Written in January 24, 2022
NEXO Tokenomics
Brief Overview
NEXO is an ecosystem that provides lending and borrowing in the crypto space through Ethereum chain. It has its own exchange, wallet, and token – all synergizing together. Users are able to earn up to 18% APR currently; With metrics such as $12B+ AUM, 29 supported cryptocurrencies, 200+ available jurisdiction, and 3M+ users. Contrary to other lending platforms, NEXO is audited by Armanino and has an investment in Texture Capital, a
registered SEC broker-dealer, to ‘bypass’ USA restriction. The founder is Antoni Trenchev, former member of the national assembly of the Republic of Bulgaria, as co-founder and managing partner. NEXO has partnered up with Nomics, Ledger, Bitgo, Blockchain.com, Terra, Brave Network, BCB Group, and much more.
In-depth Tokenomics
Launched in March 2018, the NEXO platform’s native token $NEXO facilitates dividend payouts, funding crypto-backed loans, community expansion, airdrops, and instant financing through the NEXO wallet. The ICO successfully raised $52.5 million with the token distribution since TGE to investors (52.5%), Overdraft Funding Reserves (25%), Founders and Team (11.25%), Community Building and Airdrop (6%), and Advisors, Legal, and PR (5.25%). The investors portion would be automatically burnt if not sold within a time frame. The other portion of the token distribution would be subject to vesting (image below). Total supply of NEXO is 1,000,000,000 and circulating supply is 560,000,000.
Token Distribution Table
To further boost NEXO value, the team decided on implementing a series of upgrades – Nexonomics. The first Nexonomics was launched in Q4 2020 to incentivize loyalty programs in tiers, doubled the earning rate, and initiated a $12 million buyback. The second Nexonomics update was in Spring 2021 for 600% network growth and all-time-high of $4.05. Recently, the team posted a Nexonomics 3.0 update in November 2021 to initiate a $100 million buyback with hopes of liquidity and reduced volatility. The tokens that are bought back would not be classified as circulating supply but for network infrastructure purposes, similar to burn per se.
The loyalty is a tier-based program that further provides incentive to the platform users. Tier is decided based on the percentage total amount of NEXO owned in the portfolio or wallet. The tiers are as follows: base (0 – 1%), Silver (1 – 5%), Gold (5 – 10%), and Platinum (more than 10%). Users could reap benefits such as higher yields in interest, discounts for borrowing, exchange transaction cashbacks, daily interest, and free withdrawal.
NEXO is an ecosystem by itself that provides an exchange and wallet, both synergizing its needs. Acquiring NEXO is not that much of a hassle compared to its direct competitor Celsius. Furthermore, users owning NEXO would be eligible to receive the first SEC-compliant dividend. 30% of the revenue would be paid in ETH through the NEXO wallet. Given the fast paced nature of the crypto space, NEXO’s dividend payout would be on a monthly basis. The general structure could be simplified in an economic flywheel as shown below.
Though the platform promises monthly dividend payout, there is only historical data for four dividends payout. The third dividend payout was distributed on August 15, 2020 and the fourth dividend payout was distributed on June 16, 2021; $6,127,981.39 and $20,428,359.89 respectively.
For each of the months in dividend payout, there seems to be a huge spike in volume traded and the price follows a down trend similar to that of stocks. Diving further, the dividend payment ratio to market cap during payout was 0.4% for the third dividend, reflecting the percentage effect the price is not moved. The final dividend was 1.95% of the market cap and the effect on price is -6.95%. It could be implied here that the dividend system from the
stock market nature has a similar effect towards the price of the asset.