Your March Ask-Antoni-Anything, Recapped

#WhenBankingLicense? #WhenReferral? #WhyFixedTerms? #WhenGovernanceVote? You asked, Antoni answered. Check out the March 2021 edition of our monthly AMA or read a recap of the session below:

When are you going to launch the Governance Vote and what will we be voting on?

You’ll be able to vote on a variety of things regarding Nexo’s future. I’m not at liberty to disclose a lot of details, but I can confirm that the vote will be in Q2, so bear with us as we perfect the feature. The development team and IT guys are stress-testing the potential changes to the platform that you will be voting on since we want to offer you options that we are ready and able to implement. So good things come to those who wait.

Why do you have fixed/locked terms? Why didn’t you inform your clients about it in advance?

As a team at Nexo, we admit that there are better ways of communicating such changes and we are constantly striving to improve our communication and transparency skills.

But we added fixed terms for serious reasons: Because of the growth of the platform, we need predictability when it comes to the funds we are working with. Recently, we’ve grown more than major institutions in the US and around the world – we’ll actually be communicating a new figure for assets under management next week. So this is why we need to ensure more predictability for the assets we rely on to conduct our business. That’s why fixed terms have the highest rates – because they ensure this sustainability for our platform.

Is there an update on the banking license?

Yes, there is, but unfortunately it’s all sealed under a non-disclosure agreement. We expect to see a positive outcome very soon; we’re progressing in the right direction.This will be an unparalleled milestone that will open many many doors for Nexo.

What effect would a banking license have on your insurance and interest rates for both borrowing and lending of fiat?

The most pressing aspect of this question for clients earning interest with Nexo is whether our interest rates will drop. The answer is no, not in the foreseeable future. With the supply and demand in the space as it is, we want to offer the best possible terms while also protecting the interests of Nexo investors, which many of you are. Our rates are not randomly selected, they depend on the market forces, a banking license would not have immediate effect.

My prediction is that rates will ultimately go down as blockchain makes it into the mainstream in years to come, but this would not have anything to do with us acquiring a banking license, rather it would result from the overall maturing of the blockchain space.

On the insurance side, I don’t want to talk about that prior to having secured the deal and having discussed it at length with the regulatory body, but overall a banking license will have a very positive effect on our insurance globally. It would also allow us to serve more jurisdictions with ease, without having to acquire as many new licenses. Finally, a banking license will enable us to more easily market our products to people who are currently not involved in the blockchain space.

Why does the Nexo Exchange work with a hidden fee rather than being open about it and will this change in the future?

There is no concept of hidden fees in Nexo. We pioneered #ZeroFees and we are proud to be transparent about all charges we make.

Perhaps you are referring to the spread between the bid and the ask. Such is the nature of the market, there is always a side that is asking for a certain price to let go of their crypto, and there is always a person putting up an offer to acquire a certain amount of, say, Bitcoin. If they are very close or they match, the trade is executed. So what you see in the order book is always the best bid and the best ask and it’s a matter of time until they converge; market participants come in and fill this gap. This is not something that Nexo determines, we should actually give credit to the dev team and our traders who have developed our smart routing system – it takes the bid and compares rates from a variety of different exchanges which means you aren’t dependent on the prices of a single exchange, you are getting the best price across the market.

So there are no hidden fees here and we do have some of the most competitive rates.

Will there be more options to profit from the NEXO Token, besides Dividends like, for example, earning interest on your tokens by staking?

Yes, we are always looking to stack up the utilities of the NEXO Token. We have the dividend as you know which is paid out at least once a year. We are also revamping the token’s utilities with Nexonomics. That plus the Nexo Card and free crypto withdrawals will really propel the NEXO Token’s functionalities.

Why don’t we see other members of the executive team?

Because I’m the only one without stage fright :)

At Nexo, we believe everyone should be doing what they do best. We are about 170 people now and there are a lot of team members worthy of airtime. I try to recognise the different people who deserve credit: Shoutout to Vasil our CTO whose birthday is today. Kosta, one of our other co-founders has actually been on air a couple of times, and Kalin, another of our founders is currently busy in the battle for our banking license.

But generally, it’s always better to focus the media effort on one person because this way the public presence snowballs and it becomes easier to work with the media. And then that helps everything else along. This is a traditional approach that yields the best results.

Do you have any more information on the banking license for EU clients?

This got covered on two occasions already, so I’m not really going to focus on it, but this will give us a lot more flexibility to serve clients globally, including people not currently in the blockchain space.

When will there be a referral system and when will it be activated?

Keep asking that question so that I can put more pressure on the dev team. I have been promised Q2, so that’s in the next trimester. As I said, the engineering resources at Nexo need to be very well allocated to make sure the platform keeps running safely and smoothly. But keep pushing us on this, we are working hard to deliver.

Lately there seem to have been some mishaps with communication. What are the plans in place to improve openness and reduce confusion?

I’m not sure if mishaps in the plural is accurate, I think the fixed terms of the Earn product could have been communicated slightly more in advance. Ok, scratch the “slightly” – it should have been communicated more in advance. We will do better next time. Apart from that if you have other issues with our communication, drop us new questions and we’ll pick up the topic again in the next AMA.

When are you going to #relistXRP?

There are certain aspects that an enterprise the size of Nexo has to consider. Sometimes from a business perspective we want to do something that regulations do not allow us to do safely, from a legal and compliance standpoint. This is not something we have randomly decided, we ran the XRP situation by legal counsel and they advised us to handle it this way. As you can see most large institutions had a similar approach. This is a means of keeping the Nexo enterprise and our clients safe.

At the same time – I’m probably not going to make a lot of friends today – but I do not understand the commotion around the way we handled the situation since XRP withdrawals were not restricted at any time. The only thing we restricted was the repayment of loans with XRP, anyone could have withdrawn their XRP and simply exchanged it with a company that felt comfortable working with the asset, and then repaid their loan with minimum hassle.

Our other option was to go against legal advice which is not something we do at Nexo. Relisting XRP on our platform would take a ruling by the courts that clarifies XRP’s status; only then would it be safe to relist the asset on Nexo.

Is Nexo giving out uncollateralized loans? I saw a confusing post on Reddit about the Portfolio Booster.

Yes, that got me confused as well. But there is no uncollateralized or undercollateralized lending at Nexo. This is what differentiates us from the competition.

The Portfolio Booster is used by very few clients, usually high-net-worth or ultra-high-net-worth individuals, or institutions. I don’t want to get technical but there is more than enough collateral. Basically, it works out through the execution of the loan (see the detailed explanation below).

So definitely no, the Reddit article is a confusing article, but Nexo does not issue uncollateralized or undercollateralized loans.

The Technical Explanation
The Portfolio Booster is an OTC service that combines financing and execution, which is in no way an uncollaterialized loan or undercollaterialized loan. To give you an example of how the Portfolio Booster works imagine a client tops up $1M worth of crypto on Nexo and requests a portfolio booster of $2M. This booster can be anything between 10% and 100% of the value of the assets you do hold, but for this example’s sake, let’s make it easier and assume the client wants his collateral x100%, so $2M.

The Nexo OTC team will purchase $2M worth of crypto from the market, transfer it as collateral in the client’s Nexo account (which already holds $1M of additional collateral) and credit the expense as an outstanding overdraft. All operations are manual and settled by the Nexo OTC team in the client’s wallet. That overdraft is not a loan or credit line that the client can operate with – it simply remains in their wallet while the client accrues interest on it as the market goes up. For instance, say the $3M sitting in your account is in BTC, and BTC goes up by 20%, your $3M is now $3.6M, so when you pay off the $2M that we’ve lent you, you’ve made a profit of $0.6M and now hold $1.6M in BTC that is all yours.

As for LTVs and whether there is some form of an un- or undercollateralized loan – once all operations are settled, the client’s account is left at around 66% LTV. From then on, the customer’s account is subject to our standard risk management algorithms with margin calls, and a liquidation threshold at 83.3%.

The biggest concern for big money investors is the security of their funds on the platform? Are there any plans to expand your security infrastructure?

We have grown well beyond employing services from only Ledger and Lloyd’s of London. Nexo has long passed $100M in insurance – we now have insurance of $375M and are partnering with multiple other partners. The next step in developing our security is reaching $500M in insurance, then $1B. One of our other new partners is in the process of going public, so we cannot disclose the company’s name just yet.

We are catching up with the growth or our business as fast as we can. There is no plan on slowing down the pace at which we are bumping up our insurance and safety measures, so stay tuned for more. Even in terms of regulatory safety, we are constantly working towards new licenses.

Will fixed terms always be locked in at one month? I would like the option to select specific days so I can distribute my balance over multiple dates.

We are going to have different “time horizons” and lock up periods, but right now they will be set by Nexo. You will have a choice to lock in assets for 1-24 months. Whether you will be able to specify down to a number of days how long you want to hold your assets for…I don’t think we have that in the pipeline just yet. But that’s why we have the flex terms. To implement something like what you’re suggesting, we would need a more peer-to-peer model which is currently not very efficient. I would allocate our scarce engineering resources elsewhere before addressing this aspect of our fixed terms.

What are you doing about the ETH wallets issue? It’s not fair for some of us not to be able to use the platform while waiting for a wallet to be generated.

Absolutely, I agree it’s not ok. Not for you and not for Nexo because we are also missing out on your business. We have done our best to provide a solution and since Wednesday, March 24, we have resolved the issue so that new ETH wallets can be generated on the platform. I wouldn’t push this to an extreme, but we have figured out a way to significantly lower our costs, so we are back to normal.

When will the Nexo Card arrive?

I don’t know which jurisdiction you are in. If you are in Europe, you will be able to order it very soon. If you are in the US or in Southeast Asia, you’ll have to hold on a little bit longer. The team is working around the clock to make it happen in all jurisdictions. Otherwise, the first batch is already circulating in Europe.

Any updates on the status of internships? I really want to be part of the team while studying at university and write a business thesis on Nexo.

Quite frankly, I do not have an answer for you right now, but I will make a note and address this question next month. However, internships are one thing and writing a business thesis on Nexo is another and the two may not be necessarily related. If you want to write your thesis on Nexo, do get in touch via the following email: [email protected].

You were considering other blockchain networks because of gas fees, do you have any further information about this?

First we had to figure out the mess with the ETH addresses. The gas fees are still very high but since security is our prime concern, switching from one network to another is something we have to stress-test. But the team is working on it and as soon as I know something about it, it will be announced.

Any plans to add altcoins that are less known?

There are certain criteria that we have in place for us to onboard an altcoin. First of all whether the community needs to want it, then it must have a substantial market cap and then the team needs to examine the asset with regards to its liquidity. This is a very serious process, it’s not like looking at the 24-hour volume on CoinMarketCap or CoinGecko. We need to be absolutely certain that the liquidity of the asset is sustained over a longer period of time.

Nexo issues price-based margin calls not time-based margin calls because the market prices may drop/rise and never return to a certain price level. We simply cannot expose our interest-earning clients to such risk. Ideally we would have all altcoins on the platform – it means more business – but this has to happen in a safe and responsible manner. So we are very, very careful and thorough during our process.

Can you tell us about the corporate products? Are they on a similar collateral basis? Past companies have been hurt by defaulting corporates.

For the corporate products collateralization is exactly the same as it is for retail. There is no difference between them and the retail side of our business in terms of how it works. That’s what’s great about Nexo, we don’t apply double standards, we don’t give uncollateralized loans to our friends, while asking smaller clients for collateral. As long as a company has such double standards it’s a recipe for disaster, which is why we definitely do not grant corporations any such privileges.

Will dividends be distributed quarterly or monthly?

Our commitment is to have them at least once a year – we’ll see if we can do it more frequently while also adding more benefits for token holders (this is underway with our Nexonomics series). Plus, on a yearly basis the NEXO Token has seen a capital gain of 3000%, so we do think that everyone should be happy. We have to be realistic with regards to our situation and appreciate the consistent results we have been delivering.

Do you expect to see Cardano on Nexo soon?

Yes, I do expect Cardano on Nexo quite soon. We’ve been in talks with them for a while now, so from the looks of it, they do tick all the boxes. I cannot give you an exact time of arrival, but we are expecting to have it in the months to come.

Any plans to start increasing your marketing? Sponsorship referrals? Looking good Antoni, regards to the whole team and keep up the great work!

Plans to increase marketing? We do have a substantial marketing budget so I’m not sure whether to increase it, but in terms of sponsorships we have a lot of exciting plans in the pipeline that are coming up and will be very exciting. As the business grows, so does the revenue, so keeping the same percentage of funds for marketing and sponsorship budgets means they naturally grow with the company. We have a lot of ideas and the right people to execute them so, yes, expect to see more marketing activity.

How is fatherhood treating you, wishing you and your family all the best?

I most humbly thank you for your kind wishes. Fatherhood is great, I absolutely recommend it – a month in I don’t see drawbacks, apart from a little sleep deprivation. Nicole is an absolute darling. With the consent of her mother, we might be able to squeeze in a photo next time. It’s really invigorating and puts a lot of things into perspective. It opens up your horizons for what’s really important. There’s new things happening every day, there’s no sign of slowing down on that front, much like Nexo.