Crypto

Anchor Protocol vs Nexo – What’s The Difference?

Anchor Protocol vs Nexo

If you’re looking for a way to earn interest in your cryptocurrencies, 2 platforms that may come to your mind include Anchor Protocol and Nexo.

How are they different, and which should you choose?

Here’s what you need to know:

The difference between Anchor Protocol and Nexo

The Anchor Protocol is a decentralised platform that only allows you to earn interest on UST. Meanwhile, Nexo is a centralised platform that allows you to earn interest on a wider variety of cryptocurrencies, such as BTC, ETH, and many more.

Here’s an in-depth comparison between both platforms:

Supported cryptocurrencies

Here are the different cryptocurrencies that you can deposit into either account:

Anchor Protocol only allows you to deposit UST

The only cryptocurrency that you can deposit on Anchor Protocol is UST, which is an algorithmic stable coin.

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This is a stable coin on the Terra Network, and you will need to have a Terra Station wallet to interact with this protocol.

Nexo allows you to earn on 32 cryptocurrencies

You can earn interest on Nexo with 32 different currencies:

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As such, Nexo allows you to earn interest on a wider range of cryptocurrencies.

Nexo also allows you to earn interest on BNB, which is similar to Celsius.

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Type of platform

Anchor Protocol is a decentralised platform. This is advantageous as you do not require to do any Know-Your-Customer (KYC) before you can use this platform.

All you’ll need is to connect your Terra Station wallet, and you can deposit UST straight into the protocol.

Anchor Protocol Connect Wallet

However, this means that it is also harder to navigate around the platform, especially if you are new to the decentralised finance (DeFi) world.

You will need to buy UST on a centralised exchange, before sending it to your Terra Station wallet and connecting with the Anchor Protocol.

Meanwhile, Nexo is a centralised platform, where you are required to do KYC before you can use the platform.

Interest rate

For the Anchor Protocol, the platform aims to pay you a fixed ‘Anchor Rate’ that is pre-determined beforehand.

Anchor Protocol Rate

Currently, the rate fluctuates between 19.3% to 19.5%.

Anchor Protocol Interest

This is a rather high yield, especially since you are earning interest on a stable coin that is pegged to USD.

However, there is a chance that this yield may not be sustainable in the long run. If that is the case, the interest rate may drop eventually.

Meanwhile, Nexo allows you to earn interest in 2 ways:

  1. In-Kind (i.e. the token that you’ve deposited)
  2. Earning in Nexo’s native token (NEXO)

If you choose to earn in NEXO, you are able to earn extra interest.

Nexo also allows you to earn interest on fiat currencies

Apart from crypto, Nexo also allows you to earn interest on your fiat currencies.

You are able to earn up to 12% APY! However, you would have to earn your interest in the form of NEXO to receive this high-interest rate.

If you wish to earn in-kind, you will still get a 10% interest rate. This is still really high!

There are 3 currencies that you can earn from:

  1. USD
  2. GBP
  3. EUR

However, I can’t find the USD option in my account. I only have the option to deposit either GBP or EUR.

Nexo EUR GBP

This could be because I am from Singapore.

High-interest rates mean high risks

While the high-interest rate seems really attractive for your fiat currency, I would suggest against leaving all of your money with Nexo.

This is because the reason why Nexo can offer such a high-interest rate is due to the people to whom they are lending.

You are able to take a loan from Nexo without having many requirements. The only thing that you need to provide is collateral, in case you default.

As such, there is a higher chance that a lender may default from their payment! This is why Nexo offers such high-interest rates on your money.

If you are aware of the risks involved, then you can place some of your money inside Nexo.

However, I strongly recommend not to treat Nexo like a savings account and leave all of your money inside!

How you earn your rewards

For the Anchor Protocol, you will be able to earn your interest in UST.

Anchor Protocol Daily Interest Rate

You can find out more about the differences between aUST and UST, and how this affects the interest that you earn.

For Nexo, your interest is paid out daily. You will need to hold your assets for at least 24 hours first before the payout is issued to you.

Withdrawal fee

If you are looking to withdraw UST from the Anchor Protocol to your Terra Station wallet, you will be required to pay a transaction fee in UST.

Anchor Protocol Withdraw UST

Meanwhile, Nexo does provide you with some free withdrawals. However, this depends on your loyalty tier.

The withdrawal fee that you are charged depends on the gas fees that are being charged by the network!

Lock-in period

Both platforms do not have any lock-in periods, and you are able to withdraw your funds at any time. This means that you are able to freely withdraw your crypto any time you wish!

Platform

For the Anchor Protocol, you are currently only able to access it via your desktop.

Meanwhile, Nexo has both a desktop platform,

Nexo Web Platform

as well as a mobile app.

Nexo Mobile App

Security

The risk of your funds in the Anchor Protocol is dependent on 2 things:

  1. The safety of Anchor Protocol
  2. The safety of your Terra Station wallet

In the event that the Anchor Protocol fails, it is possible for you to buy insurance.

Anchor Protocol Insurance

You can do this to provide cover against a smart contract failure, or if the UST loses its peg to the US Dollar.

Another thing you’ll need to take note of is the security of your Terra Station wallet. When you are creating your wallet, you will be given a 24-word phrase.

Terra Station Wallet Phrase

It is important that you do not share this with anyone, as this phrase will allow anyone to gain access to your funds in your Terra Station wallet!

If you lose your 24-word phrase, you will be unable to recover your wallet in the future. As such, do remember to keep your phrases in a secure place!

Nexo has a rather secure platform

Nexo has partnered with BitGo and Ledger Vault as their security partners.

BitGo is the main custodian of your crypto assets and has a pretty strong track record.

Nexo also has $375 million worth of assets being insured by both partners!

Nexo Insurance

Moreover, Nexo only loans your assets to credit lines that are overcollateralised between 200-500%.

Nexo Loan Collateral

This should help to reduce the risk of the institution defaulting from the loan!

Verdict 

Anchor ProtocolNexo
CryptocurrenciesOnly UST32
Interest Rates19.3% – 19.5In-Kind
NEXO (higher interest)
Type
of platform
DecentralisedCentralised
WithdrawalsFee in USTDepends on loyalty
tiers and gas fees
Lock-insNoneNone
PlatformsWebsiteWebsite and
mobile app
Lock-in periodNoneNone
SecurityInsurance and
wallet safety
Insured up to
$375 million

So which platform should you choose?

Choose Anchor Protocol for a high-interest rate

The Anchor Protocol provides a very high yield on UST, which is very advantageous since it is pegged to USD.

In this way, you do not experience as much volatility compared to a cryptocurrency.

However, it is much harder to access the Anchor Protocol as you will need to know how to:

  1. Send UST to Terra Station
  2. Deposit UST from Terra Station to Anchor Protocol

You may also want to be very careful about the security of your Terra Station wallet!

Choose Nexo to earn interest on a wider variety of cryptocurrencies

Hodlnaut allows you to earn interest on different cryptocurrencies, and not just on stable coins. This is useful if you want to earn interest in BTC, ETH, or other cryptocurrencies.

Conclusion

Both accounts allow you to earn extra interest on your crypto.

Here are some things you’ll need to consider:

  1. The type of currency you intend to hold
  2. The number of withdrawals you wish to make
  3. Whether you frequently use a web platform or mobile app

👉🏻 Referral Deals

If you are interested in signing up for any of the products mentioned above, you can check them out below!

Nexo Referral (Earn USD$25 in BTC)

If you are interested in signing up for a Nexo account, you can use my referral link. You will receive USD$25 in BTC after holding $100 or more in assets for the next 30 days.

Nexo Referral New

Here’s what you need to do:

  1. Sign up for a Nexo account
  2. Complete the Advanced Verification on Nexo
  3. Transfer ≥ $100 worth of assets into Nexo
  4. Hold these assets for at least 30 days

You will receive your BTC reward in the next 30 days!

You can view more information about this promotion on Nexo’s website.


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