The “New Economy Movement”, or NEM, was officially launched in 2015 after being created by an online community of developers. Rather than Bitcoin’s Proof-of-Work (PoW) or Nxt’s Proof-of-Stake (PoS) algorithm, NEM utilizes something called the Proof-of-Importance (PoI) algorithm. PoI is similar to PoS, but takes more factors into account when choosing which users get rewarded. The NEM token is called “XEM”.
According to the NEM Technical reference,“NEM is a movement that aims to empower individuals by creating a new economy based on the principles of decentralization, financial freedom, and equality of opportunity.” In other words, the NEM project was developed with the intention of addressing wealth inequality.
This is inherent in the cryptocurrency movement as a whole, as access to cryptocurrencies provides the world’s most economically underserved and impoverished people with banking services and other financial opportunities that would otherwise be unavailable to them. However, few coins have made this an explicit goal.
NEM has branded itself as “the smart asset blockchain”. Similar to Ethereum, NEM’s blockchain has been optimized for the creation of dapps (decentralized apps) that manage things like financial instruments, supply chains, notarizations, and ownership records.
The thing that is somewhat unique to NEM is that it is API (Application Programming Interface)-driven, which means that external systems can easily interact with NEM. Just as the steering wheel or the gear shift is your way to “interact” with your car’s engine, external applications can be connected and used to interact with NEM.
How NEM Works: Smart Adresses, Mosaics, and Namespaces
NEM has the advantage of not requiring users to write their own Smart Contract code–instead, users can compile their assets into “mosaics”, create their own “namespaces”, and manage “container” Smart Addresses through an API interface.
Smart Addresses on the NEM network are more than just numbers that are used to send and receive transactions. With NEM, and address could represent “things like: a package to be shipped, a deed to a house, or a document to be notarized.”
Essentially, NEM Smart Addresses are used as Smart Contracts–users add their data into a container address and define how the addresses relate to one another. Their contents are “updated and transferred” depending on the rules that users set for them.
Mosaic “fixed smart assets” are “are fixed assets on the NEM blockchain that can represent a set of multiple identical things that do not change.” Practically, a Mosaic could contain things NEM tokens, reward points, signatures, votes, or other assets (like shares of stock or other cryptocurrencies).
Creating a Mosaic
To create a Mosaic, users must define a series of attributes, including its “name, description, quantity, divisibility, transferability and more.” Mosaics are distributed between assets according to the various rules and conditions that are given to the addresses.
For example, a Smart Address’s conditions state that if one Smart Address sends a certain amount of tokens to a second Smart Address, the second Smart Address will automatically send a Mosaic full of shares of stock back to the first Smart Address (corresponding with the amount of tokens sent).
Creating a Namespace
NEM users can also create Namespaces, which operate similarly to domain names on the internet. Instead of websites, however, the Namespaces are created specifically for viewing assets. Namespaces allow users to create a sort of “place of their own” on the NEM blockchain.
Using Namespaces, businesses and individuals can be accessed by other NEM users more easily. Namespaces can contain “subdomains” that contain various assets, just like websites can have multiple pages.
Transactions on the NEM network can integrate MultiSig (multi-signature) technology. Practically speaking, this means that users can choose to require the signature of multiple parties on a single transaction before the transaction is executed and broadcast to the network.
NEM also allows users to send encrypted messages to one another. No transactions need to take place in order for the messages to be sent.
NEM is the first coin to use the Proof-of-Importance algorithm. In order to understand how PoI works, let’s first talk about Proof-of-Stake and Proof-of-Work.
In order to uphold a cryptocurrency’s network, the coin’s blockchain (a public ledger that stores transactional information) is stored on a network of individual computers. These computers are called “nodes”.
In addition to maintaining the network, nodes also fulfill the function of verifying transactions by putting them through a series of tests. When a transaction gets verified, the nodes add the transactional information to “blocks”. The blocks are then stored in a linear fashion, like a chain. That’s how “blockchain” technology gets its name.
In order to make new blocks, nodes participate in one of a few different processes. For coins like Bitcoin, which use a Proof-of-Work algorithm, that process is called “mining”. “Mining” is what happens when nodes solve complex equations that create new blocks for the blockchain.
In exchange for mining, you get rewarded in the form of crypto tokens. If you have fancier and more complicated equipment, you are able to mine more efficiently. Therefore, coins that use the Proof-of-Work algorithm can give an unfair advantage to users who have access to better equipment.
For coins like Nxt, that use a “Proof of Stake” algorithm, nodes take “forging” or “minting” instead of mining. Instead of solving complex equations in exchange for token rewards, nodes on a PoS network are chosen at random to create new blocks. Just like nodes that mine coins, these nodes receive token rewards in exchange for forging.
Now, let’s talk about Proof-of-Importance. Nodes on a PoI network are assigned an “importance score”. The “importance score” depends on a few different things. In order to be eligible to receive the score, a user must hold 10,000 XEM tokens (about US$2700 at the time of writing).
Additionally, the score depends on how many transactions a user takes part in on the network. Users who have a higher number of transactions “harvest” more blocks on the network, and are therefore given a higher importance score, leading to higher token rewards.
Proof-of-Importance has the advantage of creating a culture of serious NEM supporters who consistently support the network. The result is that all the transactions on the network happen faster, and the token value stays more consistent.
Proof-of-Importance also allows users who hold at least 3 million XEM tokens to become “Supernodes” that act as the backbone of the network. In exchange for being a Supernode, users receive 140,000XEM every day that they run a node that fits the appropriate technical criteria.
These Supernodes are also what enable NEM litewallets, mobile apps, and external (third party) apps. Transactions through these media are given access to the blockchain through the Supernodes so that they don’t have to contain the entire blockchain themselves.
However, as NEM continues to rise in value, it becomes more and more difficult for nodes to receive an importance score. Therefore, NEM’s developers may one day make some changes that would make it less expensive for users to receive and importance score.
NEM for Developers
NEM was written in Java, which means that developers do not have to learn a new programming language in order to develop dapps (decentralized application) on its blockchain. In contrast, a developer who wants to create a dapp on the Ethereum blockchain must first learn the Ethereum programming language, which could be a deterrent.
History of NEM
The crypto world sprung out of discussions in online communities. In fact, much of the history surrounding various cryptocurrencies is documented on sites like Reddit–something that seems to be unique to blockchain and other programming technologies.
NEM is no different. NEM was originally proposed by UtopianFuture, a user on a Bitcoin Talk forum. NEM was conceptualized as a fork of NXT, which is a cryptocurrency and payment network that utilizes a proof-of-stake algorithm.
On January 19, 2014, UtopianFuture placed an open call for community participation in the development of NEM. As such, NEM is a cryptocurrency that is truly community based, built from scratch by a group of developers who most likely never met offline.
NEM did not have a typical ICO, in which coins are sold to a group of investors who pay with cash or other coins (usually Bitcoin or Ethereum). Rather, 2.25 million XEM tokens were distributed among the community of developers who contributed to the creation of the coin.
The stable version of NEM was introduced to the public in March of 2015. At the time of release, a single XEM token was worth ~US$0.00004. NEM’s value didn’t change with any significance for the next two years, but it started to see a sharp increase in April of 2017.
NEM as an Investment: The Future of NEM
At the time of writing, NEM is currently the cryptocurrency with the seventh largest market cap in the world. NEM is currently priced at ~$0.28 a token. The market cap is $2,502,126,000, close to its all-time high. There are nearly 9 billion XEM tokens in circulation.
NEM has done very well for itself. It is similar to Ethereum, but has a few added bonus features that make it a little more practical for businesses to use.
Since its arrival on the scene, NEM’s token value has increased 700x. The token value is relatively low, but this is due in large part to the fact that there are so many tokens. If NEM can continue the path it’s currently on, the future is bright. However, even the most promising coins can fall–don’t put more money into NEM than you are willing to lose.