside potential.
Transparency and lack of trust
Until far, receiving loans using crypto assets has been problematic due to a lack of essential security requirements and transparency. Crypto loans were often made through peer-to-peer lending, which frequently resulted in fraud and high-interest rates. Crypto loans could not be verified using legal procedures since the laws were not rigorously enforced. Nexo secures and guarantees the ownership of digital assets through open loan arrangements.
3/ How Does Nexo Work?
A Nexo Instant Crypto Credit Line’s lifespan may be broken down into the following parts.
Step 1: To use the Instant Crypto Credit Lines, a client must first deposit their crypto assets into their Nexo Account, which is safe and secure. In terms of security, all custodial assets housed in the Nexo Wallet are kept in cold storage in Class III bank-grade vaults with BitGo, a major crypto custodian that is SOC 2 Type 2 accredited.
Step 2: The customer receives their loan promptly by bank transfer or the free Nexo Card in one of 40+ fiat currencies. They may then withdraw some or all of their loan at any moment, in a single transaction or in smaller increments, and only pay interest on what they actually spend.
Step 3: Nexo offers a 50% reduction on the total amount owed if a customer has enough NEXO Tokens in their account to satisfy their incurred loan interest. To earn the full discount, the customer must keep these NEXO Tokens in their Nexo Account for the term of their loan.
Who is eligible to use Nexo?
- Investors that want to profit from their crypto holdings without giving up control of their assets
- Companies of all sizes
- Miners Hedge funds are looking to take advantage of new investment opportunities by leveraging their crypto portfolios.
- Funds for pensions.
4/ Loan Contracts and Smart Contracts
What is a smart contract, and how does it work?
A smart contract is similar to a traditional contract, with two major differences: it is self-executing and does not require the oversight of a third party. By definition, a smart contract is a computer protocol for digitally enabling, validating, or enforcing contract negotiation and execution. It enables two parties to communicate without the involvement of a third party. Cryptographer Nick Szabo originated the phrase “smart contract” in his paper “Smart Contracts: Building Blocks for Digital Markets” in the 1990s. Take Szabo’s vending machine as an example to grasp the concept behind how they function.
The typical way to engage with a vending machine is as follows:
- You select the thing you desire.
- You insert some money into the machine.
- The item is given to you by the machine.
Isn’t it rather straightforward? However, there are two things you should keep in mind during this interaction:
- Each step cannot be completed until the one before it has been completed. Also, you won’t be able to get anything until you put money in the machine.
- Throughout the encounter, you and the machine are in direct contact with one another.
The following are the fundamental principles of smart contracts:
- A smart contract allows the two parties to interact directly with one another.
- Each step in a smart contract can only be completed once the previous step has been completed.
Recommendations when it comes to loan contracts in Nexo:
- The loan contracts are immutable and verifiable since they are kept and duplicated on the blockchain.
- Unless the customer defaults on their loan, the assets are safely safeguarded and Nexo does not have access to them.
- Through external data sources, the Nexo Oracle continuously examines the preset criteria mentioned on the loan contract.
- To reduce the risk for both parties, Oracle assesses the value of the assets in real-time on several exchanges.
- Once a pre-written condition is met, the loan contract is executed as an automatic activity.
- When the value of the client’s crypto assets increases, the loan limit is immediately increased.
5/ Nexo’s Risk Management Strategy
In addition, the Nexo Oracle monitors real-time changes in cryptocurrency values, gathering information from a variety of sources to avoid price inconsistencies. As the prices of the assets vary, the Oracle adapts as follows:
- When the value of a user’s collateral rises, Oracle makes more fiat available to the client.
- Oracle reduces the danger of having to sell a small number of a client’s assets if the price of the assets falls below the required loan-to-value ratio by sending three reminders to the borrower, asking them to either pay off a portion of their loan or add additional crypto.
Nexo has already paid two dividends totaling $3.5 million in its first two years as one of the top financial institutions for digital assets, demonstrating the company’s strong commitment to its loyal consumers. As Nexo expands its business to include more and more wonderful services, it will be interesting to observe how their goods evolve.