What Is NEM? Introduction To XEM
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What Is NEM?
NEM is a dual-layer blockchain similar to Ethereum but written in Java, a popular computer programming language. Launched on March 31, 2015, the NEM mainnet supports multiple ledgers on its cryptocurrency layer, and the NEM Smart Assets layer supports mosaics to represent any store of value. NEM’s proprietary crypto coin is XEM, which is harvested (mined) using a Proof-of-Importance (PoI) algorithm.
(NEM, by the way, stands for New Economy Movement.)
Introduction To NEM
What makes NEM so powerful is the Smart Asset System. Nodes on the NEM blockchain process API calls, which makes it easy to develop for, whether the dApp accesses NEM’s API directly, through a server, or in the background.
Basically NEM built a blockchain-based cloud platform with a NEM Infrastructure Server (NIS) made of secure, decentralized processing nodes on one side and a client side, like the NEM Community Client (NCC), which acts as a gateway.
Of course, it’s not all roses and rainbows for NEM – in January 2018 when all eyes were on the crypto market’s meteoric price spike, Japan-based crypto exchange Coincheck was hacked, and 523 million XEM coins were stolen, worth over $500 million at the time, and now worth a tenth of what it was at its peak.
Before exploring whether this structure will make blockchain palatable for the general market, let’s research the market performance of XEM, NEM’s proprietary crypto coin, on the cryptocurrency market.
XEM Crypto Market Performance
The peak price so far of XEM was $1.92 on January 3, 2018.
As mentioned above, XEM isn’t “mined” or “staked” like a traditional currency using PoW or PoS consensus algorithms. Instead XEM is “harvested” through PoI, which works more like a company pension plan than an interest-bearing savings account (which PoS cryptocurrencies like Tezos also somewhat resemble).
To begin vesting coins, you must place at least 10,000 XEM coins in an approved XEM wallet, which start out as unvested. As you hodl the required XEM balance over time, your coins begin to vest toward your importance and pay dividends. The longer you hodl more XEM, the higher your importance to the network, but you’re also rewarded for participating on the network by exchanging coins with other users.
So instead of simply putting your money in the bank and gaining passive interest, you’re incentivized to support the network in more of a profit-share model. That’s how pension plans used to work, for everyone born in the cost-cutting era where they’re endangered in the wild.
This hybrid model lets anyone participate as a node, regardless of hardware power, relieving one of the biggest pain points in blockchain. It also prevents anyone from buying control of the network, since time and participation are factors, much like Google search ranking algorithms.
Processing nodes are verified using a custom Eigentrust++ reputation algorithm. As a node turns in positive information, its reputation increases among other nodes.
Approximately $50,000,000 worth of XEM is traded on a daily basis. Exchanges that accept XEM include Binance, Upbit, Zaif, Poloniex, Kryptono, and Exrates. BTC is its most popular trading pair, although other XEM trading pairs include ETH, USDT, and even fiat currencies like USD.
And don’t forget not to store your XEM in exchanges – instead, keep it in the official NEM Nano wallet for desktop and mobile OS. This is where they’ll start vesting.
Building a Better Ethereum
While NEM/XEM certainly doesn’t sound more user-friendly than Ethereum by virtue of its acronymic name, but that was certainly the goal when Bitcoin Talk forum user UtopianFuture proposed the initial framework. Instead of forking from NXT, a full blockchain was built from the ground-up.
NEM was built to resemble the current internet, with namespace domains and subdomains assigned similar to ICANN’s internet domain name system. This alone makes it much more appealing to both developers and users.
In addition, the multisignature functionality (shortened to multisig) to control what’s ultimately broadcast to the blockchain and written to the decentralized digital ledger. The blockchain community built NEM, so it is definitely a blockchain of the people and for the people. Of course, as with most community projects, marketing isn’t NEM’s strong suit. This solid technical foundation doesn’t have the massive enterprise support other blockchain projects do yet.
But that doesn’t mean NEM is dead in the water. In fact, it does have a partnership with Tech Bureau that created Mijin, an institutional banking platform. It also built an ICO platform on the NEM network and several community-created projects jumpstarted development of the NEM ecosystem.
There are over 20 projects in various stages of development on NEM so far, including a privacy coin called Eroiy, an Australian tourism project called TravelByBit, and even integration with Pundi X.
NEM has strong support in Singapore and Australia, but China isn’t a fan.
The NEM.io Foundation’s first in a series of blockchain incubators, dubbed the NEM Blockchain Hub, was launched in late 2018 in Melbourne, Australia. These incubators are sure to continue promoting usage of NEM, and blockchain in general, in startups and established industries around the globe.
One such project funded by NEM Ventures (the VC branch of the NEM platform) is Vimba, a New Zealand-based crypto banking startup.
Recovering from the Coincheck Hack
As discussed at the start, despite the community involvement and technical chops of the NEM project, what it’s most infamous for is being involved in the biggest cryptocurrency hack in history. The $530 million Coincheck XEM heist topped the theft of Mt. Gox in scale and was blamed on the exchange’s implementation of NEM API calls.
Cryptocurrency exchanges typically store actual coin balances in “cold” wallets, which refers to them being offline. Coincheck held its XEM coins in a “hot” wallet, presumably in an attempt to vest its coin balance. This greed led to the exchange being hacked, with NEM feeling most of the burn from Coincheck’s hot-wallet snafu.
The theft caused both Coincheck and the NEM.io Foundation a lot of headaches, with money needing to be paid back, press conferences held, and full crisis alert mode activated. XEM pricing tumbled as a new development team was installed to push forward.
By November 12, 2018, XEM was relisted on Coincheck, renewing confidence in this solid community-built project. It also has active development, partnerships, and community support. These are all key ingredients in this project’s roadmap, which includes a full launch of the platform’s native engine platform, called Catapult, in 2019.
NEM Summary
NEM is the FUBU of blockchain, providing a community-built platform for easier community usage. NEM is a lean, dual-layer blockchain similar to Ethereum and NEO/GAS, but with its own methods of reducing network congestion. Because of its strong community support, NEM survived the biggest cryptocurrency hack on record as of November 2018, and these key ingredients are crucial to its success.
- XEM is harvested through a hybrid model that accounts for balance, time held, and network participation. This consensus model prevents ASIC-powered mining nodes or whales from controlling the network.
- NEM was created using Java and runs using API calls. This means any program can be easily adapted to contact and utilize the network.
- NEM using a domain/subdomain naming system similar to the current internet, making it well-poised for seamless integration and easy adoption across all platforms.
With these pieces in place, it’ll take more than one crypto exchange hack to hold NEM down. Unlike other crypto hacks, the problem wasn’t with the blockchain’s security, and the community still has strong ties to this OG crypto project.
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