NEM, or the New Economy Movement, wants a smarter, more technically advanced blockchain. It positions itself as not just another altcoin, on not just another blockchain.
NEM, which calls itself the Smart Asset blockchain, is a technology platform that aims to be an efficient way to cost-effectively manage assets and data.
Let’s look at NEM, its design, features, benefits and possible applications.
What is NEM (XEM)?
In March 2015 NEM developed as a fork-out version of the NXT, another common virtual currency and payment network platform based on blockchain.
It is run by a non-profit organization called NEM.io Foundation located in Singapore. Following the fork, to make it more flexible and quicker, NEM.io chose to build its own codebase for advancing NEM. Therefore a new NEM cryptocurrency network appeared which was entirely different from the original NXT.
NEM has a cryptocurrency of its own, called XEM. Although XEM is not used as a form of payment by merchants as bitcoins are, XEM has nevertheless risen significantly in value and currently has the twelfth-highest market cap in cryptos.
One wallet, called Nano wallet, is currently supported by NEM.
NEM’s Efficiency Pillars – Proof-of-Importance and Harvesting
NEM seeks to create a “better” blockchain, and tries to do this by using two main proof-of-importance (POI) and harvesting principles.
Many crypto-currency networks, such as Bitcoin, use a proof-of-work (POW) or proof-of-stake (POS) method that involves a mining tool to function with the blockchain. Miners are assigned the bonuses based on their contributions to the job.
At POW, however, miners with higher computing/processing capacity have an unfair advantage over those with less efficient machines. In addition, POW results in more power consumption making the energy cycle inefficient. Coin hoarders in POS have the disproportionate benefit because participants with more coins have higher chances of obtaining more coins by mining and processing transactions. It also supports saving cryptocoin, rather than spending on cryptocoin.
NEM uses its POI framework to fix the problem, as it gives more “importance” to how much one is “invested” into the NEM program, with practical “vested” interest. The XEM coins in the wallet and the holding time play a key role in determining significance.
One needs to keep 10,000 “vested” XEMs in one’s wallet to qualify for new blocks to be created and received and various transaction fees earned.
How POI works
For starters, suppose Martin gets 20,000 XEMs in his wallet. NEM’s system allocates 10 percent of assets as vested with each passing day. After day one, 2,000 XEMs will be vested from Martin’s shares, leaving 18,000 unvested XEMs remaining. On the second day, 10 percent of the 18,000 will continue to qualify as vested, taking the total XEMs vested to 3,800, etc. The vested XEMs should pass the 10,000 threshold on the seventh day, allowing Martin to receive blockchain rewards.
In addition, POI also rewards users performing network transactions with others. Carrying out more transactions above a minimum size often adds to the POI score of a participant, which helps him/her obtain more chances of winning a reward. To avoid misuse between a group of users through back and forth dummy transactions, NEM considers the net transaction amount to improve POI score.
Harvesting is an alternative to the standard mining process often followed by other popular blockchain-based platforms such as Bitcoin and Ethereum.
Newly discovered cryptocoins are added to the blockchain ecosystem through mining, and the numerous transactions that occur on the network are checked and added to the blockchain public ledger. Unfortunately, the conventional mining approach is power-intensive, and it can also take a lot of time leading to slower processing of transactions and network congestion.
The NEM approach to harvesting functions differently. Instead of each miner cumulatively adding their mining power to a computer node, a harvesting user simply links his account to an existing supernode and uses the computational power of that account to complete blocks on his behalf. Essentially, one loans the POI score to the supernode, which increases the chances of joint block harvesting without the need to increase the processing capacity.
The first node or device that captures and verifies it, notifies other users as soon as a transaction occurs on the NEM blockchain which generates a propelling wave of information that increases the chances of block generation.
To perform the harvesting process, a participant’s mining system or machine need not be running, and that helps to save power. Alternatively, processing is performed using a user’s wallet automatically. Harvesting does not need any special hardware such as that needed for bitcoin mining.
NEM uses the algorithm Eigentrust++ which maintains a “reputation structure” for the different nodes on the network. This helps manage the network load, and also tries to eliminate the non-contributing nodes, keeping the network efficient and agile.
Example of NEM Usage
NEM provides transparent communication functionality between the public and private blockchains. It allows easy transfer of any digital assets – such as tokens, contracts, or data – from a private internal enterprise network, routed through a public blockchain, and finally to the private network of another company. A consumer today can not transfer money straight from his/her Paypal account to a Venmo account. These transfers can be made possible by NEM private to public blockchain interfacing, if all concerned parties agree.
NEM can manage all – financial properties, contracts, records and a range of digitized properties.
On the NEM network one can build their own Paypal or Venmo. For instance, NEMPay, an open source payment app already exists on NEM, and a participant can easily customize the use of his/her own custom crypto tokens for easy money transfer.
Some uses of NEM include a retail store chain that uses it to retain and monitor its customer loyalty reward points scheme, or a shipping company that uses it to keep shipping and handling data, or as an open, secure, end-to-end supply chain logistics management system.
Certain social uses include protected voting, record keeping, registration and testing access. For example, the in-built multi-signature function of NEM can be used to pass a majority resolution in a constituency meeting to automatically determine if the minimum N out of the total possible M signatures has been obtained or not.
NEM also helps a participant to easily build, distribute and exchange cryptocoins and tokens which are compatible with the NEM ecosystem’s wallets and other trading apps. Using this tool one can also carry out initial coin offerings (ICO) on NEM.
Technically, NEM is compatible with API, thus enabling the connection and use of any global application on the NEM platform. Any new or existing mobile app, web app, database, or other programs can easily connect to and communicate with the NEM blockchain using API Gateway server and API calls in a secure way. In an open and self-scaling system, it allows one to easily and fully customize how they allow the access and use of NEM.
The Bottom Line
Smart Asset Blockchain, Designed for Success – NEM’s philosophy beautifully sums it up for a new-age blockchain that has opened up a wide range of possibilities for better and enhanced blockchain systems to be constructed. NEM targets the current blockchains squarely at the pressure points – extended transaction time and network congestion. It also tries to marry the much-needed private and public blockchains, making it a suitable candidate with broader potential for future adoption.
Investing in cryptos and Initial Coin Offerings (“ICOs”) is extremely risky and speculative and this article does not suggest investing in cryptocurrencies or ICOs by Review Brokers or the writer. Since the circumstance of each person is special, they should always consult a trained professional before making any financial decisions. Review Brokers does not make claims or guarantees about the accuracy or timeliness of the information found in this text. The author doesn’t own any cryptos as of the date this article was published.