Heard of Nexo? It’s a globally recognized financial institution for digital assets. Ultimately, it breaks some of the barriers that people experience in the crypto space. The platform allows its users to use their crypto as collateral as opposed to selling it.
Naturally, this has benefits for both traders and investors. It gives traders the opportunity to gain profits from their stored crypto on the platform through a dynamic Crypto Credit Line.
It also allows investors to receive dividends. All Nexo token owners receive 30% of the net profit. They distribute dividends across token owners proportionately.
What Is Nexo
Nexo is a financial services provider in the crypto industry. It allows users to use their cryptocurrencies as collateral to receive fiat currency loans. The platform supports all the major coins like Bitcoin, Ethereum, Litecoin, and more.
Once a user deposits their coins into their Nexo wallet, they have immediate access to the value of their coins in over forty fiat currencies across over two hundred territories. Users only pay interest on the money they use, and there are no other hidden costs or administrative fees.
Furthermore, their crypto credit line is dynamic. This means that as the value of a user’s cryptocurrency rises on the market, their credit limit increases.
The inverse is also true. A user’s credit limit will decrease with the value of their cryptocurrency.
The Nexo Oracle, the core of the platform, calculates a user’s credit limit, develops loan contracts, collates repayments, and uses big data and algorithms to keep running efficiently.
The platform’s native crypto is Nexo tokens. Users can use these tokens to repay their loans or use them as collateral. These tokens differ from conventional coins like Bitcoin because users receive discounts on the interest they need to pay if they use these tokens.
Additionally, users own all of their crypto in their wallets because they are not selling but using their coins as collateral. They can also receive dividends by keeping these tokens in their wallet. This adds utility to cryptocurrencies, which many crypto exchanges do not offer.
This crypto’s value is below $1, and the total supply is 1,000,000,000. They distributed this token with a hard cap of 525,000,000. It raised over $52 million.
Token owners receive dividends of 30% that is distributed according to token balance. So far, there have been three dividend payouts. The latest dividend amounted to $ 6,127,981.39, with a total of $9,449,627.26 already paid out.
This ERC-20 token is listed as a restricted security. Furthermore, users are required to hold onto their tokens for six to twelve months.
How It Works
Crypto Credit Line
The platform relies on The Oracle, which controls the Crypto Credit Line. The credit line works in three steps.
First, a user transfers their cryptocurrencies into a secure account. The Oracle then calculates how much credit a user will receive and sets up the loan after blockchain verification. The market value of the cryptocurrency the user transfers determines the loan limit.
The credit line is dynamic, and users can use multiple cryptocurrencies at one time as collateral. Also, a user’s assets are secure and kept in cold storage using BitGo.
Secondly, a user instantly receives a loan in a fiat currency. They either receive it through a bank transfer or a credit card. They can withdraw any amount, and they only need to pay interest on the money they spend.
Thirdly, the users need to repay the loan. They can do this through a bank transfer using fiat currency or with cryptocurrency.
Oracle adds the transaction to the blockchain and updates the loan limit to reflect the loan repayment. Moreover, if a user uses Nexo tokens as collateral for the duration of the loan, they get a 50% discount on their interest payments.
Users can also sell their stored cryptocurrency to repay loans if their available balance is below the loan limit. If a user fully repays their loan, they can withdraw all their coins or begin a new credit line using the amount of cryptocurrency in their wallet.
The Oracle adjusts according to the price of the crypto in a user’s wallet. If the price movement is positive, The Oracle increases the amount of available cash to the user.
Inversely, if the price movement is negative and drops below the loan-to-value ratio, Oracle sends the user three automatic notifications informing them to pay off part of the loan or add more crypto assets to their wallet.
If a user fails to partially repay the loan or add more crypto, Oracle automatically rebalances the credit limit and the outstanding balance by selling off some of the user’s crypto.
Technology And Features
The platform uses The Oracle, smart contracts, and an app to provide users with a crypto credit line and instant access to funds.
It is responsible for implementing many of the automated features on the platform. It develops loan contracts, repayment analytics, automated notifications, and employs modeling and algorithms.
The Oracle automatically determines loan contracts through blockchain verification then it manages the loan contract. It deals with all aspects related to the loan, such as cryptocurrency maintenance and loan limits.
Furthermore, it automatically keeps a record of all a user’s transactions. This includes bank transfers, loan repayments (including interest payments), and updates loan limits depending on the user’s cryptocurrency value.
The Oracle also collects data from a variety of crypto exchanges. This allows it to accurately calculate the value of a specific cryptocurrency. It uses real-time data to ensure that a coin’s market value reflects price movements on other exchanges. And due to the dynamic nature of the crypto credit line, a user’s loan limit increases automatically.
Additionally, the platform automatically sends users notifications regarding loan repayments, coin value increases, and any other news related to loan maintenance.
To ensure that Oracle runs optimally, it uses algorithms and modeling to analyze market data from the different exchanges as well as external data. Oracle uses this analysis to make the correct decisions pertaining to loan limits and interest investment.
The Oracle uses smart contracts to execute loan contracts on the platform. Smart contracts are digital agreements between two parties with no middle man. Oracle stores the loan contracts on the blockchain.
This means that all conditions of the contract (repayments, loan limits) cannot be edited or removed. The contract runs until completion, and both parties need to meet the contract’s conditions before any transactions.
The Oracle constantly monitors external data sources to assess the conditions of a loan contract. Because it uses real-time market data on different crypto exchanges, it minimizes the risk for both the creditor and debtor. There is a lower chance that a user would take out a loan on an overvalued crypto.
Finally, there are three types of smart contracts, and Oracle uses off-chain contracts. These types of contracts rely on outside operations like different currencies and dynamic loan limits. These contracts are difficult to order because of these off the blockchain factors.
Advantages Over Crypto Exchanges
Crypto exchanges are great platforms to trade and sell cryptocurrencies. Many exchanges have secure cold storage wallets, and users have the ability to exchange crypto pairs (Bitcoin to Ether) or crypto to fiat pairs (Ether to Dollar), but they also have a few drawbacks.
Firstly, users can wait up to a few days before they can liquidate their cryptocurrencies. Exchanges are not regulated or centralized, so their withdrawal limits, fees, and trading pairs may differ.
Nexo, on the other hand, allows users to access their loans instantly, and their platform has compatibility with a host of different cryptocurrencies.
Secondly, crypto on exchanges do not have much utility. Traders could gain profits from selling off their crypto assets and not much else. They also have little to gain from holding onto their assets for a long period.
In contrast, nexo users own all their assets, and their stored coins can earn them dividends if they are nexo tokens. Traders can also use their loans for liquidity but also reaping the benefits of dynamic asset appreciation and future dividends.
Lastly, in the past, users needed to receive loans through peer-to-peer platforms. They are unregulated, and interest and transaction fees varied wildly between lenders. Also, nothing was stopping a lender from just taking a borrower’s crypto assets.
Now, Oracle uses smart loan contracts to remove any middlemen and also minimize the risk of fraud. Also, these contracts are on the blockchain, so it is nearly impossible to interfere with the loan contract once it is executed.
Oracle maintains all loan contracts through the implementation of smart contracts.
The Crypto Credit Line is dynamic. A user’s assets increase in value in their wallet as its market value increases.
Users only repay their loans using a fiat currency or cryptocurrency. And they only pay interest on the money they use.
Finally, users keep ownership of their crypto assets, and they can gain dividends from storing Nexo tokens in their wallets.