What is Nexo? [Step-by-Step Guide For Beginners]

Updated on: May 16th, 2020
This content has been Fact-Checked.
What is Nexo? [Step-by-Step Guide For Beginners]

Nexo is one of the world’s leading regulated financial institution for digital assets. “This is not a startup. This is a team that has a successful track record of over 12 years in FinTech and over $2+ billion processed just with Nexo,” said Antoni Trenchev, Nexo’s co-founder and managing partner, while describing the company. So what is the business that sits behind the name Nexo? Keep reading to find out.

Nexo At a Glance: Bringing Utility to Crypto Assets

Until now, the avenues available for crypto investors to enjoy and grow their wealth have been extremely limited. The only option was to sell off their crypto once it had appreciated in value. Nexo provides a solution to this problem by allowing users to borrow against their crypto rather than selling it.

Nexo’s Instant Crypto Credit Lines allow users to take out a fiat loan by staking a variety of supported cryptocurrencies, in their Nexo Wallet to serve as collateral. The list of accepted collateral currently includes Bitcoin, Ethereum, Litecoin, Ripple, Stellar, Bitcoin Cash, EOS and others, with the Nexo team continuously working to make more assets available on the Nexo platform.  Once the collateral has been deposited, clients have instant access to the value of their crypto in 40+ fiat currencies across 200+ jurisdictions. There are no hidden fees or taxes and the whole process can be done in a few simple clicks.

What makes Nexo unique in the blockchain space is that their Instant Crypto Credit Lines are dynamic, meaning that should your assets appreciate in value, your credit limit grows proportionally. Clients may also withdraw as much or as little from their credit lines as they wish, accruing interest only on the sum they actually use.

Nexo also has a company token: Тhe NEXO Token is the world’s first compliant, dividend-paying, asset-backed token. Through its token, Nexo shares 30% of its profits with NEXO Token Holders in the form of dividends. Until now close to $3.5M have been distributed to NEXO Тoken holders over two dividend distributions in December 2018 and August 2019.

NEXO owners can also use their tokens as collateral for loans, bringing them discounts on interest when using the Instant Crypto Credit Lines.

Here is a closer look at the NEXO Тokens:

Solving the Biggest Problems in the Crypto Space

The three biggest problems in the crypto space are:

  • Slow access to the liquidity of assets.
  • Lack of utility features for assets
  • Lack of trust and transparency.

Slow Access to Liquidity of Assets

Аccessing the liquidity of your crypto can be a slow process that naturally causes a lot of problems for crypto owners and holds back the adoption of crypto. There are a host of different exchanges and the asset that you are interested in may not be available in all the exchanges. Plus, the requirements, procedures, and withdrawal limits differ from exchange to exchange. As such, it may take several days for you to liquidate your tokens.

Nexo has identified this as one of the biggest reasons behind the slow adoption of crypto. They empower their clients to receive cash globally and instantly so that they may capitalize on various investment opportunities by unlocking the liquidity behind their crypto immediately through the Instant Crypto Credit Lines.

Lack of Utility Features

Currently, cryptocurrencies lack utility, and crypto investors do not have a lot of options when it comes to making money off their assets. More often than not, they will have to sell their crypto for fiat currencies. Unfortunately, this means that if their asset appreciates in value, they will not be able to enjoy any of the profits.

By using Nexo, clients retain 100% of their crypto. They do not need to sell their assets; they can simply use Nexo’s Instant Crypto Credit Lines to borrow against their crypto without losing ownership of it. This allows Nexo users access to the liquidity they need while retaining the upside potential of their crypto.

Lack of Trust and Transparency

Up until now, it was difficult to receive loans via crypto assets as the required security standards and transparency were not maintained. Crypto loans were usually done through P2P lending, which often led to fraud and dubious interest rates. Since rules were not strictly enforced, crypto lending could not be validated via legal methods.

Nexo uses transparent loan contracts to secure and guarantee the ownership of digital assets. The details of the contracts are stored on the blockchain and are publicly available. It is important to note that Nexo users retain ownership of all their cryptocurrency while using Nexo’s services.

How Does Nexo Work?

The lifecycle of a Nexo Instant Crypto Credit Line can be broken down into the following steps.

Step 1:
To begin using the Instant Crypto Credit Lines a client transfers their crypto assets into their secure Nexo Account. The Nexo Oracle then automatically calculates the available amount for the credit line and sets up the loan once the relevant blockchain confirmations for the collateral assets are received. The loan limit is based on the market value of the crypto assets pledged as collateral. As the credit line is dynamic, the Nexo Oracle increases the loan limit should the client’s assets appreciate in value. Another unique feature of the Instant Crypto Credit Lines is that users may utilize a basket of various cryptocurrencies to back their loans, leaving them less vulnerable to the volatility of the crypto market. In regards to security, all custodial assets placed in the Nexo Wallet are held in cold storage in Class III bank-grade vaults with the SOC 2 Type 2 certified leading crypto custodian BitGo.

Step 2:
The client instantly receives their loan in one of 40+ fiat currencies via bank transfer or the free Nexo Card. They can then withdraw part or all of their loan, any time, in a single transaction or multiple smaller withdrawals, accruing interest only on what they actually spend.

Step 3:
When it comes to repaying the loan, Nexo offers multiple options. Loans can be paid back via a simple bank transfer in fiat currency, or with cryptocurrency. The Nexo Oracle records the transaction on the blockchain and instantly updates the loan limits once the repayment is received. If a user has enough NEXO Tokens staked in their account to cover their accrued loan interest, Nexo provides a discount of 50% on this total amount. However, the client must stake these NEXO Tokens in their Nexo Account for the entire duration of their loan to receive the full discount. Users can also repay loans by partially selling the crypto assets in their Nexo Account. As long as the outstanding balance is within the available loan limit, Nexo doesn’t require any monthly repayments. If the loan is fully repaid, then the client can withdraw all of the crypto assets from their Nexo Wallet or start a new credit line against the same collateral.

Who Can Use Nexo?

  • Investors looking to make money off their crypto holdings, without losing ownership of their assets
  • Businesses of all sizes
  • Miners
  • Hedge funds who are looking to take advantage of new investment opportunities by leveraging their crypto portfolios
  • Pension funds

The Technology behind Nexo

Nexo leverages cutting-edge technology with the team’s 12+ years of experience in FinTech to develop a high-quality solution that delivers dynamic credit lines backed by digital assets.

Let’s look at some of the technologies at the core of Nexo

The Nexo Oracle

The Nexo Oracle lies at the core of the Nexo platform. The following diagram shows you how the Oracle works:

What is Nexo?

The Nexo Oracle is responsible for the following functionalities:


#1 Development of loan contracts

When a credit line is started, The Nexo Oracle automatically takes care of disbursing cash, asset maintenance, notifications, and the overall management of the loan.

#2 Development of real-time data aggregation

The Oracle collects data from multiple exchanges to perform accurate, real-time asset valuation. As per the documentation, the Nexo Oracle maintains live data aggregation from at least six independent sources (exchanges), which minimizes overall risk for both Nexo and the client.

The Nexo Oracle also detects live changes in asset value and recalculates loan limits. If the asset increases in price, the loan limit is automatically and instantly increased.

#3 Developing repayment analytics module

The Nexo Oracle automatically records repayments and accounts for all transactions made by clients. The system automatically maintains interest repayments, outstanding balances, and up-to-date loan limits.

#4 Developing automated notifications

Since the loan maintenance is executed automatically by the Nexo Oracle, no manual intervention is required and all notifications are automatically generated for Nexo’s users.

#5 Development of modeling and algorithms

Nexo incorporates big data analyses, self-regulating algorithms, and prediction modelling in the Nexo Oracle to secure the proper functioning of the system. This ensures that the information obtained from the different external data sources is used for appropriate on-time business decision-making.

Loan Contracts and Smart Contracts

What is a smart contract?

Think of what a contract is and how it works in the traditional sense. A contract is a legally binding document between two parties, which is overseen by a third-party, usually a lawyer. A smart contract works similarly, except for two game-changing modifications: it is self-executing and it does not need a third-party for overseeing.

By its formal definition, a smart contract is a computer protocol intended to digitally facilitate, verify, or enforce the negotiation and execution of a contract. It allows two parties to directly interact with each other, without going through a third party.

The term “smart contract” was coined by cryptographer Nick Szabo back in the ’90s in his article “Smart Contracts: Building Blocks for Digital Markets.” To understand the philosophy behind how they work, let’s take Szabo’s vending machine example.

Here is how you usually interact with a vending machine:

  • You choose the item that you want.
  • You put in some cash inside the machine.
  • The machine gives you the item.

Pretty straightforward right? However, there are two things that you need to note during this entire interaction:

  • Each step can’t be executed until the preceding step has been fulfilled. Eg. You can’t put in the money until you select what you want. Also, the machine can’t give you an item until you put in the money.
  • During this entire interaction, you and the machine are directly interacting with each other. There is no third party, like a shopkeeper, between the two of you.

This right here are the core principles behind smart contracts:

  • The two parties bound in a smart contract can directly interact with each other.
  • Each step in a smart contract can only be fulfilled after the execution of the preceding step.

When it comes to loan contracts in Nexo, here are some pointers:

  • The loan contracts are stored and replicated on the blockchain, which makes them immutable and verifiable.
  • The assets are securely stored and Nexo does not have access to them unless the client defaults on their loan.
  • The Nexo Oracle continually evaluates the predefined conditions written on the loan contract through external data sources.
  • The Oracle determines the value of the assets in real-time on multiple exchanges to minimize risks for both parties.
  • The loan contract executes as an automated action once a pre-written condition is satisfied.
  • The loan limit automatically gets increased when the value of the client’s crypto assets appreciates.

How Nexo Manages Risk

Nexo’s business model uses under-leveraging to protect both the company and its customers. Simply put, the Nexo platform allows clients to borrow a set percentage of the value of their crypto. This protects clients from the daily fluctuations of crypto prices, allowing their loan-to-value ratio to remain intact, thus making it less likely that a client will end up losing their crypto and ensuring Nexo is protected should a user default on a loan. Additionally, the Nexo Oracle tracks the changes in cryptocurrencies’ prices in real-time, drawing data from several sources to prevent any price discrepancies.

This is how the Oracle adjusts as the prices of the assets fluctuate:

  • If the value of a user’s collateral increases, the Oracle increases the amount of fiat available to the client.
  • If the price of the assets drops below the necessary loan-to-value ratio, the Oracle mitigates the risk of potentially having to sell off a small portion of a client’s assets by sending three notifications to the borrower prompting them to either pay off a part of their loan or add more crypto

Let’s take a hypothetical example to understand how all this works.

A client, Alice, sets up her Nexo Account and agrees to the terms and conditions. She then transfers her crypto assets to the Nexo Wallet and withdraws fiat from her available credit line. A few days later, the value of Alice’s assets decreases below the minimum required limit. It leads to an immediate recalculation of the available loan limit and Alice gets instant notifications through multiple channels, including her Nexo Account, SMS and email.

In this situation, Alice has the following options:

Option I: Add more crypto

Alice can transfer additional crypto assets to her account to rebalance the loan-to-value ratio. In this case, the Nexo Oracle automatically calculates the additional crypto assets that Alice will have added to her account. Once the transfer is done, her loan limits are instantly updated. Whenever Alice repays the loan or has any excess crypto staked in her аccount, she can securely withdraw her assets at any time.

Option II: Partial Repayment

Alice also has the option to repay the difference between the loan limit and the current outstanding amount. If she chooses this option, then the Nexo Oracle calculates the amount needed to be covered. Alice can pay it off with fiat or crypto. To cover this difference, Alice needs to make the payment fast, and the Oracle takes all the necessary actions to inform her to do so promptly via multiple notifications.

Rebalancing Maintenance

However, if she fails to make the payment, the Oracle automatically rebalances the difference between the credit line’s limit and the current outstanding loan by selling a small portion of Alice’s collateral. The Nexo Oracle’s “rebalancing maintenance” function determines the best possible price of the assets and sells the crypto assets to rebalance the loan-to-value ratio.

Additional Features: The Nexo App

With the Nexo App users can access their Nexo Wallet at any time and from any place, withdraw funds or repay loans from their Instant Crypto Credit Line, and receive, spend and pay with crypto. The app is already live and is available for both Android and iOS.

Benefits of Nexo

Nexo’s Instant Crypto Credit Lines offer great benefits such as:

  • Secure storage and $100M insurance for custodial assets with BitGo
  • Automated and guaranteed instant approval with no credit checks
  • The best interest rates of just 5.9% per year and only on what you actually use.
  • No minimum loan repayments.
  • Same/next day free local bank withdrawals.
  • Available worldwide in 200+ jurisdictions.
  • Available in 40+ fiat currencies including USD, EUR, JPY, etc.
  • ZeroFees – no origination and no liquidation fees, no FX commissions.


Nexo is one of the most exciting companies in the cryptosphere,  bringing real utility to the cryptocurrency market. Crypto entrepreneur and former child actor Brock Pierce actually mortgaged a house in Amsterdam through a $1.2 million line of credit from Nexo. Pierce didn’t need to make a single repayment because Bitcoin’s price has steadily increased since he took out his loan. Cases like this are real-life examples of how lucrative Nexo’s services are both for the company and for its clients.


In its first 2 years as one of the leading financial institutions for digital assets, Nexo has already made two dividend payments amounting to $3.5M in total which is yet another sign of the enterprise’s strong dedication to its loyal customers.

It will be interesting to see how Nexo’s products evolve as they expand their business to encompass more and more fantastic services. Nexo is currently the world’s most advanced provider of instant credit lines with more than $2+ billion already processed for its 700,000+ users.

Rajarshi Mitra
Rajarshi started writing in the blockchain space after listening to Andreas Antonopoulos’ podcast with Joe Rogan. A content generating machine, Rajarshi has been consistently producing high-quality guides and articles for us since late 2016. His articles have been shared extensively in social media and several start-ups have used his guide as learning material for their staff. He is continuously invited all over his country to give talks in various crypto seminars and conferences. He has gained a solid reputation as a speaker/educator on top of being one of the most promising writers in the crypto space. When he is not busy nerding out over the latest in the blockchain/crypto space, he is usually busy watching re-runs of top gear and MMA.

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