Imagine using your cryptocurrency assets as collateral when securing a loan rather than undergoing the pain of changing them directly into fiat currency? Well, the cryptocurrency industry has undergone a tremendous revolution in the past decade. This evolution has seen hundreds of cryptocurrency assets and technologies invented and innovated to beat the fierce competition. Companies are developing assets that address different inadequacies of blockchain technology.
One of these solutions is the Nexo project, which is taking the industry by a storm. Nexo’s core value in the industry is to provide crypto-backed loans. Cryptocurrency owners can now use their digital assets as collateral for a fiat currency loan instead of selling off their digital assets.
Well, Nexo has received a warm welcome into the industry as it allows users to keep their cryptocurrency and exploit its future market adventures. In this article, we will look at Nexo in detail and all it has to offer.
What is NEXO?
NEXO is a Switzerland based cryptocurrency agency that provides loans by accepting cryptocurrency as collateral. These services are not limited to Switzerland but are available globally. Cryptocurrency owners can now get fiat money and still own their digital currencies through the Nexo crypto credit line.
Nexo was founded by high profile financial gurus mainly from Credissimo, which is a reputable European FinTech company. The company is headed by Kosta Kantchev, who is the chief managing partner. He co-founded both Nexo and Credissimo.
He is deputized by Antoni Trenchev, a former member of Bulgarian National assembly and an e-commerce scholar as well as Georgi Shulev, the co-founder of Consestimate and a banker.
The IT is led by Vasil Petrov, who was responsible for developing the Nexo’s reputable infrastructure. He has over 16 years of experience in back end computer development.
Techcrunch and Arrington’s XRP founder Michael Arrington is the company’s chief advisor.
Nexo runs on an ultra-modern technology dubbed Nexo oracle. The technology monitors and regulates all the activities that are carried out through the system. These include analytics, loan distributions, wallets, assets monitoring, and account management.
The company is working on desktop and mobile platforms and will be available to use soonest. To increase the adoption rate of this technology, the company has plans to incorporate a physical credit card on the platform.
How it Works
Creating an account
Like any other platform, you have to be an account owner to access its services. Registering an account on Nexo’s platform is free of charge. After opening an account, you will be required to verify your details. This is in line with KYC/AML regulations. Verifications are done through a reputable Know-Your-client company, Onfido, which makes the process automated and takes only a couple of minutes.
There are three different stages of verifications, and each has different withdrawal and deposit limits. Primary verification is similar to the registration process. Advanced verification requires the user to provide a passport photo, ID, and proof of residence.
After the verification process, you will have maximum access to the platform’s services.
Acquiring a loan
Here are the simple steps to follow before you are awarded credit.
- Deposit Cryptocurrency into your overdraft wallet- Nexo only accepts Bitcoin, Ether, XRP, Litecoin, NEXO tokens, and Binance Coin.
- Select a loan amount- This amount becomes available as soon as your assets reflect on the blockchain system. You can access the loan directly without any tedious verification processes.
- Withdraw The loan- You can spend your loan directly through the physical credit card or withdraw it into a bank account.
The amount of loan available in your account is adjusted as per the underlying asset prices. You can deposit more cryptocurrency to increase your loan limits. Additionally, you are required to deposit twice the value of the cryptocurrency of the expected loan amount.
For instance, if you want a $1,000 loan from Nexo, you will be required to deposit at least $2,000 worth of cryptocurrency.
Finally, the loan has a one-year maturity and has to be renewed after every 365 days.
Repaying the Loan
Nexo interest rate is 5.9%, which is remarkably lower than bank and credit card rates. Interest is calculated on the money you use from your loan limit and on the days you owed the money. There are no hidden fees and minimum loan repayments on Nexo.
As mentioned earlier, Nexo locks up the deposited amount of cryptocurrency once you pick the loan. You can repay this loan through cryptocurrency or fiat money at any time. When paid, you can transfer your digital collateral assets to an active wallet.
Loans and Volatility
Cryptocurrencies are very volatile assets, and prices can change with as much as a margin of 50% in a matter of days.
To curb this challenge, Nexo, through its oracle platform, gives a high Loan-to-Value (LTV). In traditional loan systems, LTV is given to loanees with high default risk. High LTV means that the collateral taken is of more significant value than the loan given, usually twice as much.
For instance, if you want to borrow $1,000 from Nexo, you will have to deposit twice the value of cryptocurrency $,2000, as is the case with Bitcoin. This ensures that price drops do not disadvantage the company, and price rise benefits the loanee.
Nexo has managed volatility challenges through this mechanism
Nexo owns NEXO token, which is a security token. As with all securities, NEXO token is, therefore, a fixed asset and is compliant with the Securities and Exchange Commission Regulation D Rule.
Additionally, Nexo’s has partnered with BitGo for insurance custodian services. BitGo is a reputable insured custodian and is backed by Goldman Sachs and is a platform SOC 2 Type 2 certified. It has over $100 million in insurance protection
Let’s look at Nexo against other financiers. Firstly, we have Nexo vs. SALT and then Nexo vs Celsius Network
Nexo vs. SALT
Salt is Nexo’s chief competitor in the industry. Here is a short comparison
Instant and Automatic
As soon as the digital assets exceeds the collateral assets
Prior request has to be forwarded by the loanee even if the loan is fully paid
Membership Fee, a late penalty fee
The US Only
Dividends, Discounts and asset-backed
Nexo vs Celcius Network
Celcius Network is another close competitor to Nexo in providing cryptocurrency backed loans. Here is a quick comparison between the two financiers.
12.7% current yield
3.0% current yield
Minimum loan limit
Over 45 fiat currencies and Stable coins globally
USD and Stable coins
50% – 90% of the collateral digital asset depending on the asset
25% to 50% depending on the amount of the collateral asset
Depositors BiGto hot and cold storage
Depositors BitGo Hot and Cold Storage
Nexo Card Review
Another amazing feature is the Nexo crypto credit line card. All countries that allow cryptocurrencies are legible Nexo card countries. Whenever you deposit digital assets onto your account, a Nexo credit line is created allowing you to utilize your card using the deposited cryptocurrency as the collateral.
Nexo Card Features
- The card is linked to the Nexo Phone app and can be operated directly from the phone
- It is linked to your assets and can be used at over 40 million merchants across the world.
- You can freeze and anti-freeze your card through your phone
- Manage your virtual cards through the app to enhance online security
- Allows you to update your PIN at any ATM
- ZERO fees on all transactions: Nexo withdrawals fee is zero, no maintenance fees, no hidden fees such as surcharge fees.
Cryptocurrency companies will not cease to amaze us with their new efficient solutions. Nexo is one project that introduces the aspect of trust and belief in cryptocurrency, confidence that cryptocurrency will one day take conquer the financial sector as a whole.
However, it is too early to make any bold predictions with NEXO token trading well below $1 value. Nevertheless, with such an ambitious experienced and skilled team of leaders, Nexo will soon take its space within the cryptosphere.
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