Nexo.io has emerged as a major player in the crypto-lending market in the last three years. The company has seen immense growth, attracting over a million users and $12 billion assets under management, to become the largest lending institution in DeFi. This growth can be attributed to Nexo’s pioneering efficiency in creating a secure and stable financial lending system, centered around blockchain systems and cryptocurrencies. Through the ease of access, automation, and security implemented through the usage of these burgeoning technologies, Nexo’s platform presents a disruptive banking service that will continue to grow alongside the use of digital assets.
Nexo: An Attractive Alternative
Nexo aims to directly solve the short-term liquidity problems associated with the financial value of digital and crypto-assets. These assets are estimated to have around 5 trillion dollars of “idle” value, due to the:
- Lengthy liquidation times
- High withdrawal fees
- Capital gains taxes
- Lack of trust & transparency in digital asset exchanges
Nexo allows clients to unlock the present value of their digital or crypto assets through loans to pursue other investment opportunities and short-term needs. This is facilitated without investors needing to give up ownership of their assets in the long run.
Due to fixed income in traditional markets offering extremely low yield, investors have been flocking to Nexo and other crypto lending protocols where yields are as high as 12 percent. But how exactly is Nexo able to sidestep the handicaps that have historically plagued the liquidation of cryptocurrencies, while also managing a growing amount of investors? The answer lies in the Nexo Blockchain Oracle
Nexo can autonomously regulate all transactions in the form of the Nexo Blockchain Oracle. Nexo Co-founder and Managing Partner Antoni Trenchev, describes it as an:
“algorithm that tracks all client accounts, automatically checks clients’ collateral, issues credit, pays out daily interest and, if need be, executes liquidations… a proprietary algorithm [that] smoothly, instantly, and automatically executes all transactions and processes on Nexo”
Simply put, this algorithm is key in supporting Nexo’s efficiency as a banking system. When a client transfers their assets to Nexo, they are stored on the Blockchain, which keeps them secure. The Nexo Oracle then utilizes smart contracts to automatically evaluate loan contracts based on the client’s deposit, triggering an action if the conditions of the contract are satisfied.
The code also keeps up with real-time appreciation of stored assets and automatically increases loan limits. In this manner, through the use of an automated algorithm, Nexo can provide both a secure and undeniably quick and efficient system of liquidating digital assets without any of the aforementioned hassles, while being able to operationally keep up with the rapid growth in investors the company has served in recent years.
Nexo Security And Client Protection
Visionary Financial had a chance to speak with Nexo’s Co-founder, Antoni Trenchev, to learn how the platform is maximizing security and providing client protections.
Aside from Nexo’s efficiencies, security remains a top concern for investors looking to store their assets on crypto-lending platforms like Nexo Finance.
People can remain skeptical about a platform’s ability to operate and oversee financial transactions through automated algorithms. This is present in a market that is going through maturation and has to deal with digital asset volatility. In some scenarios, competitor platforms have had issues with automated algorithms digesting market volatility.
On top of this, just like anything else centralized around technology, these algorithms are always prone to hacks or bugs. However, Nexo looks to address these issues to ensure the security of client’s assets in a multitude of ways.
From a bird’s eye view, Nexo itself is very secure. Trenchev reports that:
“Nexo’s security system is such that we have, to date, never suffered a hack… Nexo has never suffered a major bug in our near-three years of existence which is an attestation to the stability of our automated platform”.
The company takes great care in diligently stress testing updates to their automated Oracle system before launch, and their tech team has obviously done a great job to weed out any bugs that could affect operations or client assets. In tandem with this, Nexo tackles direct security of client assets by storing them in a custodial wallet, meaning that a third party stores and secures the asset. Through this diversification in different top-tier storage patterns located in a multitude of geographic locations, Nexo limits the risk of a security breach due to hacks.
However, hacks and bugs aren’t the breaches that could occur on an automated system. The code itself could be unprepared for unexpected events, tied to the price of a currency– as seen in March 2020, when the price of Ethereum crashed and many lending institutions automatically liquidated assets for practically nothing.
Trenchev told VF they are well prepared for these events. Nexo only lends out funds on an overcollateralized basis, meaning that they will have always have a source of liquidity to protect interest-earning clients and against losses. This policy of overcollaterization is strengthened by the Nexo Oracle: certain predetermined conditions of collateral MUST be met, meaning that this source of liquid funds should function impeccably.
Also, the Nexo oracle constantly monitors a customer’s loan to value ratio, automatically selling off portions of a client’s assets during a drop in the price of collateralized funds. Though undesirable, this automatic liquidity keeps its business and clients safe from loan defaults. Ultimately, at the very core of its business, Nexo isn’t solely an automated software– the company aims to always keep a centralized human element in their company by also providing reimbursements for any unjust liquidations, providing yet another layer of security to its lending services.
Conclusion
Nexo.io continues to serve as an attractive alternative for investors looking to capitalize on higher yields, through its efficient and highly secure lending service centered around digital assets and blockchain technologies. Despite being an established name in the industry, it seems like Nexo is just getting started as a disruptive pioneer in the space. Continuously seeking to scale their business and improve upon their services to clients and investors, Nexo’s future goals include acquiring a banking license while also keeping their services updated with local regulations around the world, and performing constant technological maintenance to ensure that the Oracle system performs consistently up to standards.
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