Crypto lending is getting a lot of attention recently. Before the blockchain revolution a few years ago, it was not thinkable to do everything via blockchain-based assets, but now it is. Almost everybody predicts that the crypto lending industry will get even bigger in the next few years. This is possible because theoretically, you can tokenize every asset into the blockchain. Imagine when many trusted companies or government entities issue gold-backed crypto assets or backed-by-real-estate crypto assets. Suddenly, getting a loan via the crypto ecosystem will become much more attractive because they are naturally faster, cheaper, and more automatic compared to a loan program in a more traditional system.
And this is where Nexo plays its role. Nexo is one of the most popular cryptocurrency lending and loan platforms, created by a European FinTech company Credissimo. Nexo aims to become the leading platform when the crypto lending industry gets more serious. They are very optimistic that crypto lending will eventually become much more mainstream than today. At the present time, the majority of crypto loans are still targeted toward crypto traders and enthusiasts.
So, how does Nexo work, and what’s the history behind it? Let’s find out!
History of Nexo
Nexo founder, a European FinTech company called Credissimo, has a long history for more than ten years ago. Credissimo was created in 2007 by four founders, and their mission was to disrupt the inefficient lending market. After seven years of growth, Credissimo finally went public with its initial public offering (IPO). At the time, they successfully listed 2.5 million shares in public markets. Just two years later after they went public, Credissimo integrated a Bitcoin loan repayment option into its business. They also became the first company that used the Chatbot automatic lending feature.
Finally, in 2017, they launched Nexo, the first instant crypto-backed lending and loan platform. To fund the Nexo platform, Credissimo was using the then-popular initial coin offering (ICO) program. Nexo’s ICO eventually gathered $52.5 million from the participants. Its ICO success has transformed Nexo into one of the largest crypto lending platforms today (if not the largest).
During the first year of its launch, Nexo often bragged about its platform being licensed and regulated. You can even read their official statement here about their license. Nexo team also cooperated with BitGo and PrimeTrust to safely ‘guard’ the crypto collaterals. The marketing team of Nexo often tried their best to show the world how fast and secure the loans inside the Nexo platform due to their cooperation with BitGo and PrimeTrust.
Purpose of Nexo
The idea here is quite straightforward. Nexo wants to become the leading cryptocurrency lending and loan platform. The team believes that the cryptocurrency lending industry will become huge in the next few years, and it will become much more mainstream than today. And when it happens, they want to be there, as the ‘face’ of the industry.
And they have done everything to achieve this goal. They are marketing their project heavily, and they also try to make sure they are compliant to the regulations, especially in countries such as the United States. As of today, the Nexo token is not normally-registered security with the SEC (U.S. Securities and Exchange Commission).
The SEC document shows that the Nexo team is allowed to not register its NEXO securities due to Regulation D, Rule 506(c). It means that the NEXO token is ‘defined’ as restricted securities. American Nexo token holders are required to hold their NEXO holdings for at least 6 to 12 months. And they also need to register the securities when they want to sell their NEXO tokens.
Of course, there’s a difference between the Nexo platform and the NEXO token. Well, you are not required to use the NEXO token if you want to use the platform to lend your crypto assets or to get a loan. If you are there to get a loan, you can ‘ignore’ the existence of NEXO token altogether. The token itself has some benefits. You can get a 50% discounted interest rate on the loans if you use the NEXO tokens as your collaterals. And, holding NEXO tokens in your Nexo account will give you some dividends. Just like how some stocks pay dividends when you hold them for a certain period of time.
How To Get A Loan With Nexo
The process of getting a loan with the Nexo platform is quite automated. You need to have crypto assets that are accepted as forms of collateral by the Nexo team. They are BTC, ETH, LTC, XLM, XRP, NEXO, BNB coin, and stablecoins. They also promise to start accepting other altcoins before the end of this year (2019).
To begin, you need to verify your account with Nexo. For basic verification (without uploading any document), you can get a loan up to $10,000. But of course, if you decide to upload a document for KYC/AML verification (such as passport or driving license), you will be able to upgrade your status to “Advanced Verification” where you will be able to get dividends, Nexo card, and even up to $2 million bank withdrawals. The verification process itself is done by a third party KYC service provider, Onfido. Don’t worry, though. The whole verification process is very easy, and it won’t take more than a few minutes.
Once you finish your verification, you need to deposit your crypto assets into your Nexo account as collateral, and then you will be able to see an instant credit line. You will see how much loan you can get, and you can instantly ‘accept’ them without any manual authorization nor credit check from the Nexo team. The money from the loan can be transferred directly to your local bank account, or you can spend them with your Nexo card. You can even accept the loan in the form of stablecoin, just in case you don’t want to deal with slow banking processes. If you decide to choose local bank transfer, you can get the loan within one business day. International bank transfers require about 2-5 business days.
And when you have repaid all of your loans, you can withdraw your collaterals back to your Nexo account (and from there, you can withdraw them to your own crypto wallets). The whole process is quite easy and instantaneous.
How To Earn Interest With Nexo
Above, we talk about how to get a loan with Nexo. But how if we want to become the ones who lend our money to these borrowers? Well, the process is quite simple. You can read the straightforward process here, but the idea here is that you can only lend your stablecoins along with your fiat currencies. Currently, you can earn an 8% APR on USD, GBP, EUR, USDT, TUSD, PAX, DAI, and USDC. There are plans to integrate BTC and other volatile cryptocurrencies, but for now, you can only earn interest with Nexo if you have stablecoins or fiat currencies.
Keep in mind that Nexo’s custodian, BitGo, is considered ‘very secure’ among other players in the same industry. Custodial assets by BitGo are covered with a $100 million insurance policy. BitGo itself incorporates Crypto Security Standard level 3, and it is SOC 2 compliant. Not only that, crypto assets stored in Nexo are 95% secured in multi-sig cold wallets. Theoretically, hackers cannot remotely ‘access’ Nexo crypto assets.
The good thing is that the Nexo team is highly professional. There’s no known controversy regarding Nexo, at least until this post was written. They have been thinking of everything from the ground up. From a regulation perspective, from a technical perspective, and even from a security perspective. Everything looks good so consistent so far, and the Nexo team keeps trying to improve its platform.
There are some well-known competitors to Nexo. One of them is Celsius.network. It works almost the same way with Nexo, just that they have different lending rates to attract people to their platform. Another known competitor to Nexo is Dharma. The homepage states that you can earn 8.1% interest from anywhere in the world, 0.1% higher than what is promised on Nexo.
Other than these two, crypto exchanges with margin trading feature can also be seen as indirect competitors to Nexo. Because, you know, a lot of crypto-asset lenders are usually still crypto traders themselves. With the rising popularity of crypto margin trading, some people might choose to ‘lend’ their crypto assets directly on these exchanges, and they might be able to get better rates.
NEXO In The Crypto Market
At the time this post was written, one NEXO token was worth $0.092521 with market cap of $51,811,697 USD and more than $8 million daily trading volume. It was ranked 77th in the crypto rankings by market cap. You can trade NEXO tokens on crypto exchanges like Hotbit, Huobi, Bitrue, HitBTC, or LiveCoin.
Nexo has a bright future in the crypto lending industry. It may become the leading platform for many years to come, considering how popular it is. Most people who are bullish about crypto and crypto lending most likely would be optimistic on Nexo as well.