Heard of Nexo? It’s a globally recognised financial institution for digital assets. The platform allows users to use their crypto as collateral instead of selling it. Ultimately, it breaks some of the barriers people experience in crypto.
Naturally, this has benefits for both traders and investors. Through a dynamic Crypto Credit Line, it allows traders to gain profits from their stored crypto on the platform.
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 platform’s core, 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 cryptos 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. The company distributed this token with a hard cap of 525,000,000. It raised over $52 million.
Token owners receive dividends of 30% that are distributed according to the token balance. The latest dividend amounted to $ 6,127,981.39, with a total of $9,449,627.26 already paid out. So far, there have been three dividend payouts.
This ERC-20 token is listed as restricted security. Furthermore, users must 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 simultaneously as collateral. Also, a user’s assets are securely and in cold storage using BitGo.
Secondly, a user instantly receives a loan in fiat currency. They either receive it through a bank transfer or a credit card. They can withdraw any amount and 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 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 crypto price in a user’s wallet. If the price movement is positive, Oracle increases the available cash available to the user.
Inversely, suppose the price movement is negative and drops below the loan-to-value ratio. In that case, Oracle sends the user three automatic notifications to pay off part of the loan or add more crypto assets to their wallet.
Suppose a user fails to partially repay the loan or add more crypto. In that case, 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, and automated notifications and employs modelling and algorithms.
Oracle automatically determines loan contracts through blockchain verification and manages the loan contract. It deals with all aspects of 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 updated loan limits depending on the user’s cryptocurrency value.
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 other news related to loan maintenance.
To ensure that Oracle runs optimally, it uses algorithms and models to analyse market data from the different exchanges and external data. Oracle uses this analysis to make the correct loan limits and interest investment decisions.
Smart contracts are digital agreements between two parties with no middleman. Oracle uses smart contracts to execute loan contracts on the platform. Oracle stores the loan contracts on the blockchain.
This means that all contract conditions (repayments, loan limits) cannot be edited or removed. The contract runs until completion, and both parties must meet the contract’s conditions before any transactions.
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 minimises the risk for both the creditor and the debtor. There is a lower chance that a user would take out a loan on an overvalued crypto.
Finally, there are three smart contracts, and Oracle uses off-chain contracts. These 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 can 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 centralised, so their withdrawal limits, fees, and trading pairs may differ.
On the other hand, Nexo allows users to access their loans instantly, and their platform is compatible with a host of different cryptocurrencies.
Secondly, crypto on exchanges does 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 dividends if they are nexo tokens. Traders can also use their loans for liquidity and reap 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 vary 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 minimise fraud risk. 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 their wallet as their market value increases.
Users only repay their loans using fiat currency or cryptocurrency. And they only pay interest on the money they use.
Finally, users keep ownership of their crypto assets and can gain dividends from storing Nexo tokens in their wallets.