COINBASE for Crypto has come

[Clinamenic]

Not sure if I already shared this with you, but this is some good on-chain forensic accounting regarding the issuance and distribution of Tether, and Nexo is mentioned as one of the big recipients.

Tether Papers: This is exactly who acquired 70% of all USDT ever issued

We catalogued every USDT distributed by Tether in the past seven years to present the most transparent research on the stablecoin to date.

protos.com

Zug-registered Nexo is a sizable player in the DeFi ecosystem. It operates an exchange, a crypto lending service, and an over-the-counter trading desk.

Nexo’s crypto platform offers yield on a raft of cryptocurrencies, including stablecoins like Tether.

Nexo has been around since 2017, having deployed its own utility token NEXO in May 2018.

Understandably, Nexo handles large amounts of USDT to help manage its activities within the space.

• Tether sent Nexo $2.6 billion in USDT.
• Practically all of that was in the past year.
• Nexo received a touch over 2% of all outbound volume.

 

[vimothy]

so nexo is obviously borrowing stable coins in the market, and using them to pay you your loan

 

[Clinamenic]

Zug-registered Nexo is a sizable player in the DeFi ecosystem

Bit of a misnomer, as Nexo is in the "CeFi" ecosystem, being a centralized custodial platform.

 

[vimothy]

it then has to use the yield from your loan to pay it's own back

 

[Clinamenic]

so nexo is obviously borrowing stable coins in the market, and using them to pay you your loan

Also using depositor's funds to issue loans, which I gather is the whole point of offering interest to depositors, as deposits would increase the pool of capital Nexo has to work with.

 

[vimothy]

Bit of a misnomer, as Nexo is in the "CeFi" ecosystem, being a centralized custodial platform.

decentralised platforms still need centralised actors for practical purposes

 

[vimothy]

Also using depositor's funds to issue loans, which I gather is the whole point of offering interest to depositors, as deposits would increase the pool of capital Nexo has to work with.

right. that's what I was getting at with the parallel loans question

 

[Clinamenic]

it then has to use the yield from your loan to pay it's own back

But it's not solely relying on these stablecoin issuance. It's also relying on the depositors, hence the risk, which is still minimal considering the loans are overcollateralized.

 

[vimothy]

but it depends on what the inflow is from those loans. do you have to pay back in stable coins or can it be any crypto asset?

 

[Clinamenic]

decentralised platforms still need centralised actors for practical purposes

True, there can't be an algorithm that is completely severed from human will and physical infrastructure, but a DeFi protocol like Aave is quite distinct from Nexo.

 

[vimothy]

But it's not solely relying on these stablecoin issuance. It's also relying on the depositors, hence the risk, which is still minimal considering the loans are overcollateralized.

collaterlisation is not important here, only loan repayments

 

[Clinamenic]

but it depends on what the inflow is from those loans. do you have to pay back in stable coins or can it be any crypto asset?

There are a variety of assets which are accepted as loan repayment, and Nexo can always exchange these assets between their liquidity pool, to suit their needs.

 

[vimothy]

nexo cant spend collateral

 

[Clinamenic]

collaterlisation is not important here, only loan repayments

It is important, because the risk of borrower default is lessened drastically if the loan is overcollateralized.

 

[vimothy]

well, at any rate, they shouldn't!

 

[vimothy]

It is important, because the risk of borrower default is lessened drastically if the loan is overcollateralized.

but it doesnt help their cashflow

 

[Clinamenic]

nexo cant spend collateral

Right, but the deposits themselves aren't all used as collateral. They can be locked up in fixed terms, though.

 

[vimothy]

unless they're dodgy af, which is not a given

 

[Clinamenic]

but it doesnt help their cashflow

But the overcollateralization seems to help secure their cashflow, in terms of risk minimization, as far as I understand.

 

[vimothy]

Right, but the deposits themselves aren't all used as collateral. They can be locked up in fixed terms, though.

exactly so the collateral doesnt matter wrt the cashflow needed to service their loans