Last Update October 2020
Today we’re going to review NEXO and their crypto interest account. We’ll also look at how NEXO compares to other crypto interest platforms in the market which allow you to earn interest on your crypto holdings.
Nexo.io is operating as a crypto lending platform which allows you to earn interest on cryptocurrencies. Similarly to BlockFi and Celsius.network which we also reviewed, Nexo.io is offering high-interest rates on the cryptocurrency you have deposited with them.
So whether you’re just starting to learn about how to earn interest on your crypto or you just want an honest review about the Nexo.io interest account, we hope you’ll find what you’re looking for in today’s review of Nexo.io.
Now, before we get started, do understand that Nexo.io is a custodial service, which essentially means that you are entrusting them (third-party) with your digital assets. So, as there is third party risk involved, you should do your due diligence as to whether you’d like to be involved and use their services to earn interest on your cryptocurrencies. While we can compare platform features here in this NEXO review, we cannot easily form any profound opinion about how NEXO is functioning as a business.
What is Nexo?
Nexo.io is a private company operating as a lending platform. The company is currently offering its services in over 200 jurisdictions worldwide. NEXO is offering crypto depositors an interest return on deposited crypto assets with the company. Its business model allows them to do that by lending out your crypto assets and earning a higher yield on those funds. NEXO is planning to add additional crypto banking services, including trading services and launching a crypto card.
How does Nexo make money?
As a lending platform, NEXO focuses on providing collateralized loans to individuals and institutions. They are leveraging the existing high demand for cryptocurrency loans. With the interest they earn from those activities, they will payout interest to crypto account holders who are providing them with the liquidity.
Why do individuals and institutions borrow digital assets from Nexo.io?
From the standpoint of an individual borrower:
Imagine you are in a position where you have a substantial amount in digital assets and you wish to hold them for the long term, then how can you get liquidity today without selling? Because you know that if you sell, you are creating a taxable event and you might want to avoid that for the time being.
Nexo will allow you to initiate a loan backed by your cryptocurrency as collateral. Do keep in mind that taking out a loan against your crypto collateral does expose you to being margin called. If you are backing your loan with BTC for example, and one day BTC price flash crashes, your BTC collateral will be sold off to cover for the LTV (loan-to-value) ratio.
In other words, if you are planning to take out a loan with Nexo based on your cryptocurrency collateral you have to be well aware of the risk of being liquidated if the value of your collateral suddenly drops too fast. In the past, users of the platform have been caught off guard with this.
From the standpoint of institutions and other industry players:
There is a growing demand from institutions and other professional players in the market to take out short term loans in certain cryptocurrencies. This might be to hedge their trading positions, short the market, or express any other belief they have financially in the current cryptocurrency market.
Why do people consider depositing digital assets with NEXO?
- Traditional banks no longer share profits with their clients by offering compelling interest yield, instead, they often charge you with annual holding costs.
- For many long term holders – “hodlers” – of cryptocurrency assets, it’s an easy way to capture significant yield on their digital assets, especially if they were already comfortable using custodial services.
In other words, you can earn interest on idle digital assets by joining NEXO and depositing your cryptocurrencies with them. NEXO will lend out your deposits and share the profits with you by paying out a fixed interest rate. While earning interest is attractive, you need to understand that there is also an inherent risk you are taking.
Do you need cryptocurrency to earn interest or can you also deposit dollars?
Yes, you’ll need to deposit a cryptocurrency, however, nowadays you can actually easily convert your currency into a stable coin which represents your USD, GBP, and so on, 1 for 1. In other words, you can avoid the price volatility of cryptocurrencies. So, these stable coins represent the equivalent of an underlying traditional national currency. Note that NEXO will start paying interest as soon as it receives cryptocurrency assets, but also if you send fiat EUR, USD, or GBP.
NEXO also supports a number of stable coins, among which:
- USDC – (USD Coin)
- USDT – (Tether)
- HUSD – (USDH)
- PAX – (Paxos Standard)
- TUSD (True USD)
Breaking down the NEXO interest account - NEXO Crypto interest rates and safety
Comparing Crypto interest rates - Earning interest on crypto!
NEXO.io allows you to earn interest on a number of different cryptocurrencies and stable coins.
Currently, NEXO is supporting:
NEXO token (NEXO), Ethereum (ETH), Bitcoin (BTC), Chainlink (LINK), Ripple (XRP), Bitcoin Cash (BCH), Litecoin (LTC), Stellar (XLM), EOS (EOS), Tron (TRX)
Supported stable coins:
TrueUSD (TUSD), DAI (DAI), Paxos Standard(PAX), USD Coin (USDC), Tether (USDT ERC20),
How much interest do I earn with NEXO?
Comparing NEXO interest rates with other interest account providers, like Celsius and BlockFi
In the table below, you can observe that NEXO.io, Celsius and BlockFi, are offering very competitive rates for your crypto deposits. Do note that overall Celsius offers higher interest rates. Especially if you are willing to accept CEL token as interest payment. For stable coins, for example, you can earn up to 15.89% in interest if you accept a payout in CEL token.
In comparison to Celsius Network and BlockFi, NEXO is either offering 5% crypto interest rate or 8% crypto interest rate. Essentially the company offers 8% on all stable coins and is offering 5% on all other regular cryptocurrencies.
If you are confused by having seen the NEXO interest offers at 8% and 12% respectively for cryptocurrencies and stable coins, you are not wrong. In order to get a higher rate your you would need to have 10% of your assets in NEXO token in your savings wallet. If you have 10% in NEXO tokens you’ll receive 6% on regular cryptocurrency and, 10% on stable coins.
If you accept an interest payout in NEXO tokens, you can earn an additional 2% interest, bringing the total earned interest on cryptocurrencies 8% and the total earned interest (APY) on stable coins 12%.
All these interest offers are actually pretty impressive. So, with respect to your choice between NEXO, Celsius Network or BlockFi, and other lending platforms it probably comes down to:
- which platform you prefer from a user perspective.
- which company do you trust more with your digital assets
If you want to exclusively compare Bitcoin interest rates between different platforms, you can check them in the following article “Best Bitcoin Interest Account“.
Let’s discuss the risks involved with the business model & then continue with a closer look at the NEXO web application and mobile app.
Are your cryptocurrency assets safe with NEXO?
Are NEXO daily compounded interest rates legit?
As we have previously discussed, the NEXO model revolves around issuing crypto asset-backed loans to private individuals and lending out your digital assets to institutional players. While the offered rates seem to be legit, Inherently there will be risk in the business model.
What are the risks with the NEXO business model?
As with any starting business, there are risks involved. We won’t get into all of the different risks here, but you’ll definitely have to do your due diligence on its management, follow its profitability, funding capability, and so on.
While the team behind NEXO has indicated that it will provide audited financials in the future, to this date it does not.
From a business model perspective, one of the things to watch out for is a scenario of extreme volatility where NEXO cannot sell the assets which are backing a loan quickly enough.
There are really two parts of the equation here. You obviously need to understand the products NEXO is offering.
This means, understanding that if you take out a loan with NEXO, the company might automatically liquidate your collateral based on their terms and conditions with respect to the LTV ratio.
So, as a user taking out a loan you have to be aware that you could unwillingly be liquidated if the asset prices of your collateral would suddenly drop like a stone.
The other part of the equation is the question whether NEXO can avoid being liquidated itself. While generally speaking, lending platforms will or should take the right measures to ensure that their lenders are solvent enough not to default on the principal loan, or to be able to sell assets that back the loan quickly enough in case of extreme price volatility. So while theoretically, it seems they seem to have a low-risk profile as they have an abundance of collateral for the loans they are issuing, you never really know these things until it’s too late.
Are my funds safe with NEXO.io?
If you are depositing your assets with any third party you’ll want to know that your funds are held safely, and learn about how best practices are applied to secure that. Especially in the digital asset space where we keep hearing about security breaches and hacks. NEXO is working with BitGo which is a well-respected custodial asset custodial.
Does NEXO have insurance?
NEXO does have insurance in place up to 100 million USD through its digital asset custodian BitGo.
Is NEXO FDIC insured?
No, there is no FDIC or equivalent insurance for NEXO.io or any other cryptocurrency interest provider. In other worlds, you should take this into account when comparing interest rates at traditional banks with crypto interest accounts.
Over time, we do expect that the deposit insurance situation will improve, on the flip side, rates might start trending down when that happens.
How to get started with a NEXO interest account?
1. Create an account on NEXO.io or download the NEXO app
Create your account via the web or mobile App.
Getting started with NEXO is pretty straight forward. You can choose to create your account directly on their website or choose to download the NEXO app, which is available for Android & IOS.
2. Deposit cryptocurrency
Once your account is created, you’ll first have to enable the 2-factor authentication if you want to deposit any crypto asset. NEXO supports Google authenticator and Authy.
Tip for beginners:
- It is highly recommended that you write down the letters/code of your authentication when you are setting it up. If you ever lose your phone, you’ll need that code to re-establish your 2nd factor authenticator.
- Remember to double-check the copied address before sending cryptocurrency and to make sure that you are sending the correct cryptocurrency. You cannot send Bitcoin a Litecoin address for example. You can use the copy to clipboard function to copy the address, but a good practice is to always double-check the first and last letters of a cryptocurrency address before you hit send from your wallet.
Now simply deposit your cryptocurrency. Simply select the currency you want to deposit.
3.Start Earning interest on your cryptocurrency
Once you have deposited your cryptocurrency, you will start earning interest on the deposited coins immediately. The interest payments are scheduled daily.
The NEXO Dashboard
The NEXO user interface will feature your total earned interest and allow you to withdraw and deposit or top-up all available cryptocurrencies.
You’ll also see immediately what your available credit line is based on your deposited assets. Do note that the amount you can withdraw on a daily basis, and the amount of credit available will vary depending on the level of verification you have provided. Nexo currently differentiates between a starter verification, Basic verification, and Advanced verification.
Starter verification requires:
Basic verification requires:
Full name, country of residence, address, and mobile phone
Advanced verification requires:
A personal document (ID, Passport, or a Driving License)
NEXO interest account features
Is NEXO offering compounded interest?
Yes, interest payments are deposited on a daily basis.
Does NEXO charge withdrawal fees?
No, NEXO does not apply any withdrawal fees.
Is there a minimum withdrawal amount with NEXO?
Yes there are minimum withdrawal amounts set for each cryptocurrency.
You can find those minimum amounts here: https://support.nexo.io/hc/en-us/articles/360012914014-What-is-the-minimum-amount-of-crypto-I-can-withdraw-
Maximum withdrawal level are based on the level of verification of identity that you have provided.
Is there a minimum deposit amount in a NEXO interest account?
No, you can deposit any amount.
Does NEXO require a lockup period for your funds?
No, you can withdraw your funds at any time.
How does NEXO handle security on an account level?
- NEXO offers Two-factor identification (2FA): NEXO offers two-factor identification, which is solid protection to your mobile app or web access.
- No address whitelisting: Currently Nexo does not offer address whitelisting. Personally we’d like to see this option. With address whitelisting you add a predetermined specific withdrawal addresses. This ensures that any withdrawal of funds goes to a crypto address you control.
NEXO Review - Conclusion
What we like & what we are looking forward to?
What we like:
- Mobile app
- Daily Compounded interest!
- No fees for withdrawals
- Competitive interest rates!
- No-lockup period
What we would like to see:
- Trading within the app at reasonable rates – NEXO is working on this
- Crypto Debit card or Credit Card (Without prohibitive fees of course!) – NEXO is working on this.
NEXO Review - Final thoughts
Earning interest on your crypto assets is definitely appealing, however, we we are still in the early days and it remains to be seen if these services remain reliable over the long term.
Overall, it seems that NEXO is heading into the right direction with the evolution of its services, and our first impression in experiencing the platform is positive. We’re looking forward to their seeing their crypto credit card and in-app trading services becoming a reality.
With so many different companies offering attractive interest rates, it’s not easy choice. In our opinion, your choice should be focused on the strength and transparency of the company, and not necessarily on whoever is offering the highest rate.
We hope you have found this NEXO review to your liking and invite you to share this review to support if you’d like to support our work here at OnchainGuru.com.