# What is Nexio? Source: https://docs.nexio.xyz/01-Overview/1.what-is-nexio Explains Nexio's BTC lending model connecting lenders with institutional borrowers through fixed terms, borrower-specific vaults, legal agreements, custody controls, and on-chain payment auditability. Nexio is a lending platform that connects BTC lenders with institutional borrowers through fixed-term, fixed-rate credit arrangements. Bitcoin’s market cap now exceeds \$2 trillion, yet a large share of BTC remains idle or is deployed through opaque lending channels where terms can change quickly and borrower risk is difficult to assess. Nexio addresses that gap with a structured credit model built for institutions: lenders commit BTC into borrower-specific vaults, borrowers receive financing under negotiated legal agreements, and loans pay fixed interest with principal returned at maturity. Nexio connects lenders to institutional borrowers through enforceable legal agreements, trusted custody providers, and controlled operational workflows. Borrower payments are exposed on-chain for lenders to audit, and Nexio does not rehypothecate client funds. With Nexio, institutional borrowers are not required to overcollateralize every position. Instead, they can access more capital-efficient financing backed by legal agreements, credit underwriting, covenant oversight, and custody controls. That creates a different risk profile than overcollateralized lending, one grounded less in excess collateral and more in borrower identification, legal enforceability, and disciplined servicing. Overcollateralized BTC lending still has a clear place in the market, particularly where lenders want protection centered on pledged assets and liquidation mechanics. Nexio is built for a different use case: institutional borrowers that need more capital-efficient financing and can be evaluated as credit counterparties. That creates a different risk profile, one grounded less in excess collateral and more in underwriting, legal enforceability, covenant oversight, custody controls, and disciplined servicing. What this means: * **For lenders:** Earn fixed, BTC-denominated income by lending to vetted institutional borrowers under clear legal terms. Each borrower vault has its own rate, duration, and credit profile, so lenders can choose the exposure that fits their risk appetite. Borrower payment activity is visible on-chain, giving lenders an auditable record of how obligations are being serviced. * **For borrowers:** Access BTC liquidity through structured loan facilities without needing to overcollateralize every position. Loans may be undercollateralized or fully uncollateralized, but borrowers remain contractually obligated to repay interest and principal under signed legal agreements. ### **How Nexio Works** Nexio organizes lending through borrower-specific vaults. Each vault corresponds to a single institutional borrower and a defined set of commercial terms. Those terms typically include: * A fixed interest rate * A fixed loan duration * A defined repayment schedule * Legal agreements governing payment obligations, default handling, and lender protections This structure gives lenders visibility into who they are lending to, how long capital will be locked, what return they should expect if the loan performs as agreed, and how borrower payments are made over the life of the facility. ### **Why the Model Matters** Traditional BTC lending often leaves lenders exposed to changing rates, unclear custody arrangements, rehypothecation risk, and limited transparency around the borrower. Nexio replaces that with a more structured model built around identified counterparties, fixed commercial terms, segregated borrower vaults, professional custody, and auditable payment flows. The table below highlights Nexio's key differences: | Existing BTC Lending Solutions | Nexio | | ----------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | Opaque borrower exposure | Institutional borrowers complete the Nexio onboarding review before access is granted, and each vault is tied to a specific borrower and term sheet. | | Commingled capital across many activities | Borrower vaults are segregated so lenders can evaluate exposure on a borrower-by-borrower basis, without rehypothecation of funds. | | Floating or unstable loan pricing | Loans are issued at fixed interest rates, with principal due at maturity. | | Heavy reliance on overcollateralization | Nexio supports undercollateralized and, in some cases, uncollateralized lending backed by legal agreements and credit underwriting. | | Informal operating processes | Lending activity is managed through documented workflows, a single institutional onboarding relationship with Nexio, enforceable borrower obligations, and transparent payment reporting. | | Weak custody controls | BTC is held through trusted custody arrangements, including qualified custodians such as BitGo where appropriate. | ### Custody Custody is a core part of the Nexio model. Borrower vaults are administered through trusted custody arrangements designed to separate assets, control movements of BTC, prevent rehypothecation, and support institutional oversight. These arrangements can include: 1. **Segregated borrower vaults:** Each borrower facility is structured as its own vault with its own terms, balances, and operational controls. 2. **Qualified custodians:** Nexio can work with trusted custodians such as BitGo to hold BTC and support secure settlement, reporting, and asset segregation. 3. **Controlled operations:** Deposits, draws, interest payments, and repayments follow managed operational processes. Nexio exposes borrower payment activity on-chain so lenders can independently audit loan servicing. We cover this further in **Section 5.1: Bitcoin Custody.** ### Architecture At a high level, Nexio brings together lenders, borrower-specific vaults, and institutional custody through a coordinated three-layer operating model. These include: 1. **Client Layer:** Lenders, BTC treasuries, and institutional allocators access Nexio through a one-time onboarding process, then use reporting and borrower vault selection to choose among facilities based on borrower profile, interest rate, and duration. 2. **Operations Layer:** Nexio manages onboarding, legal documentation, payment workflows, and borrower monitoring. This is where facility terms are documented, lenders are matched to facilities, and repayments are tracked through the life of each loan. 3. **Custody Layer:** Trusted custodians and controlled settlement workflows hold and move BTC under approved operating procedures. This layer is designed to protect asset segregation and support secure loan funding and repayment. # Key Concepts Source: https://docs.nexio.xyz/01-Overview/2.Key-Concepts Defines Nexio's core concepts, including lenders, borrowers, borrower-specific vaults, fixed-rate BTC lending, legal agreements, custody, servicing, covenant oversight, and payment transparency. Nexio combines BTC-denominated lending with institutional legal, custody, and servicing workflows. The concepts below explain the core building blocks of the current model. ### **1. Series** A **series** is a defined BTC lending arrangement between Nexio, approved lenders, and a specific institutional borrower. Each series has its own commercial terms and risk profile. Rather than contributing to an open pool, lenders are taking exposure to a specific borrower opportunity with defined parameters. Those parameters typically include: * A defined strategy (e.g., CME basis, delta-neutral, market-making) * A fixed interest rate and duration * Named borrowers that have completed Nexio's KYC/KYB onboarding * A repayment schedule * Series-specific covenants and reporting requirements This structure helps lenders evaluate borrower risk on a case-by-case basis rather than relying on a pooled, one-size-fits-all product. ### **2. Borrower Vaults** Nexio uses **borrower vaults** as segregated operational buckets for tracking lender allocations, borrower funding, and repayment activity. In the current model, a borrower vault is not a DeFi primitive or tokenized structure. It is a controlled Series-level construct used to separate exposure, maintain clean records, and support reporting. That separation matters because it helps Nexio: * Track each lender's exposure to a specific borrower * Keep series activity distinct from other borrower programs * Reconcile deposits, disbursements, coupon payments, and repayments * Reduce the risk of commingling or rehypothecation If a lender allocates BTC to a borrower vault, that BTC is associated with that borrower series and its agreed terms rather than being converted into a protocol token or pooled across unrelated activities. ### **3. Custody and Settlement** BTC is held and moved through centralized custody and settlement workflows designed for institutional use. Nexio works with approved custodians and controlled operational processes to support: * Asset segregation * Transaction approval controls * Borrower funding * Repayment processing * Ongoing reconciliation and reporting This is an important distinction from older crypto lending models: Nexio does not rely on tokenized deposit receipts, decentralized custody, or smart-contract-native fund flows to operate the product. ### **4. Counterparty Diligence and Covenants** Because Nexio supports undercollateralized and uncollateralized lending, counterparty diligence and covenant design are central to the model. Before a borrower receives BTC financing, Nexio coordinates a diligence process that may include review by Nexio, participating lenders, and/or third-party diligence providers, depending on the facility. * Business quality and operating history * Financial condition and liquidity * Risk management processes * Compliance and governance standards * Strategy profile and use of proceeds Once a series is established, the facility can include covenants and reporting requirements such as borrowing limits, payment schedules, information rights, and other controls designed to protect lenders. In other words, lender protection comes primarily from legal agreements, counterparty diligence, facility-specific covenants, monitoring, recovery rights, custody controls, reporting, and disciplined operations rather than automatic overcollateralized protocol mechanics. ### **5. Legal Agreements** Each Nexio series is backed by legal documentation that defines the rights and obligations of the parties involved. These documents typically include: * The master lending framework with the borrower * Series-specific term sheets or credit terms * Covenant and reporting obligations * Default, enforcement, and recovery provisions Where applicable, additional collateral or security documents may also exist, but the platform is not defined by overcollateralized lending. This legal layer is what makes the product institutional: borrowers are identified counterparties with binding contractual repayment obligations. ### **How It All Fits Together** Together, these concepts form Nexio's operating model: * **Series** define the economic terms of each loan program. * **Borrower vaults** keep allocations and reporting tied to a specific series. * **Centralized custody and settlement** control how BTC is held, funded, and repaid. * **Counterparty diligence and covenants** help define which borrowers and facilities may be made available, what obligations apply, and what protections lenders receive. * **Legal agreements** anchor each lending relationship in enforceable obligations. The result is a BTC-denominated institutional lending platform built around identified counterparties, clear commercial terms, trusted custody, and lender-visible payment flows. # System Architecture Source: https://docs.nexio.xyz/02-how-nexio-works/0.system-architecture Describes Nexio's client, operations, and custody layers for lender onboarding, borrower vault selection, legal workflows, reporting, settlement, and repayment tracking. Nexio is organized as a three-layer BTC lending platform. These layers connect institutional lenders, borrower-specific credit facilities, and the custody and control processes that move BTC through the life of each loan. 1. **Client Layer:** The institutions that supply or borrow BTC through Nexio. 2. **Operations Layer:** The onboarding, facility coordination, servicing, monitoring, and reporting workflows that run the lending business. 3. **Custody Layer:** The custody and settlement infrastructure that receives BTC, funds approved borrowers, processes repayments, and keeps balances reconciled. Together, these layers let lenders allocate BTC to defined borrower opportunities while Nexio manages operational controls and repayment tracking. ### **1. Client Layer** The Client Layer represents the counterparties participating in Nexio's lending marketplace. This primarily includes: * **Institutional lenders:** Funds, family offices, corporate treasuries, and other BTC holders seeking fixed-term BTC income. * **Institutional borrowers:** Trading firms, market makers, hedge funds, and other approved counterparties seeking BTC financing. Lenders do not allocate into a general pool. Instead, they choose a specific borrower facility, often referred to in the docs as a **Series**, based on its borrower profile, term, coupon, strategy, and covenant package. Each facility corresponds to one borrower and one defined set of commercial terms. That gives lenders visibility into who is borrowing the BTC, how long it will be committed, and what repayment obligations apply. ### **2. Operations Layer** The Operations Layer is the core of the platform. It is where Nexio coordinates and services each lending facility. This layer includes five main functions: * **Facility structuring:** Nexio defines the interest rate, facility size, duration, repayment schedule, permitted use of proceeds, and borrower-specific covenants. * **Onboarding and diligence coordination:** Nexio completes KYC/KYB, compliance checks, and the onboarding steps required before a facility is opened. * **Lender allocation:** BTC deposits are booked to the relevant borrower facility so exposure remains tied to the selected borrower rather than being mixed across unrelated programs. * **Servicing and monitoring:** Nexio tracks utilization, borrower reporting, coupon payments, covenant compliance, and concentration limits throughout the loan term. * **Legal and reporting workflow:** Every facility operates under legal agreements and reporting requirements that define payment obligations, default remedies, and lender protections. This is also the layer where Nexio applies concentration limits, covenant monitoring, and operational controls. In practice, lender protection comes from legal agreements, counterparty diligence, facility-specific covenants, monitoring, recovery rights, custody workflows, reporting, and operational controls across the life of the facility. ### **3. Custody Layer** The Custody Layer handles how BTC is received, held, disbursed, and reconciled. Nexio uses approved custody and settlement arrangements designed for institutional lending. The objective is to keep assets segregated, control the movement of BTC, and maintain records that support lender reporting and internal oversight. This layer typically includes: * **Deposit receipt and booking:** Lender BTC is received into the relevant custody arrangement and recorded against the selected borrower facility. * **Segregated handling of assets:** Balances are tracked through borrower-specific account structures and internal controls to reduce commingling risk. * **Controlled borrower funding:** BTC is released only after the facility's legal, credit, compliance, and operational conditions have been satisfied. * **Repayment processing and reconciliation:** Coupon payments and principal repayments are received, matched to the correct facility, and reflected in Nexio's reporting. * **Auditability:** BTC movements can be reconciled against custody records, facility records, and lender reporting so stakeholders can verify how each facility is being serviced. The Custody Layer does not replace counterparty diligence or legal review, but it provides the operational backbone that makes funding, repayment, and recordkeeping reliable. ### **How the Layers Work Together** In practice, Nexio's architecture works as follows: 1. A lender selects a borrower-specific facility and deposits BTC under the published terms. 2. Nexio books that BTC to the relevant facility and keeps the exposure associated with that borrower. 3. Once the borrower's onboarding is complete, legal documentation is in place, and any ongoing compliance and funding conditions are satisfied, BTC is disbursed to the borrower through approved settlement instructions. 4. The borrower deploys the BTC within the bounds of the agreed facility and strategy. 5. Nexio monitors reporting, covenant compliance, facility utilization, and payment performance during the loan term. 6. Coupon payments and principal repayments flow back through the custody and servicing process, after which lenders can withdraw or recommit BTC according to the facility terms. The result is a lending architecture built around identified borrowers, fixed commercial terms, controlled BTC movement, and ongoing servicing rather than a generalized tokenized credit pool. # Borrower Overview Source: https://docs.nexio.xyz/02-how-nexio-works/1.borrower-overview Explains how institutional borrowers use Nexio to access BTC liquidity through onboarding, facility terms, legal agreements, draws, interest payments, repayment, and covenant obligations. Nexio borrowers include institutional trading firms, market makers, arbitrage desks, and other professional counterparties seeking fixed-rate BTC-denominated credit for short- and medium-term strategies. These borrowers complete the KYC/KYB onboarding process with Nexio and already operate under regulatory oversight and manage large positions across established venues. Many of these borrowers also have high minimum facility requirements, meaning the capital they need must be sized for institutional deployment rather than small-ticket lending. Today, the strategies these borrowers run (basis trades, funding rate arbitrage, market making) already exist and generate real yield, but access to them is fragmented and typically gated by high minimums, bespoke legal structuring, and direct relationships. The result is that a large share of Bitcoin capital simply can't participate. Nexio standardizes this into clean, allocatable facilities where capital can be deployed with defined terms and transparency, without the overhead of independently sourcing borrowers, conducting due diligence, and structuring each deal. Although some traditional BTC lending markets exist, they have several challenges, including: * **Unverified borrowers:** Counterparties are opaque, with limited KYC/KYB or legal enforcement. * **Variable, unpredictable rates:** Yields fluctuate with market conditions and platform risk. * **Regulatory uncertainty:** Many platforms lack standardized compliance or auditability. * **High access barriers:** Institutional borrowers require large facilities, and lenders lack a standardized way to fund them without direct relationships and custom legal work. Nexio addresses this by combining standardized onboarding, legal documentation, managed custody arrangements, and ongoing monitoring into a single servicing process. Each borrower is onboarded into a defined facility with its own terms, limits, and reporting requirements, while lenders choose exposure based on the specific borrower and facility they want to fund. BTC funding and repayment are handled through approved custody and settlement workflows rather than decentralized wallet logic or protocol-native contract execution. ### **Step-by-Step Flow** There are **five steps** in Nexio's borrower process, from onboarding to repayment. The following illustrates this flow: 1. **Onboarding and diligence:** Borrowers complete the institutional onboarding process with Nexio and provide the financial, operational, and legal information required for the facility. 2. **Documentation:** Approved borrowers sign the relevant legal agreements, including facility terms, reporting obligations, and default provisions. 3. **Facility approval:** Nexio sets the borrower's limit, pricing, duration, and any covenants or structural protections applicable to that facility. 4. **BTC funding:** Once the facility is approved and operational requirements are satisfied, BTC is disbursed through Nexio's managed custody and settlement process. 5. **Servicing and repayment:** Borrowers make scheduled interest payments and repay principal according to the agreed terms, while Nexio monitors compliance and reports performance to lenders. ## Example: Borrower Flow Consider a high-credit borrower approved for a 90-day BTC facility with a fixed 7% rate. After onboarding is complete, the facility documents are finalized and the operating terms for the borrower are confirmed. Once the borrower satisfies the funding conditions, Nexio arranges disbursement of 2 BTC through its approved custody and settlement workflow to the borrower's designated settlement instructions. Throughout the loan term, the borrower makes scheduled coupon payments and provides any required reporting. At maturity, the borrower repays principal and outstanding interest, and Nexio records the repayment and updates lender reporting for that facility. # Lender Overview Source: https://docs.nexio.xyz/02-how-nexio-works/2.lender-overview Explains how BTC lenders evaluate borrower-specific vaults, review borrower identity and facility terms, commit BTC, monitor payments, and receive fixed BTC-denominated income. Lending on Nexio is designed for institutions, funds, and BTC treasuries seeking predictable, fixed-rate yield while keeping Bitcoin in native custody. Lenders don’t create Series themselves; they allocate BTC into predefined Series that have published term sheets, fixed coupons, and borrowers that have already completed Nexio's onboarding process. Nexio also provides aggregation services for lenders, combining capital across participating accounts so they can access institutional borrowers that might otherwise be out of reach on a standalone basis. Each Series corresponds to a single borrower with its own Taproot vault and term sheet, operating like a structured loan fund for Bitcoin: lenders supply capital, verified borrowers draw under enforceable terms, and coupon payments flow back on schedule. All deposits, repayments, and yield accruals are visible on-chain in real time. Although traditional BTC lending markets exist, they come with several limitations: variable rates, off-chain custody, and opaque counterparties. Nexio solves these challenges by combining Bitcoin-native custody with transparent on-chain credit operations, giving lenders predictable income and institutional-grade security. # Nexio FAQ Source: https://docs.nexio.xyz/02-how-nexio-works/3.borrower-lender-faq Answers borrower and lender questions about Nexio's BTC lending structure, vaults, facility terms, repayment obligations, custody, legal agreements, and risk controls. ### 1. What is Nexio in plain English? Nexio is a lending platform that matches BTC lenders with institutional borrowers through fixed-term credit facilities. In practice, Nexio: * Connects institutional lenders and borrowers around defined BTC credit facilities. * Coordinates onboarding, documentation, funding, repayment, and reporting. * Structures loans with fixed commercial terms and legal agreements. * Uses custody and controlled operations to manage funding, repayment, and reporting. * Gives lenders visibility into borrower-specific exposure rather than pooling everything together. The simplest way to think about it is BTC-denominated institutional private credit. *** ### 2. Who can borrow and who can lend? Nexio is designed for institutional participants. * **Borrowers:** Trading firms, market makers, hedge funds, treasuries, and other approved institutions seeking BTC financing. * **Lenders:** Institutions, funds, family offices, and BTC treasuries looking for fixed-term BTC yield. Borrowers are not anonymous, and lender exposure is tied to identified counterparties and defined loan terms. *** ### 3. Are Nexio loans collateralized? Nexio is built for undercollateralized and uncollateralized lending. That means lender protection comes primarily from: * Borrower selection * Covenant packages * Legal agreements * Monitoring and recovery processes Some facilities may still include collateral, but it may not generally be provided. *** ### 4. What happens if a borrower defaults? A default occurs when a borrower fails to meet its payment or other contractual obligations. If that happens, Nexio follows the remedies defined in the relevant legal agreements and facility documents. Depending on the structure, that can include: * Enforcement of covenants and default provisions * Workout or restructuring discussions * Claims against pledged assets, if any exist * Legal recovery against the borrower and related obligors Losses, if any, are borne according to each lender's exposure to that facility. *** ### 5. What happens to a lender’s BTC when deposited? When a lender deposits BTC: 1. It is allocated to a specific borrower facility under Nexio’s operating and custody framework. The lender’s position is recorded within that borrower vault together with the applicable commercial terms. 2. If the borrower draws on the facility, that BTC is lent out under the agreed fixed-term loan. 3. If the borrower has not yet drawn the full facility, or once prior loans have been repaid, BTC can remain in the borrower vault pending withdrawal or commitment to a subsequent loan, depending on the lender’s election and the facility terms. *** ### 6. Once BTC is lent out and paid back, will it be lent out again next time? Potentially, yes. Once a loan is repaid, BTC that remains in the same borrower vault can be committed to a new fixed-term loan for that borrower, typically at updated terms for the next facility. *** ### 7. Does BTC collect compound interest? Not automatically. BTC only compounds if interest or repaid principal remains in the borrower vault and is then committed to a subsequent loan, allowing returns to be earned again on a larger balance. # Yield Strategies Source: https://docs.nexio.xyz/03-strategies-and-yield-sources/1.strategy-overview Introduces borrower strategy categories that may support facility repayment, including CME basis trades, delta-neutral funding strategies, and market-making activity. Every Nexio Series represents a single, borrower-specific yield strategy. These strategies generate predictable BTC returns for lenders while providing borrowers with efficient, fixed-rate credit for established, market-neutral trading activities. Each Series is operated by one verified borrower under fixed terms, clear covenants, and continuous on-chain monitoring. Here are some illustrative examples of the types of strategies borrowers may use to generate yield for lenders: | Strategy | Description | Example | | ------------------------ | ------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | 1. CME Basis | Captures the premium between spot BTC and futures on regulated exchanges. | If spot BTC trades at \$100,000 and the 3-month CME future trades at \$106,000, a borrower buys BTC spot and sells the future. When the contract expires and prices converge, the \$6,000 spread becomes locked-in profit (forming the yield paid to lenders). | | 2. Delta-Neutral Funding | Arbitrage perpetual futures funding rates across exchanges. | If a borrower holds 1 BTC spot and shorts a perpetual future paying 0.02% funding every 8 hours, they collect steady BTC payments from long traders. Over a year, this can compound into \~10–15% annualized yield shared with lenders. | | 3. Market-Making | Provides two-sided liquidity and earns spread income from trading volume. | If BTC trades between \$99,950–\$100,050, a borrower posts buy orders at \$99,950 and sell orders at \$100,050. Each completed trade earns a \$100 spread. Repeated thousands of times per day, these small spreads compound into a predictable return. | We'll go into greater depth on each strategy in the subsequent sections. Each approach is market-neutral, meaning returns are generated from structural inefficiencies (like price spreads or funding differentials), not speculative bets on BTC’s direction. They therefore enable a consistent, transparent yield, which makes them suitable for fixed-rate BTC credit. Each Series discloses key details upfront: * **Borrower Type:** Which kind of institution does the capital support (e.g., market maker, basis trader, or delta-neutral desk). * **Collateralization:** How much BTC or equivalent collateral is pledged and what structural protections apply. * **Expected APR Range:** Typical yield range based on historical market conditions. * **Strategy Mechanics:** How returns are generated and what market exposures exist. This transparency lets lenders select Series aligned with their risk and liquidity preferences. # Strategy 1: CME-Basis Source: https://docs.nexio.xyz/03-strategies-and-yield-sources/2.cme-basis Explains CME Bitcoin futures basis strategies, including spot and futures positioning, basis spread capture, facility repayment relevance, and key risks. Borrowers in this Series execute the **CME Basis trade**: a market-neutral strategy designed to capture the small but consistent price premium between spot Bitcoin and regulated Bitcoin futures on the [Chicago Mercantile Exchange (CME)](https://www.cmegroup.com/). The CME is the world’s largest regulated derivatives exchange, handling tens of billions in notional Bitcoin futures each month and serving as the primary venue for institutional BTC exposure. ### How The Strategy Works At a high level, it works by buying BTC on the spot market and selling a corresponding futures contract that trades at a higher price. A futures contract is an agreement between two parties to buy or sell an asset at a fixed price on a specific future date. A futures contract is a promise between two parties: one agrees to buy the asset later at a fixed price, the other agrees to sell it at that price. Futures exist so traders can hedge or speculate on price movements without holding the asset itself. On the CME, all contracts are cash-settled in USD, and the exchange guarantees positions through margin and collateral systems. Because of factors like funding costs, interest rates, and institutional demand for long exposure, CME Bitcoin futures often trade slightly higher than spot, creating the premium that basis traders capture. The ‘basis’ refers to the difference between the futures price and the spot price of Bitcoin. CME Bitcoin futures often trade slightly above spot, creating the basis. For those borrowing BTC on Nexio, this might look as follows: 1. **Borrow BTC & Buy BTC on Spot Market:** The borrower borrows BTC on Nexio and purchases Bitcoin at the current market price. 2. **Sell CME Futures (Forward Contract):** The borrower simultaneously sells a CME Bitcoin futures contract that trades slightly above the current spot price. This locks in a known sale price for a future date. 3. **Hold Until Expiry:** Over time, the futures price and the spot price naturally converge as expiry approaches because, on the settlement date, the futures contract must match the real market price of Bitcoin to close out positions accurately. 4. **Settle the Trade:** When the contract expires, the borrower delivers the BTC into the futures contract and realizes the locked-in spread as profit. Because they hold equal and opposite long/short positions, Bitcoin’s price movement during the period does not affect the outcome. ### **Example: 3-Month CME Futures** Assume spot BTC trades at **\$100,000** and the **3-month CME future trades at \$106,000**. This price premium is standard as CME futures reflect the cost of capital and institutional demand for regulated exposure. In this situation, a borrower can: 1. Buy 1 BTC on the spot market. 2. Sell 1 CME futures contract at \$106,000. When the contract expires, the futures price converges with the spot price. The borrower delivers the BTC against the futures position and keeps the \$6,000 premium, equivalent to roughly 6% annualized yield. # Strategy 2: Delta-Neutral Funding Source: https://docs.nexio.xyz/03-strategies-and-yield-sources/3.delta-neutral Explains delta-neutral funding strategies using spot and perpetual futures positions to earn funding spreads while managing market, exchange, liquidity, and operational risks. Borrowers in this Series execute the **Delta-Neutral Funding** strategy: a market-neutral approach that earns yield from the funding-rate differential between long and short perpetual futures across exchanges. **A perpetual future** is a type of futures contract with no expiry date. Traders pay or receive a small funding fee every few hours to keep the contract price aligned with Bitcoin’s real spot price. This strategy captures those periodic funding payments (not price movements) to generate a steady BTC-denominated yield from market imbalances. ## How the Strategy Works The strategy captures periodic funding payments that flow between long and short traders on perpetual futures exchanges. These payments occur every few hours and are calculated as a percentage of the contract’s notional value. Funding payments are periodic transfers between traders on perpetual futures exchanges. They exist to keep the perpetual contract’s price aligned with the real Bitcoin spot price. If the perpetual price is **above spot**, long traders pay shorts a small fee (a positive funding rate) to discourage excessive long positions. If the perpetual price is **below spot**, shorts pay longs (a negative funding rate) to reduce selling pressure. These payments occur periodically and are calculated as a percentage of the contract’s notional value. These transfers are enforced by the exchange’s matching engine, ensuring they occur automatically and reliably. The realized spread flows back into the borrower’s Series vault, increasing its NAV and the uBTC value held by lenders. For those borrowing BTC on Nexio, this might look as follows: 1. **Borrow BTC & Buy BTC on Spot Market:** The borrower borrows BTC on Nexio and holds it as their spot position, forming the base of the trade. 2. **Short Perpetual Futures:** The borrower simultaneously opens a short position in a BTC perpetual futures contract on an exchange with favorable funding rates, meaning longs pay shorts. 3. **Hold the Hedge:** As BTC’s price moves, gains and losses on the spot and futures positions cancel out. The trade remains delta-neutral, meaning immune to directional price swings. 4. **Collect Funding Payments:** The borrower earns recurring funding payments from long traders on that exchange, which accumulate as BTC yield over time. ### **Example: 0.03% funding rate** Assume BTC trades at **\$100,000**, and a perpetual futures contract on **Exchange A** pays a **+0.03% hourly funding rate** to short positions. The borrower: * Buys **1 BTC** on the spot market. * Sells **1 BTC** perpetual futures on Exchange A. If BTC’s price rises to \$105,000, the spot position gains \$5,000 while the short futures loses \$5,000, resulting in no net directional profit or loss.\ Meanwhile, the borrower continuously earns the 0.03% hourly funding from long traders on Exchange A. For lenders, the Delta-Neutral Funding Series provides predictable, BTC-denominated coupons backed by this funding-rate spread.\ Borrowers are high-credit trading firms with exchange access, proven hedging systems, and strict collateralization, ensuring BTC-backed coupons remain verifiable and transparent on-chain throughout the Series term. # Strategy 3: Market Making Source: https://docs.nexio.xyz/03-strategies-and-yield-sources/4.market-making Explains how market-making borrowers may earn spread income while managing inventory, liquidity, exchange, operational, and counterparty risks. Borrowers in this Series execute the Market-Making strategy: a trading approach that earns yield by providing BTC liquidity across exchanges and capturing the spread between buy and sell orders. Each Series is operated by a single verified borrower executing this market-making strategy under fixed terms and continuous on-chain monitoring. When a borrower draws BTC from this Series on Nexio, they deploy it across trading venues to earn small, repeated profits from market activity. This is similar to how high-frequency trading firms operate in equities or Foreign Exchange (FX). For Market-making to occur, Market Makers quote both sides of the order book so other traders can buy or sell instantly. This means they both offer to buy and sell an asset, with profit coming from the spread (the small gap between the bid and ask prices). **Risk arises** when markets move faster than positions can be hedged, or when liquidity dries up during volatility. To manage this risk, professional firms use algorithms to rebalance exposure across different exchanges, adjust spreads dynamically, and hedge inventory using financial instruments. Compared to hedged-spread strategies like CME Basis or Delta-Neutral Funding, Market-Making involves moderate operational and market risk. It is typically suited for operationally sophisticated borrowers with robust infrastructure, exchange connectivity, and real-time risk management. ### **How It Works on Nexio** At a high level, the borrower earns from the **difference between bid and ask prices** on Bitcoin markets while maintaining neutral exposure through continuous hedging and inventory balancing. For those borrowing BTC on Nexio, this might look as follows: * **Borrower Draws BTC:** The approved market-making firm borrows BTC from the Series vault under a fixed-rate, short-tenor Series (typically 30–90 days). * **Deploys on Exchanges:** The borrower posts buy and sell orders across centralized and decentralized venues, earning the bid–ask spread and maker rebates. * **Manages Exposure:** The borrower continuously hedges and rebalances inventory across venues to remain market-neutral. * **Pays Coupons and Settles:** Periodic BTC income flows back to the Series vault as coupon payments, and at maturity, the borrower repays principal plus remaining yield (all verifiable on-chain). ### **Example: \$50 BTC spreads** Assume BTC trades around **\$100,000**. The borrower: * Places buy orders at \$99,950 and sell orders at \$100,050. * When both orders fill, the borrower earns \$100 in spread profit (\$50 per side). Repeating this thousands of times per day generates steady BTC-denominated income. If volatility increases, the borrower widens spreads to protect profitability while staying neutral in exposure. The trading income (after fees and hedging costs) funds the fixed coupon owed to the Series vault, with any excess yield retained by the borrower. # Concentration Limits Source: https://docs.nexio.xyz/04-risk-and-governance/1.Concentration-Limits Describes how Nexio uses borrower, strategy, geography, tenor, and platform-level concentration limits to manage exposure across BTC lending facilities. **Concentration limits** are the guardrails Nexio enforces to prevent overexposure to any single borrower, strategy, or geography. If one trading firm borrowed across several Series, or if most Series funded the same strategy, a market shock could impact the whole platform. Concentration limits prevent that. Once capital is allocated to a borrower’s Series vault, the borrower can freely deploy those funds within that Series according to its approved strategy parameters. Concentration limits only apply at the platform level (governing total exposure across borrowers, strategies, and regions), not restricting how an approved borrower uses BTC already allocated to their Series. ### **How Concentration Limits Work** Nexio applies multiple independent concentration layers, each continuously monitored by the risk engine and the governance committee. These include: * **Borrower caps:** Limit the maximum share of total platform exposure attributable to a single borrower across all Series. * **Strategy caps:** Limit total active capital allocated to any single trading strategy (e.g., CME Basis, Market-Making). * **Geographic caps:** Control regional exposure to exchanges or jurisdictions with correlated risk. * **Liquidity floors:** Require each Series to keep a minimum percentage unallocated to support redemptions under stress. The system constantly tracks how capital is distributed across borrowers, strategies, and regions, automatically halting new draws or reallocations if any threshold is approached. ## Example: Classification Limits As an example, let's assume an active Series has 1,000 BTC total. Concentration limits would ensure: * No single borrower controls a disproportionate share of total exposure. * No single strategy dominates overall capital deployment. * Sufficient liquidity remains unallocated for redemptions even under adverse conditions. This layered structure keeps Series utilization diversified and ensures lenders can redeem even if one borrower, strategy, or region experiences stress. # Covenant Monitoring Source: https://docs.nexio.xyz/04-risk-and-governance/2.Covenant-Monitoring Explains Nexio's covenant monitoring approach for borrower reporting, operational requirements, credit triggers, compliance obligations, escalation, and facility oversight. Covenants are borrower-specific financial and operational rules that govern how a facility can be used after it is approved and funded. They define the limits, reporting obligations, and escalation triggers Nexio uses to monitor borrower performance throughout the life of the loan. They are also a core part of Nexio's ongoing credit discipline after a facility is funded. Covenants translate underwriting decisions into measurable operating requirements, giving Nexio and participating lenders a way to track borrower performance, respond to deterioration early, and enforce remedies when conditions change. ### **Why Nexio Uses Covenant-Based Credit Controls** Many institutional borrowers use BTC financing for market-making, arbitrage, treasury, or hedging activity, which means the loan has to be monitored as an ongoing credit exposure rather than treated as a static transaction. In those cases, Nexio treats the borrower as a credit counterparty rather than as an anonymous wallet that can only be managed through automatic liquidation. That means lender protection depends on whether Nexio and the participating lenders can: * Underwrite the borrower and its strategy before funding * Define financial and operational covenants specific to that borrower * Require periodic reporting and prompt notice of material events * Limit draws, pause activity, or require remediation when risk increases * Enforce payment, workout, and recovery rights through legal agreements ### **Covenant Types** Each borrower is bound by a covenant package tailored to its facility terms, credit profile, strategy, and operating model. Nexio's Risk and Governance Committee reviews the covenant framework as part of facility approval. There are two types of covenants: **1) Financial Covenants:** * **Liquidity requirements:** Borrowers *may* be required to maintain minimum cash, collateral, or unencumbered asset buffers relative to outstanding BTC borrowings, although this is not necessarily enforced. * **Leverage limits:** Facility terms can cap overall leverage or risk concentration across venues, strategies, or counterparties. * **Utilization and draw limits:** Borrowers can be restricted in how much of an approved facility may be drawn or rolled at any point in time. * **Performance triggers:** Material deterioration in financial condition, losses, or capital position can trigger additional review or remedial action. **2) Operational Covenants:** * **Reporting cadence:** Borrowers must provide periodic balance, position, and operating updates at the frequency defined in the facility documents. * **Venue and counterparty restrictions:** Borrowers may be limited to approved exchanges, custodians, brokers, or trading counterparties. * **Notice obligations:** Borrowers must promptly disclose material events such as regulatory issues, liquidity stress, operational incidents, or covenant pressure. ### How Covenant Enforcement Works Nexio monitors covenant compliance through borrower reporting, internal review, and facility servicing controls. 1. **Data collection:** Nexio receives borrower reports, position data, payment updates, and any required supporting information under the facility's reporting schedule. 2. **Threshold testing:** The servicing and risk functions compare that information against the borrower's approved covenant package and facility terms. 3. **Escalation:** If a covenant is breached or trending toward breach, Nexio can issue a notice, require additional reporting, or pause further draws while the issue is reviewed. 4. **Cure or remediation:** During the cure period, the borrower may be required to reduce exposure, improve liquidity, repay part of the facility, or satisfy other corrective measures. 5. **Default response:** If the breach is not cured, Nexio can apply the remedies available under the legal agreements, including suspension, acceleration, enforcement, or workout procedures. All covenant events, borrower notices, payment issues, and remediation steps are recorded through Nexio's servicing, legal, and reporting workflows so lenders and internal stakeholders can track facility performance over time. ### **What This Protects Against** This framework is intended to reduce the risk that lenders are surprised by borrower deterioration or left dependent on a single control point. Excess collateral can be helpful when it exists and is legally perfected, but it does not eliminate market gap risk, custody risk, jurisdictional risk, or documentation risk. Covenant-based institutional credit addresses a different problem: making the borrower observable, contractually bound, and operationally monitored throughout the life of the facility. For that reason, Nexio evaluates undercollateralized credit as an underwriting and servicing question. The protections come from the full stack working together: diligence, legal agreements, custody controls, reporting, covenants, concentration limits, and default remedies. # Default and Workouts Source: https://docs.nexio.xyz/04-risk-and-governance/3.Default-and-Workouts Explains how Nexio handles missed payments, covenant breaches, default events, workout planning, lender communication, enforcement rights, and recovery processes. Default in Nexio is a legal and servicing process, not just a price event. If a borrower misses a payment, breaches a covenant without curing it, becomes insolvent, or triggers another defined event of default under the facility documents, Nexio and the relevant lenders move from normal servicing into enforcement or workout procedures. ### **What Happens When a Default Occurs** The exact sequence depends on the facility documents, but the default workflow generally follows this pattern: 1. **Event identification:** Nexio identifies a missed payment, uncured covenant breach, insolvency trigger, or other contractual default event. 2. **Notice and verification:** Nexio issues the required notices, confirms the facts against the legal documents, and determines whether any cure period applies. 3. **Draw suspension and controls:** New draws, rollovers, or discretionary actions can be paused while the facility is reviewed. 4. **Acceleration or workout decision:** If the default is not cured, the debt may be accelerated, moved into a negotiated workout, or otherwise enforced according to the legal agreements. 5. **Recovery process:** Claims may then be pursued through settlement, restructuring, court-supervised proceedings, collateral enforcement where applicable, or other recovery channels. ### **Why This Differs From Instant Liquidation Models** Overcollateralized crypto loans often focus on margin thresholds and liquidation engines. Nexio's institutional credit model assumes that some facilities will instead be protected through borrower underwriting, contractual rights, reporting obligations, covenants, and legal remedies. That means default management looks more like traditional private credit workouts rather than a smart-contract liquidation. The protection is not that losses are impossible. The protection is that the borrower is identified, documented, monitored, and legally accountable before and after a payment failure. ### **What Lenders May Hold After Default** In traditional credit markets, defaulted debt can continue to trade at distressed prices, and creditors may receive replacement claims, restructuring securities, or bankruptcy proofs of claim depending on the proceeding. In Nexio, the economic logic is similar: * A defaulted facility may still have residual recovery value * That recovery value may depend on seniority, documentation, and the outcome of a restructuring or liquidation process * In a court-supervised restructuring, the original debt claim may be amended, exchanged, or replaced by whatever the approved plan provides ### **Claims and Recoveries** It is natural to represent post-default claims in a more transferable form where the legal structure permits it. In that event distressed claims are tokenized and fungible after issuance. # Bitcoin Custody Source: https://docs.nexio.xyz/05-Security-Custody-Compliance/1.Bitcoin-Custody Describes Nexio's BTC custody approach, including segregated borrower vaults, trusted custody arrangements, controlled operations, settlement workflows, and payment auditability. Nexio uses centralized custody arrangements to hold and move BTC in support of its lending business. Nexio works with qualified custodians and controlled operational processes designed for institutional clients. ### Centralized Custody Model Under this model, BTC is held with approved custodians in accounts or sub-accounts that support asset segregation, transaction controls, and institutional reporting. The goal is straightforward: * Keep client assets segregated * Prevent unauthorized movements of BTC * Support documented approval workflows * Reduce rehypothecation risk * Provide auditable records for lenders, borrowers, and counterparties In practice, this means Nexio coordinates with one or more regulated or otherwise approved custodians to manage deposit receipt, disbursement, repayment, and account reconciliation. ### How It Works Nexio's custody process typically follows four steps: 1. **Deposit and booking:** Lender BTC is received into the appropriate custody arrangement and booked to the relevant lending facility. 2. **Segregation and controls:** Assets are held under account structures and approval processes designed to keep exposures separated and movements controlled. 3. **Borrower funding:** Once the relevant legal, credit, and operational requirements are satisfied, BTC is disbursed to the borrower through approved settlement instructions. 4. **Repayment and reconciliation:** Coupon payments and principal repayments are received, matched to the facility, and reflected in Nexio's reporting and oversight processes. ### Key Custody Controls * **Qualified custody:** Nexio can work with established custodians such as BitGo or other approved providers appropriate for institutional BTC settlement. * **Asset segregation:** Borrower and lender exposures are tracked through segregated account structures and internal controls rather than pooled informal balances. * **Controlled movement of funds:** BTC transfers are subject to documented approval, settlement, and reconciliation procedures. * **Instruction verification:** Funding and repayment instructions are checked against approved facility terms, counterparty records, and internal authorization workflows before BTC moves. * **Role separation:** Credit approval, operations, custody initiation, and reconciliation are separated across defined workflows so a single action does not control the entire transfer lifecycle. * **Operational oversight:** Custody activity is integrated with Nexio's onboarding, compliance, and reporting processes. * **Auditability:** Nexio maintains records that support lender reporting, internal monitoring, and counterparty verification. ### Why This Matters Custody is a core part of lender protection in Nexio's model. Because Nexio facilitates undercollateralized and uncollateralized institutional credit, it is important that BTC funding and repayment occur through trusted operational infrastructure with clear controls, defined counterparties, and documented oversight. Strong custody does not eliminate credit risk, but it does reduce operational ambiguity and helps ensure that asset handling matches the legal and commercial structure of each facility. ### Example Assume a lender allocates BTC to a borrower-specific facility on Nexio. The BTC is received into the relevant custody arrangement, recorded against that facility, and held subject to Nexio's approval and settlement controls. Once the borrower satisfies the agreed funding conditions, BTC is released through the designated settlement workflow. During the life of the loan, coupon payments and final repayment are received through the same controlled framework, reconciled to the facility, and reflected in lender reporting. # Compliance Controls Source: https://docs.nexio.xyz/05-Security-Custody-Compliance/2.Compliance-Controls Explains Nexio's compliance controls for borrower onboarding, institutional diligence, KYC, KYB, AML, sanctions screening, monitoring, and regulatory obligations. Because Nexio originates and services institutional BTC loans, compliance controls sit alongside onboarding, legal documentation, and custody operations. Their purpose is to ensure that only approved counterparties can access the platform and that BTC movements occur within defined legal and regulatory requirements. These controls typically include: * **KYC / KYB verification:** Lenders and borrowers complete the Nexio onboarding review covering identity, beneficial ownership, and institutional eligibility before they begin participating on the platform. Nexio does not require a brand-new full KYC/KYB process for every facility. * **AML and sanctions screening:** Nexio screens counterparties, wallets, and transactions against applicable AML, sanctions, and prohibited activity controls. * **Jurisdiction and eligibility checks:** Participation is limited to approved entity types and jurisdictions consistent with Nexio's legal and compliance framework. * **Source-of-funds and wallet review:** Where relevant, Nexio reviews the origin of assets and settlement instructions before approving funding or repayment flows. * **Document and authority verification:** Facility agreements, settlement instructions, and authorized signatories are verified before BTC is disbursed or material facility changes are processed. * **Recordkeeping and audit trails:** Onboarding decisions, screening results, approvals, and transaction records are retained to support internal oversight, audits, and regulatory review. That initial onboarding is complemented by ongoing monitoring rather than repeated full re-onboarding. Nexio can refresh screenings, request updated documentation, and re-check settlement details throughout the life of a facility if borrower circumstances, counterparties, or transaction patterns change. ### Example Assume a borrower is scheduled to draw BTC under an approved facility. Before funding is released, Nexio confirms that the borrower's existing onboarding record remains in good standing, that sanctions and other monitoring checks remain clear, that the legal documentation is in force, and that the settlement instructions match the approved operating setup for that borrower. Once those checks are complete, the custody and operations teams can process the transfer through the approved settlement workflow and record the activity in Nexio's compliance and servicing records. # On-Chain Auditability & Legal Assurance Source: https://docs.nexio.xyz/05-Security-Custody-Compliance/3.Auditability-and-Legal Explains how Nexio combines legal agreements, custody records, servicing workflows, reporting, and on-chain payment visibility to support lender oversight and auditability. Nexio ensures that every BTC movement is verifiable directly on-chain. Instead of relying on PDF statements or delayed reporting, lenders, auditors, and counterparties can observe real-time data sourced from the same BTC transactions that govern vault operations. This gives all stakeholders continuous visibility into Series health, utilization, and compliance status, without exposing private borrower details. Auditors or custodians can use Nexio’s read-only APIs to verify that balances and vault states match the underlying Bitcoin custody on Bitcoin itself — ensuring full reconciliation between legal and technical layers. # Community Links Source: https://docs.nexio.xyz/06-community/community-links Lists official Nexio community and public links, including the website, docs, X/Twitter, Discord, and support resources. Connect with our team and community to stay informed, collaborate, and build on top of Nexio’s Bitcoin credit infrastructure. Get early updates, technical releases, and ecosystem news. Learn everything you need to know about Nexio.