Nexo (NEXO) sustainability report

NEXO is present on the following networks: Ethereum, Fantom, Polygon.

The Ethereum blockchain network, following "The Merge" in 2022, operates on a Proof-of-Stake (PoS) consensus mechanism, a significant departure from its previous Proof of Work system. This transition replaced energy-intensive mining with validator staking, aiming to enhance energy efficiency, security, and scalability. In this model, participants willing to secure the network act as validators by staking a minimum of 32 units of the network's native asset (Ether). The network organizes its operations around a precise slot and epoch system. Every 12 seconds, a validator is randomly selected to propose a new block. Following this proposal, other validators on the network verify the integrity and validity of the block. Finalization of transactions, meaning they become irreversible, occurs after approximately two epochs, which translates to about 12.8 minutes, utilizing the Casper-FFG (Friendly Finality Gadget) protocol. The Beacon Chain plays a central role in coordinating the activities of these validators, while the LMD-GHOST (Latest Message Driven-Greedy Heaviest Observed SubTree) fork-choice rule is employed to ensure all network participants agree on the canonical chain, following the branch with the heaviest accumulated validator votes. Validators are economically incentivized for their honest participation in proposing and verifying blocks, but they also face severe penalties, known as slashing, for malicious actions or prolonged inactivity. This PoS framework is designed not only to reduce the network's environmental footprint but also to lay the groundwork for future upgrades, such as Proto-Danksharding, which are intended to further improve transaction efficiency and overall network throughput. The core components like validator selection, block production, and transaction finality are intrinsically tied to the amount of Ether staked, ensuring that participants have a vested interest in the network's security and stability.

Fantom's operational foundation is built upon the Lachesis Protocol, an Asynchronous Byzantine Fault Tolerant (aBFT) consensus mechanism specifically engineered to deliver rapid, secure, and highly scalable transaction processing. This innovative protocol diverges from conventional linear blockchain structures by employing a Directed Acyclic Graph (DAG) architecture, which facilitates the parallel processing of multiple transactions across various nodes. This parallel execution significantly boosts network throughput, making Fantom exceptionally well-suited for decentralized applications (dApps) that demand swift and efficient transaction handling. A cornerstone of the Lachesis Protocol is its asynchronous and leaderless design. This means that individual nodes can achieve consensus independently, without needing to defer to a central leader. Such a design inherently enhances the network's decentralization and overall speed, minimizing potential bottlenecks. Transactions on Fantom are organized into "event blocks," which undergo validation asynchronously by a multitude of validators. Once a sufficient number of validators confirm an event block, it is integrated into the network's immutable history. A critical feature distinguishing Fantom is its instant finality, meaning that once transactions are confirmed, they are irreversible and cannot be altered. This property is particularly valuable for applications where immediate and unchangeable transaction settlement is paramount, offering a high degree of confidence and reliability to users and developers alike.

The Polygon blockchain network, originally known as Matic Network, operates as a Layer 2 scaling solution for Ethereum, leveraging a sophisticated hybrid consensus mechanism to enhance scalability, ensure security, and maintain decentralization. The foundational elements of its consensus protocol are built upon a combination of Proof of Stake (PoS) and Plasma Chains. Within the PoS framework, validators are selected based on the number of MATIC tokens they have staked, with a larger stake increasing their probability of being chosen to validate transactions and produce new blocks. This system also allows MATIC token holders who prefer not to run their own validator nodes to delegate their tokens to trusted validators, thereby earning a share of the rewards and actively contributing to the network's overall security and decentralization.

Supplementing PoS, Polygon utilizes Plasma Chains, which serve as a framework for establishing child chains that run in parallel with the main Ethereum chain. These child chains facilitate off-chain transaction processing, significantly improving transaction throughput and reducing congestion on the Ethereum mainnet by committing only the final, aggregated state back to Ethereum. To uphold the integrity and security of these off-chain transactions, Plasma Chains incorporate a robust fraud-proof mechanism, enabling the challenging and potential reversion of any detected fraudulent activity.

The consensus process on Polygon begins with validators confirming the validity of transactions and subsequently integrating them into blocks. Validators then propose new blocks, with their staked tokens influencing their voting power, and engage in a collective voting process to reach consensus. A new block is officially added to the blockchain upon receiving a majority of votes. A critical security measure is the periodic checkpointing system, where snapshots of the Polygon sidechain's state are regularly submitted to the Ethereum main chain, thereby leveraging Ethereum's inherent security for the finality of Polygon's transactions. The Plasma framework further enables off-chain validation of transactions on child chains, with their final states eventually submitted to the Ethereum main chain, and fraud proofs ready to challenge any suspicious transactions within a specified period, collectively reinforcing Polygon's operational integrity and security.

NEXO is present on the following networks: Ethereum, Fantom, Polygon.

The Ethereum network's Proof-of-Stake (PoS) system is underpinned by a robust framework of incentive mechanisms and applicable fees, meticulously designed to secure transactions and encourage active, honest participation from validators. Validators, who are essential for the network's operation, commit at least 32 units of the network's native asset (Ether) to secure their role. Their primary incentives include rewards for successfully proposing new blocks, attesting to the validity of other blocks, and participating in sync committees, all of which contribute to the network's integrity and consensus. These rewards are distributed in newly issued Ether, alongside a portion of the transaction fees generated on the network. A key feature of Ethereum's fee structure is the implementation of EIP-1559, which divides transaction fees into two main components. The first is a base fee, which is automatically burned, effectively reducing the overall supply of Ether over time and potentially introducing a deflationary aspect, especially during periods of high network activity. The second is an optional priority fee, also known as a "tip," which users can choose to pay directly to validators to incentivize faster inclusion of their transactions into a block. This dual-fee structure aims to make transaction costs more predictable for users. To enforce honest behavior and prevent malicious activities, the network employs a strict system of economic penalties, including slashing. Validators who engage in dishonest acts or demonstrate extended periods of inactivity risk losing a portion of their staked Ether, providing a powerful deterrent against misconduct and ensuring the long-term security and reliability of the network. This comprehensive system aligns the economic interests of validators with the overall health and security of the Ethereum blockchain.

Fantom's economic framework incorporates a robust incentive model crafted to bolster network security and foster broad participation among its users and validators. A primary mechanism involves staking rewards for validators, who are crucial to the consensus process. These validators earn rewards in FTM tokens, directly proportional to the amount they have staked, thereby creating a strong incentive to actively secure and maintain the network. To ensure a balanced reward structure and support long-term network security, Fantom employs a dynamic staking reward rate, which adjusts based on the total FTM staked across the network. Consequently, if the total staked amount increases, individual rewards may see a proportional decrease. Beyond active validators, the network also facilitates participation for token holders who do not wish to operate their own validator nodes through delegated staking. These users can delegate their FTM tokens to existing validators, and in return, they receive a share of the staking rewards. This delegation option is vital for encouraging wider community involvement in the network's security without requiring significant technical overhead. Regarding applicable fees, transactions on the Fantom network are subject to fees paid in FTM tokens. Thanks to the network's high throughput capabilities, largely attributed to its DAG structure, these transaction fees are kept remarkably low. This efficient fee model, combined with the network's inherent scalability, renders Fantom an exceptionally cost-effective platform for users and an attractive environment for developing and deploying high-volume decentralized applications.

The Polygon network employs a robust set of incentive mechanisms and a distinct fee structure, combining its Proof of Stake (PoS) consensus with the Plasma framework to ensure network security, encourage active participation, and maintain transaction integrity. Validators play a crucial role, securing the network by staking MATIC tokens. Their selection for validating transactions and producing new blocks is directly influenced by the quantity of tokens they have staked. In exchange for their services, validators receive rewards in the form of newly minted MATIC tokens and a portion of the transaction fees. They are responsible for proposing and voting on new blocks, with incentives structured to promote honest and efficient operation, while also deterring misconduct through potential penalties. A key security feature involves validators periodically submitting checkpoints of the Polygon sidechain to the Ethereum main chain, which leverages Ethereum's established robustness to guarantee the finality of Polygon's transactions.

Delegators, who are token holders opting not to operate their own validator nodes, can delegate their MATIC tokens to trusted validators. This delegation allows them to earn a share of the rewards distributed to their chosen validators, fostering broader community participation in securing the network and enhancing its decentralization. The economic security of Polygon is further reinforced by a slashing mechanism, which penalizes validators for malicious actions, such as double-signing transactions or extended periods of inactivity. Slashing entails the forfeiture of a portion of their staked tokens, serving as a powerful deterrent against dishonest behavior. Additionally, validators are required to bond a substantial amount of MATIC, ensuring they have a significant financial interest in upholding the network's integrity.

Regarding the fee structure, one of Polygon's significant advantages is its remarkably low transaction fees compared to the Ethereum main chain. These fees, paid in MATIC tokens, are designed to be affordable, thereby encouraging high transaction throughput and widespread user adoption. While fees on Polygon can exhibit dynamic variations based on network congestion and transaction complexity, they consistently remain considerably lower than those on Ethereum, making Polygon an attractive option for users and developers. Deploying and interacting with smart contracts on Polygon also incurs fees, which are determined by the computational resources required. These smart contract fees are also paid in MATIC and are substantially lower than on Ethereum, offering a cost-effective environment for developing and maintaining decentralized applications (dApps). Furthermore, the Plasma framework facilitates off-chain processing for state transfers and withdrawals, with associated fees also paid in MATIC, collectively contributing to a reduced overall cost of utilizing the network.

NEXO is present on the following networks: Ethereum, Fantom, Polygon.

The methodology for calculating the Ethereum network's energy consumption primarily employs a "bottom-up" approach, which focuses on the energy demands of individual nodes that are central to the network's operation. These nodes are considered the fundamental factor driving the network's overall energy use. The assumptions underpinning these calculations are derived from empirical data gathered through a variety of sources, including public information sites, open-source crawlers, and proprietary in-house crawlers developed for this purpose. A critical step in this methodology involves determining the hardware used within the network, primarily by assessing the computational and other requirements necessary to run the client software. The energy consumption characteristics of these identified hardware devices are then rigorously measured in certified test laboratories to ensure accuracy. When quantifying the energy consumption for the network, the Functionally Fungible Group Digital Token Identifier (FFG DTI) is utilized, when available, to identify all implementations of the asset in scope, with mappings regularly updated based on data from the Digital Token Identifier Foundation. The information regarding the specific hardware deployed and the total number of participants in the network relies on assumptions that are diligently verified using empirical data whenever possible. Generally, participants are presumed to act in an economically rational manner. Furthermore, adhering to a precautionary principle, if there is any doubt in estimations, conservative assumptions are made, meaning higher estimates are used for potential adverse impacts to ensure a comprehensive and cautious assessment of energy consumption.

The methodology employed for calculating the Fantom network's energy consumption utilizes a "bottom-up" approach, which identifies individual nodes as the primary contributors to the network's overall energy footprint. This calculation is grounded in a combination of empirical findings derived from various public information sources, proprietary in-house crawlers, and publicly available open-source crawlers. The core factor in estimating the hardware deployed across the network is the technical specifications and operational demands required to run the client software. To ensure accuracy, the energy consumption associated with these specific hardware devices is meticulously measured in certified test laboratories. When determining the full scope of crypto-asset implementations for energy calculation purposes, the Functionally Fungible Group Digital Token Identifier (FFG DTI) is utilized whenever available. This allows for comprehensive mapping of the asset in question, with these mappings being updated regularly based on data provided by the Digital Token Identifier Foundation. The underlying data regarding the types of hardware in use and the total number of participants in the network relies on carefully constructed assumptions. These assumptions are rigorously verified through a best-effort approach, cross-referencing against available empirical data. A general principle guiding these estimations is the assumption that participants are largely economically rational actors. Furthermore, in instances of uncertainty, a precautionary principle is applied, leading to conservative estimates that lean towards higher assessments of potential adverse environmental impacts. The detailed approach aims to provide a comprehensive, albeit assumption-based, quantification of energy usage. No specific external document links are available within the provided context for this section.

The methodology for assessing the Polygon network's energy consumption is primarily based on a comprehensive "bottom-up" approach, which identifies the various nodes as the fundamental contributors to the network's overall energy footprint. This detailed calculation relies on empirical data collected from diverse sources, including publicly available information platforms, open-source crawlers, and proprietary in-house developed crawlers. The key factors for estimating the hardware utilized across the network are determined by the specific requirements for operating the client software. To ensure the accuracy of these estimations, the energy consumption of the identified hardware devices is precisely measured in certified test laboratories.

An integral part of this energy accounting involves the use of the Functionally Fungible Group Digital Token Identifier (FFG DTI). This identifier is employed to accurately determine and encompass all implementations of the crypto-asset relevant to the scope of analysis. The mappings derived from the FFG DTI are regularly updated, drawing upon data from the Digital Token Identifier Foundation to maintain their currency and reliability. Information concerning the specific hardware deployed and the total number of participants within the network is based on assumptions that undergo rigorous, best-effort verification using available empirical data. It is generally assumed that participants in the network behave in a largely economically rational manner. Adhering to a precautionary principle, in situations where uncertainties exist, estimates for potential adverse impacts are conservatively adjusted upwards, ensuring a robust and cautious assessment.

Crucially, due to Polygon's architectural design as a Layer 2 scaling solution for Ethereum, its energy consumption calculation incorporates a shared security model. Consequently, a proportional share of the Ethereum network's energy consumption is also attributed to Polygon, acknowledging Ethereum's foundational role in providing security to the Layer 2 solution. This specific proportion of Ethereum's energy usage is quantitatively determined based on the gas consumption on the Ethereum network. While the documents mention reliance on "public information sites" and the "Digital Token Identifier Foundation" for data, they do not provide specific URLs for these external resources.

NEXO is present on the following networks: Ethereum, Fantom, Polygon.

To ascertain the proportion of renewable energy utilized by the Ethereum network, a specific set of methodologies is applied. The initial step involves pinpointing the geographical locations of the network's nodes. This crucial geo-information is gathered through various means, including publicly available information sites, as well as both open-source and internally developed crawlers designed to scan the network. In instances where comprehensive geographical data for nodes is not directly accessible, the analysis resorts to leveraging "reference networks." These are comparable networks chosen for their similar incentivization structures and consensus mechanisms, providing a proxy for node distribution. Once the geo-information is established, it is then integrated and cross-referenced with public data obtained from "Our World in Data." This comprehensive dataset offers insights into the energy mixes and renewable energy penetration across different regions globally. The final calculation of energy intensity is defined as the marginal energy cost incurred for processing one additional transaction on the network. This approach allows for an estimation of the energy footprint associated with scaling the network's transactional volume. For detailed information and the underlying data sources on the share of electricity generated by renewables, relevant information can be found through sources such as Ember (2025) and the Energy Institute - Statistical Review of World Energy (2024), with further processing by Our World in Data, accessible via Share of electricity generated by renewables – Ember and Energy Institute.

Regarding the key energy sources and methodologies for the Fantom network, the provided documentation primarily details the methodology for calculating energy consumption rather than specifying the direct energy sources (e.g., electricity grid mix, renewable percentages) powering the network's operations. The approach to quantifying energy usage is described as a "bottom-up" methodology, where individual operational nodes are identified as the central elements contributing to the network's energy demand. This calculation process is informed by empirical data gathered from public information sites, as well as both open-source and internally developed crawlers. Hardware specifications necessary for running the client software serve as the main criteria for estimating the equipment used across the network. The energy consumption of these hardware components is quantified through measurements conducted in certified test laboratories. For a comprehensive assessment, the Functionally Fungible Group Digital Token Identifier (FFG DTI) is used to identify all relevant implementations of the asset, with regular updates to these mappings from the Digital Token Identifier Foundation. Assumptions regarding hardware deployment and participant numbers are carefully vetted with empirical data, operating under the premise of economic rationality and a conservative estimation approach in cases of doubt. Therefore, while the methodology for measuring consumption is thoroughly outlined, explicit details on the specific types of energy sources remain undetailed within the given context. No specific external document links are available within the provided context for this section.

The available documentation details the methodologies for calculating the Polygon network's energy consumption, but it does not explicitly identify the key energy sources (e.g., renewable vs. non-renewable electricity, specific grid mixes) that power its underlying infrastructure. Instead, the focus is on the methodology of consumption assessment. The energy calculation employs a "bottom-up" approach, which considers individual nodes as the primary units of energy consumption within the network. This methodology draws on empirical findings from various data points, including public information sites, open-source crawlers, and proprietary in-house developed crawlers, to estimate the hardware utilized across the network.

The primary determinants for estimating the hardware's energy usage are the computational requirements for running the client software. The energy consumption of these specific hardware devices is meticulously measured and verified in certified test laboratories to ensure precise data collection. To accurately scope all relevant implementations of the crypto-asset for energy calculation, the Functionally Fungible Group Digital Token Identifier (FFG DTI) is utilized, with its mappings regularly updated through data from the Digital Token Identifier Foundation. Assumptions regarding the hardware in operation and the total count of network participants are diligently verified against empirical data, operating under the premise that participants are largely economically rational. In line with a precautionary principle, any uncertainties default to conservative estimates, leaning towards higher figures for potential adverse impacts.

Significantly, as Polygon functions as a Layer 2 scaling solution for Ethereum, its energy consumption calculation also integrates a portion of the Ethereum network's energy usage. This inclusion acknowledges Ethereum's fundamental role in providing security to Polygon. The specific proportion attributed is determined by the gas consumption on the Ethereum network, ensuring a comprehensive view of Polygon's energy demand, considering its reliance on the main Layer 1 chain. While these methodologies provide a clear framework for quantifying energy use, specific details regarding the actual sources of this energy are not elaborated upon in the provided documents, nor are any direct links to external documents specifying these sources or methodologies furnished.

NEXO is present on the following networks: Ethereum, Polygon.

The methodology for determining the Greenhouse Gas (GHG) emissions of the Ethereum network closely mirrors the approach used for energy consumption, focusing on identifying emission sources and their quantification. The initial and fundamental step involves precisely identifying the geographical locations of the network's operational nodes. This data collection is facilitated through a combination of publicly available information, as well as specialized open-source and proprietary crawlers designed to actively discover and map node distributions across the globe. Should there be an absence of specific geographic information for the nodes, the analysis intelligently defaults to utilizing "reference networks." These are carefully selected networks that exhibit comparable characteristics in terms of their incentivization structures and consensus mechanisms, providing a basis for estimating the geographic spread when direct data is unavailable. This collected geo-information is then meticulously integrated with publicly accessible data from "Our World in Data." This integration allows for the application of regional carbon intensity factors to the estimated energy consumption, thereby enabling the calculation of associated GHG emissions. The overall GHG intensity is quantified as the marginal emission generated per additional transaction processed on the network, offering a metric for the environmental impact of increased network activity. For detailed information and original data regarding the carbon intensity of electricity generation, sources include Ember (2025) and the Energy Institute - Statistical Review of World Energy (2024), processed by Our World in Data, available at Carbon intensity of electricity generation – Ember and Energy Institute. This resource is licensed under CC BY 4.0.

The provided documents offer comprehensive details regarding the methodologies for calculating the energy consumption of the Polygon blockchain network, which are predicated on a "bottom-up" approach focusing on node energy demand, hardware requirements, and the integration of a proportion of Ethereum's energy consumption due to Polygon's Layer 2 architecture. This framework is robust for quantifying electrical energy usage. However, when addressing the topic of key Greenhouse Gas (GHG) sources and their associated methodologies, the provided information is notably insufficient. The documents do not contain any specific data or discussions pertaining to the direct or indirect GHG emissions generated by the Polygon network's operations.

Crucially, there is no mention of the types of emissions (e.g., Scope 1 for direct emissions, Scope 2 for indirect emissions from purchased electricity, or Scope 3 for other indirect emissions within the value chain), nor any dedicated methodologies for calculating, monitoring, or reporting these GHG emissions. The absence of information on the energy mix that powers the network's validators and underlying infrastructure – whether it is predominantly from renewable sources, fossil fuels, or a specific national grid mix – makes it impossible to determine the carbon intensity of the energy consumed. Without such details, a comprehensive assessment of GHG sources cannot be made.

While the methodology for energy consumption includes a "precautionary principle" to make higher estimates for "adverse impacts," these impacts are not explicitly defined or quantified in terms of GHG emissions. There is no information provided on specific conversion factors used to translate energy consumption into carbon dioxide equivalents or other greenhouse gases. The documents do not offer any external links or references to dedicated environmental impact assessments or GHG reporting standards followed by the Polygon network. Consequently, based solely on the provided information, it is not possible to identify the key GHG sources or the specific methodologies employed for their quantification within the Polygon ecosystem.