Nexo Token
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The Nexo platform and the community NEXO token form the core of the Nexo blockchain-based system whose main business is to provide direct cryptocurrency backed loans. Launched in April 2018, the platform seeks to promote the model of obtaining crypto loans easier than ever, with loans in fiat currency independent of credit score checks. Users are required to deposit approved crypto tokens into their Nexo wallet and receive instant loans.
The system is designed as a way to save money automatically and smoothly, with the added bonus of supporting the flow of customers through their digital assets.
Nexo supports more than 20 cryptocurrencies including popular options like Bitcoin, Ethereum, XRP, Cardano, Monero, etc.
Payments are supported for USD, EUR, BTC, ETH and NEXO tokens.
Blockchain technology provides the backbone of the underlying understanding system at the core of Nexo, the Nexo Oracle division responsible for processing smart contracts based on Ethereum, as well as storing important data for a single loan. Finally, the NEXO token of the platform is an ERC-20 token that works as a security covered interest.
Working Principle of Nexo
Nexo’s business model uses an “under-leverage” strategy to protect both the company and its customers. The Nexo platform allows customers to borrow a set percentage of their crypto value, protecting customers from daily fluctuations in crypto prices, allowing profitable loans to be sustainable. This ensures that the customer is less likely to lose their crypto and ensures that Nexo is protected if the customer defaults on their loan.
The success of the model adds to the real-time tracking provided by Nexo Oracle, which changes the price of the cryptocurrency in real time, drawing data from many sources to avoid any price differences ‘time to give money to the customer.
Nexo Oracle
To get started, the customer must transfer their crypto assets to their secured Nexo account to start using Instant Crypto Lines of Credit.
The Nexo Oracle will automatically calculate the amount available for the line of credit (based on real-time data on the price of a cryptocurrency) and establish a loan based on this data once the verification of the blockchain needs to communicate assets must be. received.
Blockchain oracle is a third-party service that provides smart contracts and external information, serving as a bridge between the blockchain and the outside world.
The loan amount depends on the market value of the crypto assets that the client pledges as collateral. The dynamic nature of the credit line is unique to the NEXO platform: Oracle Nexo increases the loan amount if the value of the client’s assets increases.
In addition, users can use different types of cryptocurrencies to secure their loans, making them less vulnerable to market fluctuations and changes. All assets and deposits are kept in the Nexo Wallet, which is kept in a Class III cold storage with a SOC 2 Type 2 master certified by BitGo.
Receipt of money
As soon as the transaction starts, the customer receives an instant loan in one of more than 40 fiat currencies via wire transfer or a free NEXO card. After receipt, the customer can withdraw part or all of the loan, at any time in one transaction or in several small withdrawals, receiving interest only on what they spend .
Loan repayment
Nexo also offers several services to pay off the loan, including bank transfers in fiat currency or cryptocurrency. Nexo Oracle records the transaction on the blockchain and updates the loan amount as soon as the repayment is received. If a user has enough NEXO tokens deposited in their account to cover the interest on their loan, Nexo offers a 50% refund on the total amount.
However, the user must add these NEXO tokens to their Nexo account for the entire term of their loan to qualify for the full discount.
Unlike traditional loan programs, Nexo does not require monthly payments as long as the outstanding balance is within the loan limit. Once the loan is fully repaid, the client can withdraw their crypto assets from their Nexo wallet or start a new credit process against this same contract.
How does Nexo protect its money
Nexo works as a custodian of all deposits, which means that the company keeps your digital assets safe. It does this through a partnership with cryptocurrency holding solution BitGo.
According to Nexo’s terms and conditions, the Nexo Wallet service is provided “as is” and the company’s end is protected against hacking, tampering, or transmission of computer viruses. These restrictions are common among cryptocurrency interest account platforms, as most of them are security platforms.
That being said, these companies often partner with dedicated spying solutions designed to save user money. For example, BlockFi uses the cryptocurrency exchange Gemini as its custodian.
Nexo’s assets are stored in a multi-signature cold wallet, and the private key is stored offline (via BitGo) locked in a Class III bank vault for physical security. These protections provided the security of the heavy platform in our Nexo review.
Through a partnership with BitGo and Ledger Vault, Nexo’s deposits are covered by $375 million in secure storage. Before you breathe a sigh of relief, remember that Nexo claims $12 billion in assets under management. It is not known what percentage is saved in cold storage and insurance, but Nexo’s insurance and calculations will cover about 3% of the money if everything is lost in an apocalyptic situation.
It has to be said that insurance and cryptocurrency assets are still very new and few platforms offer insurance compared to Nexo, if any.
This is why these types of accounts are called cryptocurrency interest accounts and not cryptocurrency savings accounts – neither your principal nor your interests are guaranteed.
