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Ask Nexo Anything: An AMA with Antoni Trenchev on Dividends and Much More

Aug 27, 2020·18 min read
Ask Nexo Anything: An AMA with Antoni Trenchev on Dividends and Much More

The Nexo Community has been calling for greater engagement on our behalf in addressing the hottest topics around Nexo. You asked, we delivered.

In our first Ask-Me-Anything session since 2019, our Co-founder and Managing Partner Antoni Trenchev answers your questions about the Third Dividend and Nexo’s plans for the future, also providing insightful commentary on the resilience of our business model and making the most of the economic context that you, our clients, and Nexo operate in.

Watch the full AMA below or read the brief summary that follows.

AMA Summary

  • The NEXO Token price for the Third Dividend was kept confidential to protect the enterprise and NEXO Token Holders from coordinated market manipulation.
  • Going forward, the price of the NEXO Token will be taken at exactly 15:00 UTC on the record date.
  • Nexo has paid out a record dividend despite the current economic situation, bringing the total dividends paid out over time to $10 million.
  • We can currently commit to at least one dividend annually and are aiming for monthly dividend payouts in future.
  • The Nexo Team are among the biggest NEXO Token Holders, making our interests and those of our clients perfectly aligned.
  • In view of the success and desirability of the NEXO Token, we do not plan on offering dividend payments in other currencies in the foreseeable future.
  • Nexo will provide a separate video explaining the calculations of the Loyalty Dividend in detail.

As a courtesy to our community, our AMA had an exclusive overtime session, addressing our future plans and priorities, including: the Nexo 360O services and exchange, our prime brokerage suite, banking licenses and audits, the Nexo Card, and more upcoming partnerships.

Thank you once again for your active participation and investment in Nexo’s future.

Stay healthy and stay ahead!

Transcript

Hello everyone,

My name is Antoni Trenchev and I am one of the co-founders and a managing partner at Nexo, and today we’re here at an ask-me-anything session, which hasn’t happened in a while. It has been long overdue, so here I am and I’m happy to address the questions that have been piling up for the past few days.

A few words about the structure of today’s session:

First things first -- dividends, and depending on how we’re doing time-wise, we’re going to address the versatile questions on a variety of topics which you guys found interesting and that I’ll be more than happy to address today.

PART 1: DIVIDENDS [00:59-17:19]

Why was the NEXO Token price taken at a different time from last year? [01:03-04:55]

The most frequent questions were surrounding the cut-off date and why the price of the NEXO Token was picked at a different time from the way we did it in the past and last year. The reason is quite simple -- the thinking was, on the part of some of the Nexo team members, that this would defend the enterprise and the NEXO Token Holders from cooperated and coordinated market manipulation attacks due to the nascency of the space, due to the large volatility in crypto, and due in part to the not sufficient liquidity. When you know the exact hour, this opens the possibility of illicit activities and ill-actors to take advantage of that.

We made a decision here. We understand the community has not been entirely satisfied with that, so our commitment from henceforth is to have the price of the NEXO Token at the exact cut-off date like we announced, like we did it last year.

We’ve heard you loud and clear. From henceforth 15:00 UTC on the cut-off date is going to be the exact time at which we take the price of the NEXO Token and there’s not going to be any deviation from that rule going forward and in all future dividend payouts and distributions.

Now that we’ve addressed the elephant in the room, I want us to take step back and have a look at the bigger picture, because with expectations in the blockchain space, where everyone wants their token to go five, 10, 100 X, preferably within a month, it is quite frequent that we find ourselves in a situation where we don’t see the woods from looking at the trees.

The truth to the matter is that we are in uncharted territory and in an unprecedented economic downturn. Do not let the disconnect between Wall Street and, partially, crypto from mainstream and “the real economy” fool you. We are in some very very complicated times. We have, in the US, a situation where unemployment is at its highest rates since the Great Depression. We see the S&P 500 being driven by five companies and all 495 underperforming. We see a situation where the vast majority of companies have slashed their dividends by 15 to 20%, or the equivalent of 400 billion, just for that last quarter that we saw. Nobody is even bothering to make any predictions on how the future is going to unfold and, you know, we need to take a step back and appreciate the fact that, at the same time, Nexo -- the enterprise, the business model, as we, together with you, the NEXO Token Holders, have devised it -- is such that it prospers and thrives in both bull markets and bear markets. And that in this economic situation, in this post-pandemic world, we have Nexo paying out a record dividend in terms of nominal dollars, but also as a percentage, and now a year and a half in, we have already paid out 10 million dollars to you, the NEXO Token Holders.

How frequently does Nexo plan to distribute dividends going forward? [04:56-08:36]

Another question you guys had was about the frequency of the dividend distribution. Total honesty and transparency here -- it is really difficult here to give you some forward guidance, as the Federal Reserve so eloquently puts it. The truth to the matter is that we are in uncharted territory and unprecedented economic challenges. We see that, you know, companies in the UK and the US, they’re slashing their dividends with 15, 20, even 30%, refusing to give any sort of insights as to how they see the world unfolding over the next few years, which, quite truthfully, gives me a cause to stop and think and reflect as to what we can promise.

With regards to the frequency of the Nexo dividend payments, our aim is to make them much more frequent, even to reach levels of monthly distributions, but we’re not quite there yet. What I can definitely commit to is that we are going to pay out dividends at least once a year.

This I can promise you, because, when compared to other players in the blockchain space, we have a sustainable business model that makes sense, and that is self-sufficient in the sense that we do not rely on venture capital, we do not rely on what, in the traditional markets, is access to cheap and easy money which we then distribute to our clients, you, the NEXO Token Holders. Because we are quite the opposite to what has been manifested as the new business model of the future over the past 10 years, where you had the Ubers and the WeWorks, where they give you -- like, they have customer acquisition costs of a couple hundred dollars, and people say they have a great product… Of course they have a great product -- they give you free money! And unfortunately that's replicated in the blockchain space, like, with companies that have billions and trillions of transactions, and all the while they take unsecured loans from their own companies to buy houses in, you know, Manhattan, stuff like that. And they are on the verge of bankruptcy every three months and they need to find new capital to keep on the house of cards going and upright -- not to use the more colloquial term of a Ponzi scheme.

Nexo in that regard is quite different and we’re proud to be that, and we are very happy to have you on board for this incredible journey, because we do think that, you know, when those cycles of bull and bust flatten out -- and they will inevitably do so in the blockchain space -- it is the sustainable companies that will emerge as the next Amazons, the next Googles, and the next Apples. And, you know, those who had the foresight, the patience, and the realistic expectations of what is possible will be the ones like those who bought Apple in ‘97 for a dollar a share.

How will you comment on the NEXO Token dump at snapshot hour? [08:37-12:28]

A few of you asked me to comment on the price action surrounding the dividend distribution and, you know, some of you even suspected that we are that powerful that we can control the market and that we had a certain sway over it. The market is bigger than any one of us, including the Nexo team. And some of you raised the question of “I knew for certain that there’s going to be a price action, like a bull run leading up to the NEXO Token dividend distribution and then a sale.”

Now, first of all, sell-offs after dividends are the most normal thing. You can have a look at any dividend-paying stock in traditional markets, and you’ll see that the second they announce the amount of the dividend it gets instantly subtracted by the market from its current price. So this is only the most natural thing.

So, whenever you see a pattern emerge, feel free to capitalize on that. This is your right and I’d almost say an obligation for you if you see a recurring sustainable pattern to act upon it. And this is ultimately what the blockchain space, Bitcoin, and crypto has given us -- this freedom to structure our personal finances as we see fit, as our needs might be, and you are in a perfect position to do that.

The claim that Nexo has something to do with the price drop is truly preposterous for the simple reason that, not to be boastful, but I am a large NEXO Token Holder and so are the other team members. Our interests here are perfectly aligned. We want the NEXO Token to have a high price, the Nexo enterprise to be very profitable, very well developed, to be constantly, you know, giving you new features, new capabilities. The success story is in our own best interest.

And the question that came up as a corollary of the previous one is with regard to the circulating supply and whether the Nexo team is selling tokens given the fact that a not insignificant number of our tokens have already vested. Quite simply, we are in it for the long run. We do not sell NEXO Tokens, neither as a company, nor as individuals. I, under different circumstances, would actually be buying the NEXO Token because I see this enormous potential in the enterprise and in the token itself.

We’re going to talk a little later about what the priorities are and what we’re working on, and additional features to the NEXO Token, which would give even more utilities, and even more reason for it to be valued higher by the market. It is something that we are constantly working on and we have a significant number of people here at the Nexo team working precisely on that and I think we’re in for some very good times here with regard to the NEXO Token.

Will Nexo pay out dividends in other currencies going forward? [12:29-14:08]

Another recurring question was with regard to currency in which the Nexo Dividend is going to be paid out going forward. By now we had three dividend distributions and a total of 10 million dollars given back to the community.

For the foreseeable future we do not intend on changing the currencies in which the payouts are done and this due to a number of reasons.

The US are treated a little bit differently and this has its regulatory reasons. But you know that this year we introduced a 20% bonus if you are willing to stake your NEXO Tokens for an entire year. And I can tell you that the largest US holders and a total of 80% of all eligible NEXO Tokens and their holders opted for this opportunity to get 20% more in NEXO, and this tells you volumes about the desirability of the NEXO Token and the way that the whales marketed in value the NEXO Token, Quite frankly, in my opinion, right now, the NEXO Token, at its current price is heavily discounted and undervalued.

How are the Base Dividend and Loyalty Dividend calculated? [14:09-15:40]

Another question you guys had was around the split between Base and Loyalty Dividend, and the notion that it’s 50/50 and how come the two are actually different amounts. Now, since this is a rather complex topic involving some math, and it’s difficult to do mathematics and explain formulas in a stand-up format, as we’re having today, we’ll give that to the Nexo team and the responsible members of it to do a short explainer video, which will shed light on the inner workings of exactly how the formula is calculated.

Suffice it to say, because the loyalty is complicated based on the number of days from the last dividend that the NEXO Tokens were on the platform, this gives them different eligibility metrics and that’s why the two numbers are somewhat different and it’s not 50/50 in notional amounts as some of you expected. But I think this will be best addressed in a short explainer video and we’ll have the guys prepare something to that accord.

Part 1: Dividends conclusion [15:41-17:19]

So, I would like to take a moment and thank you guys for the constructive criticism that we received on some of our efforts, which were lacking.

I would like to single out to a few of you: obviously Rasto -- the biggest Nexo fan on planet Earth; Rob has been giving us some very constructive criticism; we got some incredible feedback from Cris; “Frank” aka Heston, I know who you are… just kidding here… I thank you for the points you raised; The Goat; Nexonewwayoflive; and many many more -- you know who you are.

If I missed someone, please don’t be too hard on me, I have certain limitations on my memory given a hard day’s work, but I want you to know that I might not always be the most responsive on social media and across the board, but everything you said is being taken to heart, and we shall continue to strive to improve upon everything around Nexo, the products, the features, the way we do business, and obviously the way we engage with you guys.

And with that, we can close out the Dividend part of the ask-me-anything session, and we can take it into overtime, where we address some of the other questions, not dividend-related, that you guys had. So stay tuned!

PART 2: OVERTIME [17:20-33:50]

Introduction [17:20-17:33]

Alright you guys, we are now into the overtime session where I will be addressing those non-dividend-related questions that you have.

How will Nexo grow its business? [17:34-23:37]

First on the list is the road ahead. What can you expect from Nexo, how do we ensure that the enterprise continues to grow, and what does the updated roadmap look like.

Well, one of the things we have been working on for a while is this notion of what we internally call “Nexo 360”. This is the idea that you, as an existing crypto enthusiast or somebody who just becomes excited about crypto -- and we see one in 10 Americans already owning some sort of crypto and 80% of people over there knowing what Bitcoin is, quite a huge number… Regardless of what stage you are at, we want Nexo to be there for you and to provide and cater to all your needs, whatever they might be -- whether this is wallet services, send, pay, receive type of functionalities…

The internal crypto currency exchange -- something that lots of people asked about, this is definitely on the roadmap. Obviously, the Earn product, which goes into the direction of fiat currencies where you can earn up to 10% on your dollar, euro, and British pounds, with more options coming very soon.

The product that we launched a short while ago, the Earn on Crypto, I explained this some time back that the idea was to build a sustainable business model, rather than do what some of our competitors do -- either burn through VC money and easy access to money, or to be extending the crypto that we receive from you guys through unsecured lending to other “worthy” of it counterparties. This is definitely not a risk that we like to have on our balance sheets. So, that’s why it was slightly delayed, but all the better -- we now have a sustainable model of generating this revenue for you guys, so that you know that the raise that we are paying you is not something that, at whim or at the snap of a finger, is going to change and that you have been promised something that we cannot deliver.

The road ahead obviously includes the banking license. There were a lot of questions with regard to what the banking capabilities that we have been aspiring to for quite some time, how all of this is developing.

The third thing I would highlight is to further enhance the retail aspect of our product. We are the de facto lender of the retail side of the business, we want to… This is success does not make us idle, it’s the exact opposite. We are starving for new success on new fronts, so we are definitely going to keep pushing the envelope here, whether that be through the card enhancements that are bound to happen -- I promised another separate AMA session for the card, so I’m not going to go in great detail here -- but whether it’s more assets, more partnerships, and companies that we closely work with, just like what we did a couple of months ago with Chainlink. Everything that would make the retail product even better, this is not something where we are going to rest on previous successes, we are going to continue to improve the features, the capabilities for you that you have on the platform. So the retail, we’re going to stay very retail-focused.

At the same time, we want to replicate that success that we have in the retail space -- I would say the dominance of it -- into institutional lending through our OTC desk, which has very capable people developing proprietary systems to even more efficiently manage the collateral, the swaps, the products, the optionality, the derivatives that we devise for our clients in the most efficient manner, that is sustainable, that is very reduced and low on any sort of risk. So this is where… you know…

They don’t want me to talk about prime brokerage, but I am going to do it nevertheless -- we are working very aggressively and actively on giving a full-fledged prime brokerage solution to our institutional clients. This is going to be very very important in a space where you see more and more institutions coming in, whether they be crypto funds, which are recruiting talent from Wall Street and elsewhere, or whether it will be traditional hedge funds, like Paul Tudor Jones’ coming into the space.

So lots and lots of stuff that we are working on and that we will be presenting to you guys in the next couple of months. So definitely very interesting times that we live in.

When will Nexo be audited? [23:38-28:22]

When audited financials? Almost as frequent a question as when Moon, when Binance, and when Lambo. Honest question here to you guys: name one blockchain-native company that has audited financials. Hint: there’s none. And there is a simple reason for it and we are experiencing that as we speak. We are working with numerous auditors and auditing companies and unfortunately for the time being they are very very inexperienced with any crypto-related, blockchain-related auditing.

We did an audit of the ICO for a variety of different reasons and that’s for just the ICO, which had a couple hundred -- actually, less than 200 -- investors, that took a whopping six months. It is because the reputable companies that you would expect to have audited us, they do not have the capabilities, the understanding of how to conduct what they do on a regular basis for traditional companies, how to do that exact same thing for a blockchain company.

The reason is that we have literally tens of millions of transactions, we have 800,000 registered users, with a bull market in crypto as we’re seeing today we have hundreds of thousands of active users, and just the sheer volume of transactions and the intricacy and the complexity of the derivatives that we have, of the bespoke swaps and deals, it is very hard for the auditors given their experience with the blockchain space to conduct a comprehensive financial statement audit, as would be expected. We are by no means alone in this boat -- this is true for any company in the blockchain space. That’s why none of it has been audited thus far.

We are a private company. And quite honestly, we have no obligation to ever even have audited financials. But we’re going to do it nevertheless for the simple reason that I pointed out during the first part of the ask-me-anything session. It’s the reason that we want Nexo to be successful. We want to build upon the trust that you, the NEXO Token Holders, investors, the clients have blessed us with. And one of the ways -- we are perfectly aware of that -- is through auditing of the financials. It is just very very complicated at this present day and time.

We are working on it and let me tell you something about the future of Nexo: we have very ambitious plans of listing on a traditional stock exchange, such as the NASDAQ or the New York Stock Exchange. A prerequisite for us accomplishing this goal of ours is having audited financials. So it’s not a matter of “are you going to do that given that you are a private company and you are under no obligation to do that?” Yes we are, because we need that in order to take Nexo to the next stage, and to this higher plateau where we ultimately believe that Nexo is headed, where it deserves to be.

So, to sum up, there’s definitely going to be audited financials. As I mentioned, this is the next logical step and what will take Nexo to the next level where we’re headed, where we belong, and where we will arrive together with you, the NEXO Token Holders, investors, supporters and clients. But we’ve got to make sure that the auditing companies can live up to the expectations that we have for ourselves, that you guys have. As soon as one of the serious guys can guarantee that, we’ll have the audited financials.

What are Nexo plans for an exchange? [28:23-30:03]

Another great question we received is about a Nexo cryptocurrency exchange. I think I briefly touched upon this during the section about the way forward. Definitely a crypto-exchange is in the works. We have a portion of the dev team working on it and we view this as a crucial part of the 360 Nexo product that we would like to develop and a cryptocurrency exchange is very very crucial to it.

It will go in a couple of directions: you’ll be able to switch between collaterals, even having taken out a loan against those, you would be free to exchange your assets in your Nexo wallet, which are not necessarily backing a loan; or to switch between assets in order to utilise and make use of higher interest rates when and if such occur on the platform -- my guess would be that they will. And obviously, the very very important question with regard to fiat on- and off-ramps -- this is also something that is in the works and we’re very terribly excited about that.

The ETA here is a bit hard to pinpoint, but my expectation would be that we’ll have an internal exchange on the Nexo platform by the end of 2020.

Will Nexo acquire a banking license? [30:04-33:11]

Commercial banking capabilities can be acquired in two major ways: one would be to acquire a bank or a share of a bank, an existing one; the other one would be to apply for a license from scratch.

We are working on all of the above and we have been for quite some time now. As anyone who has been in the mergers and acquisitions sector would let you know, you can have a perfectly streamlined deal and have 98% of it done, and you can see the light at the end of the tunnel and then something could mix up your plans. Whether that would be something on a balance sheet that doesn’t belong there, or something missing; whether that would be talks with regulators who don’t finalize in the way you envisioned. The latest example would be Binance’s attempt to acquire UnionBank, the Lichtenstein bank that we also had looked at. There is variety of things that could go wrong until the very last moment.

We have an incredible team here at Nexo that works on all sorts of acquisitions, but most notably, and relevant to the question -- a bank acquisition. It’s headed by a co-founder of Nexo and a managing partner, Kalin Metodiev. He has been in the investment banking and M&A sector in the US for a quarter of a century, so he is well advanced in the talks of acquiring a US bank and a European bank. We’re finalzing the deals, but as I said, you know, it’s not done until it’s done, to quote the Rocky movie. More relevant than anything to the question of banking capabilities is, really, that we have to wait out until the process is finalized to be able to announce something here.

Last but not least, we are bound by confidentiality agreements, so what i can say at this stage is “one bank in Europe, on bank in the US”, and we’re also working a banking license in some of the sunnier parts of the world -- I’m not going to elaborate on that too much and let your imagination run its course here. But, banking capabilities is definitely something very important to the Nexo enterprise, to the management, to the entire Nexo team, and ultimately to you guys. We are working on it, and we will, sooner rather than later have something very very exciting to announce here.

Conclusion [33:12-33:50]

So, this was it guys! I hope you will enjoy watching this as much as I enjoyed recording this for you. The next AMA session will be about the Nexo card, but we’ll have overtime as well.

Until then, I wish you all the best.

Stay healthy and stay ahead!

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