So I've tried the Nexo Earn platform for two weeks where you can earn up to 12% APY on stablecoins and up to 8% APY on cryptos. to which the interests earned are compounded daily. I gotta say, my experience so far has been flawless where my interests has been transferred to my Nexo wallet consistently every day at the same time without any issues.
Until I dig deeper into the numbers.
I deposited 0.04 BTC into the Nexo Wallet and maintained more than 10% of my portfolio in Nexo tokens. Here's the daily interests I accumulated for the past 14 days.
As you can see, I'm earning 0.00000639 BTC daily. At first, it looks like my interests are not compounded daily. Yes, 0.04BTC is just a small amount where my earnings might be compounding but it's negligible, so I pull out my spreadsheet to calculate and confirm if the interests I'm earning is as what Nexo mentioned.
Let's start with briefly show the equation on how Nexo's daily interests are simply calculated:
Daily interest = Principal amount (in original cryptocurrency) x (APY/365)
From my example above, with my principal amount of 0.04 BTC and an APY of 6% earn in BTC, the calculation is:
Daily interest = 0.04 * (0.06/365) = 0.000006575. Hmmm, a discrepancy?
Here's the daily interests that I should be earning with 6% compounding APY for the next 14 days.
Here's the amount that was reflected in my wallet. Technically, I'm actually earning around 5.82% APY instead of the 6% that was advertised.
The question is: does this discrepancy matter? Well, from what I'm earning right now, assume the BTC price to be $16k, the difference between the earnings for the past 14 days is only $0.04, which is basically negligible. Now let's for example I change the principal amount to 1 BTC just to measure the magnitude of the discrepancy with more BTC.
The difference in earnings in USD is actually only $1.10 , assuming 1 BTC = $16k. Still very negligible after 14 days. How about extending this calculation to one year?
As you can see , if you HODL for a year without withdrawing and assuming the BTC price fixed at $16k, the difference in the interests earned is only $30.16.
However, do note that if the BTC price increases like right now (1 BTC = $18,261.33 from the time of writing), the discrepancy will start to increase, but the discrepancies calculated is still negligible, and that Nexo is still currently paying higher interests than the likes of Celsius. You may be wondering: Why I never mentioned the reason Nexo are paying at a slightly lower APY than what was advertised? Well I did raise a support ticket asking this question since last week, but they haven't get back to me for an answer. Leave a comment below if you have an idea why. Until then, keep HODL-ing!
