Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


Jumping into loans with NEXO, is cryptocurrency lending profitable?

Nexo (NEXO) is an Ethereum platform and token that raises the question is cryptocurrency lending profitable? In detail, Nexo’s platform is one of many attempts to use crypto assets as loan collateral.

Nexo builds its platform around a wallet that lets users borrow against cryptocurrency. Essentially, to borrow all you need to do is deposit crypto assets in the wallet.

In addition, users can earn interest income from funds in the Nexo Wallet. Notably, Nexo currently offers an Annual Percentage Rate (APR) of up to 8%.

Thus, the Nexo Wallet looks and operates like a bank account. In fact, Nexo claims Lloyd’s of London and BitGo insure the wallets for up to $100 million.

Is Nexo a Bank and is it legal?

Obviously, Nexo could get into trouble for operating an unregulated bank fast. Thus, I predict banking regulators could ban Nexo or demand Nexo register as a bank.

Moreover, Nexo could be illegal in the United States where the federal government regulates most banks. Additionally, US authorities could force Nexo to offer Federal Deposit Insurance Corporation (FDIC) insurance on its accounts.

However, Nexo operates like a bank. To explain, clients put crytpocurrency in a wallet, borrow against it and receive funds through the Nexo wallet.

Is Nexo an Investment Bank?

Interestingly, Nexo claims it can tap some huge markets including crypto investors, crypto miners, and hedge funds. Hence, Nexo looks like an investment bank.

Importantly, investment banks like Goldman Sachs (NYSE: GS) are acting more and more like consumer banks. For instance, Goldman Sachs is offering consumer loans and savings accounts through its Marcus artificial intelligence platform. Furthermore, Goldman Sachs and Apple (NASDAQ: AAPL) are teaming up to offer credit cards to Apple Pay users.

Tellingly, Nexo looks a great deal like Goldman Sachs’ Marcus platform. For example, both Nexo and Marcus offer loans and saving accounts. Plus, Nexo mentions plans for a “Nexo card.”

Intriguingly, Goldman Sachs backs BitGo, the company that helps insure the Nexo Wallets. Thus, Nexo has connections to a major investment bank.

Will Nexo issue a Credit Card?

In particular, Nexo’s website mentions a Nexo Card and shows a picture of a card with a MasterCard (NYSE: MA) symbol on it.

To clarify, Nexo claims you can access a line of credit secured by crypto assets through the Nexo Card. This sounds like a credit card to me because the original name for credit cards was “line of credit cards.”

However, MasterCard CEO Ajaypal Singh Banga is an outspoken critic of cryptocurrency. Banga has told reporters he thinks “cryptocurrencies are junk” frequently. Banga can kill the Nexo Card because you need MasterCard’s permission to issue cards that access MasterCard’s platform.

Under these circumstances, I can’t imagine MasterCard allowing a Nexo Card to reach the market. In fact, both MasterCard and Visa (NYSE: V) have pulled the plug on cryptocurrency-backed cards in recent years.

Is Nexo a PayPal for Cryptocurrency?

With or without a card, Nexo could make money because it looks like PayPal (NASDAQ: PYPL). To explain, PayPal is a platform that lets you store, transmit, spend, and borrow against funds in a digital account.

Correspondingly, Nexo is a platform that lets you store, transmit, spend, and borrow against crypto assets in a digital account. Impressively, Nexo lends money on most of the big cryptocurrencies including Ethereum (ETH), Bitcoin (BTC), EOS (EOS), Ripple (XRP), Tron (TRON), Bitcoin Cash, and DASH (DASH).

Like PayPal, lets you send money to bank accounts, or spend it through a card. Notably, I can spend funds in my PayPal account with a MasterCard. In addition, I can make purchases with funds from PayPal through a Google Pay app on my phone.

The similarity between Nexo and PayPal interests me because PayPal is a very lucrative company. For instance, PayPal reports a yearly gross profit of $7.114 billion on annual revenues of $15.451 billion in 2018.

Why you should invest in Platforms

Nexo is an excellent example of blockchain platform investment. To elaborate, they design a platform like Nexo to deliver a service through the blockchain.

In Nexo’s case the product is cryptocurrency loans in over 45-fiat currencies. Hence, Nexo will allow you to use cryptocurrency funds in the real world if it works as advertised.

For example, you could use a Nexo line of credit to buy groceries or fuel for your car. To increase stability, Nexo lends money on several stablecoins including Tron (TRON). Thus, Nexo creates cryptocurrency liquidity by offering instant access to lines to credit on altcoins.

Platforms that offer access to digital products and services are big business. In fact, Apple is trying to reinvent itself as a platform company, OneZero contributor Jathan Sadowski explains. To clarify, Apple is focusing more and more of its business on offering digital products and services.

How Platforms Make Money

Specifically, Apple is offering access to digital banking from Goldman Sachs and producing its own movies and TV shows.

Apple is expanding its platform because platforms make a lot of money. For instance, made $46.6 billion from the App Store in 2018, CultofMac estimates.

Platforms like the App Store and Nexo make money by charging people for access to goods and services. Tellingly, Sadowski calls this business model, “Landlord 2.0.”

Landlord 2.0 or Tollbooth 2.0?

I think Tollbooth 2.0 is a better description of the platform model. To explain, super investor Warren Buffett often writes and speaks of his desire to own a tollbooth. The tollbooth makes money because people have to pay a toll to access something.

Correspondingly, platforms like Apple and PayPal function as digital tollbooths. Not surprisingly, Buffett’s Berkshire Hathaway (NYSE: BRK.B) is a major investor in Apple, CNBC reports.

On the other hand, there are some serious drawbacks to platforms that Buffett’s good friend Bill Gates observes. For instance, Gates believes they base most platforms on intangible assets.

Should you Invest in Intangible Assets?

To clarify, intangible assets are strategies, business plans, and patterns of behavior are impossible to patent. For example, Nexo’s cryptocurrency wallet that pays interest. I imagine they can program any cryptocurrency wallet to pay interest.

Hence, platform operators face an almost unlimited amount of competition and have few legal protections. However, Gates writes that intangible products offer other advantages.

For instance, you can quickly and easily scale a platform based on intangible assets into a large business at a low cost. In particular, companies like Uber and Netflix (NASDAQ: NFLX) have built huge customer bases in just a few years with digital platforms.

Can Blockchain Platform Tokens like NEXO make money?

Therefore, speculators who buy Ethereum platform tokens like Nexo (NEXO) are really investing in platforms.

To clarify, they design a token like NEXO to drive transactions on a platform. In particular, NEXO serves as an accounting tool to simplify bookkeeping and lending. Plus, NEXO allows outsiders to speculate on its transactions without a wallet.

Interestingly, NEXO plans to repay investors by paying a 30% dividends to holders of the NEXO Dividend Token for 10 years. Hence, the NEXO Dividend Token looks like a stock. However, Nexo claims the Token complies with all US Securities and Exchange Commission (SEC) regulations.

Thus, Nexo is trying to rework Landlord 2.0 or Tollbooth 2.0 to pay everybody. Intriguingly, I wonder if Nexo’s dividend scheme could be the basis of a tax on cryptocurrency and the platform economy.

For instance, a token that pays a dividend on government-owned platforms to all citizens. Hence, something like NEXO could become the basis of a tokenized basic income.

Is Nexo (NEXO) a good cryptocurrency?

The Nexo (NEXO) is an Ethereum request for comment (ERC20) token which trades as a cryptocurrency. For example, Nexo participates in Bancor’s liquity network and trades on many exchanges.

Moreover, Coinmarketcap gave NEXO a Coin Price of 7.3₵, a Market Capitalization of $40.949 million, and a 24-Hour Market Volume of $4.52 million on 11 April 2019. Those numbers made NEXO the 113th most valuable cryptocurrency on that day. In addition, there was a Circulating Supply of 560 million NEXO and a Total Supply of one billion NEXO.

Unfortunately, nobody knows if blockchain platforms like NEXO can make money because the business model is new. However, digital platforms like Apple and PayPal are making a lot of money right now. Hence, I advise all speculators to investigate the platform economy and its implications for crypto assets.