Nexo (NEXO)

Nexo

Type	Compliant token
Total supply	1,000,000,000 NEXO
Website	http://nexo.io/

Crypto lending platform

Basics

• Started in:
• Mainnet release: Is live (9-2019)
• Based in:

• CeFi
• From CMC (9-2019): "NEXO (NEXO) is a compliant token that is backed by the underlying assets of Nexo’s loan portfolio. NEXO reportedly provides regular passive income to token holders in the form of 30% from the company’s profits. The latest dividend payout to NEXO Token Holders on August 15, 2019 was reportedly for $2,409,574.87. The token also offers discounted interest rates (-50%) on Nexo’s Instant Loans. The NEXO Token can also be used as collateral on the platform in addition to BTC, ETH, XRP, LTC, BNB and several major stablecoins."
• From Decrypt (5-8-2020):

"Nexo is a centralized company that offers interest for those who want to lend their crypto. The company distributes 30% of its net profits to those that hold—and are staking—Nexo’s native, eponymous token."

This resulted in $6.1M in dividends for that year.

History

• When Celsius got into trouble during the 2022 bear market, Nexo claimed it was not in a similar position (28-6-2022):

"Nexo, which points to its real-time attestations from accounting firm Armanino as proof that it hasn’t gone the way of its competitors, has also had to contend with a Twitter user who claims its co-founder Kosta Kantchev embezzled funds from a charity to build “a palace the size of a high school.”

“He claims a lot of things, but that we are insolvent. is not one of them,” Nexo co-founder and Managing Partner Antoni Trenchev told Decrypt. “It’s a prediction that we will be insolvent by the end of the year, and they haven't backed this up in any meaningful way.” (Disclosure: Nexo is one of 22 investors in Decrypt.)"

Unlike its competitors, Nexo says it only makes overcollateralized loans. That means it tends to pay lower yields than BlockFi and Celsius, but exposes clients to “basically no risk,” according to its website."

Audits & Exploits

• Bug bounty program can be found [insert here].
• SafeCEX scored it 0% (8-12-2022):

"⌛️ 6 days since Proof of Reserves

📎 Announcement

🔎 Assets included:

❌ Merkle tree not available or not verifiable online

❌ Merkle tree not open sourced

❌ Wallet addresses not made public

❌ Wallet ownership not audited by third-party

❌ Wallet ownership not proven publicly by custom message"

Governance

How Decentralized is Nexo?

• Was classified CeFi on the HackerNoon rankings of 25-4-2019. "CeFi products are custodial, use centralized price feeds, initiate margin calls centrally, centrally determine interest rates, and centrally provide liquidity for their margin calls."

• A BIG side note, is that the blog was written by Kyle J Kistner who is Chief Vision Officer at bZx. He gave his own project the highest ranking. What a surprise.

Is it trustworthy?

• Seems to have been behind the Zeus Capital short scheme targeting LINK in July 2020.
• From this extensive blog criticising Centralized and Decentralized Finance (16-12-2019):

"NEXO is a “spinoff” of Credissimo, which is a retail lending company from Bulgaria. NEXO filed for SEC compliance for their token sale with a company registered on the Cayman Islands.
Credissimo focuses on short term retail loans in Southern and Eastern Europe and seems to be registered in Malta. Our guess is that they launched the NEXO platform as a way to gather more liquidity and penetrate the crypto lending market. To do this, they launched an ICO for NEXO tokens — these are both discount tokens for loans and are to share dividends from profits by the company. This makes the NEXO token a clear security, which raised $52M in March 2018. At the time of writing, NEXO marketcap is $52M.
The token is holding up its value very well despite the overall bear market thanks to the perception of dividends from profits, which give the token value. NEXO lacks regulated markets, typical for most security tokens —its largest market is Huobi, which historically just doesn’t give a damn.

NEXO is apparently incorporated everywhere and nowhere at the same time. We can assume that if things fall apart, Delaware (where a company named NEXO Inc. got registered in 2018), Bulgaria or Cayman Islands (maybe Malta?) is where all the legal actions will lead. Nevertheless, NEXO is backed by an established company and is exposed to a plethora of regulators from various countries that do give us a bit more confidence in the platform — meaning they should not just suddenly go “bankrupt” and exit-scam their users.

The security of the funds deposited on the platform is a different story. This is a recurring problem that all the centralized platforms share. Centralized lenders use a third party insurer (usually BitGo) who only insures funds that are stored in cold storage and held by BitGo as custodian. NEXO claims to store 95% of funds in cold storage. This may slow down the process of withdrawals of users' funds but it is a price worth paying for security. The question remains if this insurance policy applies to those who lend their cryptoassets or only to those who use their cryptoassets as collateral.

At the time of writing, the annual percentage rate of the loans starts at 5.9% if the user is repaying or taking out the loan using NEXO tokens. Otherwise, the annual percentage rate for borrowers is 11.9%. The interest for lenders of stablecoins and FIAT is 8%. How NEXO tokens make a profit out of -2.1% profit margin is beyond our current knowledge. An assumption is that the company accepts the loss in exchange for boosting the use and prices in this velocity sink of the NEXO tokens.

NEXO is a master of vague responses. If a company is supposed to pay out dividends based on profits, they should release regular statements as to their operations (as is normal for a typical publicly traded entity). The problem is both NEXO and Credissimo are private entities and have no obligation to make their earnings public, other than pressure from NEXO token holders.
The token holders should have “rights” to dividends, however, this is not in any way enforced through blockchain. Therefore, their only avenue is to prosecute — and there, they are left with the muddy waters of NEXOs web of shell companies and Bulgarian parent company. Good luck with that.

On a positive note, NEXO does pay out dividends, but schedules are never clear. The latest dividends were paid out in August 2019, with a yield below 3% APR. From a short history of dividends payout it seems that volume is growing, while the number of staked tokens is stagnant.
The dividends are based on profits, however, no earnings statement has been shown to the public. The dividend value can therefore be taken only at face value.
It is important to note that your personal yield on the token can vary significantly based on the price where you bought your NEXO tokens at. Secondly, NEXO has added a “Loyalty dividend”, which is essentially a further velocity sink, which rewards not moving the tokens.

The yield plays an important role in case you want to utilize Nexo for borrowing and use the token as collateral because not only you will get a discount on the loan but also receive dividends for that collateral.

NEXO summary:
+ Decent yield (also on fiat currencies)
+ Credissimo is a legit lender, ensuring NEXO will always have customers
+ NEXO tokens are eligible to collect dividends when used as loan collateral
- Web of jurisdictions and shell companies
- Lack of clarity regarding NEXO earnings/dividends
- Lack of clarity in the NEXO token yield arbitrage
-Who are the borrowers?"

Tech

• Whitepaper can be found [insert here].
• Code can be viewed [insert here].
• Built on:
• Programming language used:

Oracle Method

• Got Chainlink integrated (8-7-2020).

Compliance

Nexo got raided by Bulgarian police as part of an investigation into suspected money laundering and tax crimes (1-2023).

Roadmap

• Can be found [Insert link here].

Usage

• Claims to have 200.000 Nexo users, a 10+ years track record in online lending and over 1B in crypto loan requests.
• From Our Network #22 (22-5-2020):

"Earlier this week, Nexo took the final step and locked up their remaining 997.4 WBTC (~$9.2m USD) in Maker, as expected. And just yesterday, Nexo minted another 1.5k(!) WBTC - beating their last record. This latest mint ultimately made it into Maker as well. The result is a massive spike on the "WBTC in Maker""

Pros and Cons

Cons

• Seems to have been behind the Zeus Capital short scheme targeting LINK in July 2020:

"In this article, Ioan talked to multiple former @Nexo employees. These employees individually confirmed that Nexo was behind Zeus Capital and that Nexo had short position on $LINK. This lead to a wave of Nexo employees leaving, some who were even threatened and assets frozen. A former@Nexo employee even provided an early draft of the Zeus Capital report, written by Simeon Rusanov, Nexo head of research. A copy of the 11 page pre-release draft is linked in the article."

Team, Investments, partnerships, members

Team

• From Decrypt (5-7-2022):

"Nexo said it will continue growing throughout the bear market and is seeking to fill a range of positions that include engineers and marketers. The company claims to have tripled its headcount in the past year while keeping its “expenses optimized and fundamentals solid,” according to a tweet that directed talent to its hiring page."

Investments

(as of 9-2019 on their website)

• Part of (9-3-2020) the portfolio of Arrington XRP Capital.
• Is one of the investors of Decrypt (28-6-2022).
• Just one day after suspending customer withdrawals, Singapore-based crypto lending firm Vauld has struck a deal to be acquired by rival company Nexo (5-7-2022).

Partners

(as of 9-2019 on their website)

• BitGo (Nexo Custodian), Securitize (who is also partners with BitGo), Onfido (compliance partner), TrueUSD and UCL CBT

Member of

(as of 9-2019 on their website)

• Crypto Valley, Enterprise Ethereum Alliance, Bitcoin Association Switzerland, The Bitcoin Foundation and Swiss Finance + Technology Association