NEM project purpose and description
What is NEM?
NEM is a smart asset blockchain that offers highly customizable blockchain solutions to businesses in a cost-effective way. NEM in full stands for New Economic Movement, though the name has been dropped in favor of the shorter version–NEM.
After forking from Nxt, NEM was built from scratch in 2015 by a community of supporters and the NEM foundation. It presents many unique features most notably the 1 minute block time, proof of importance algorithm, multi-signature accounts and unique harvesting methods.
The native token of NEM is XEM which has a total supply of 8,999,999 tokens all of which were mined at the genesis block. Let’s look at some of the unique features of NEM.
There are different algorithms used to verify transactions on a blockchain. The most common is the proof of work algorithm used by Bitcoin and the proof of stake algorithm used by Ethereum.
NEM, on the other hand, uses a unique algorithm called proof of importance (POI) consensus. In this algorithm, nodes are selected to verify transactions based on their comparative importance as perceived in the network.
Similar to how proof of stake works, the nodes/ participants have to “stake” a certain amount of their cryptocurrency in order to verify transactions.
However in the POI model, other factors that prove “importance” are also considered such as; account balance, how well and how fast transactions have been completed and the quality of transactions completed.
Nodes that show most “importance” as judged by these factors are then permissioned to verify transactions. However, it is important to note that even accounts with minimal balances can also be permissioned to verify transactions based on the quality of their previous work.
The POI system is an energy saving algorithm as it does away with the complex verification process. This can be seen as an upgrade from both the proof of work and proof of proof of stake algorithms
The process of verifying transactions in the POI model is called harvesting, the same thing that is called mining in the bitcoin blockchain. This process involves verifying transactions using your computer and adding them to blocks on the blockchain.
For an account to be eligible to harvest, it needs to have maintained at least 10,000 XEM over a couple of weeks as the account balance. Also, the node needs to link to a supernode that is able to process transactions 24 hours a day.
With this link the node allows the supernode to borrow its proof of importance score and do the harvesting on its behalf.
As a result, the node will be rewarded with transaction fees that will be charged for processing transactions. Remember that no new coins are created in the NEM blockchain through harvesting, therefore verification efforts are rewarded through the transaction fees charged.
NEM is a blockchain platform that supports the building of new applications with minimal technical difficulties. Compared to ethereum, NEM has a gentle learning curve for developers.
NEM primarily exists to create a “Smart asset system” where users are given access to create their own customizable blockchains. The Smart asset system can be divided into four components:
What is the problem that NEM Solves?
NEM exists in the same space as Ethereum, Ubiq, Ripple, and Factom among others. NEM ‘s blockchain was designed to focus on scalability and speed.
Many businesses would love to utilize blockchain technology but may not have the financial and technological capacity to transition to a smart economy.
NEM exists to bridge this gap by creating a blockchain that is highly adaptable and customizable to suit the business needs of different projects. NEM focuses on these four core components; performance, ease of development, deep customization and security.
How does NEM Solve the problem?
NEM uses a unique algorithm – Proof of importance and delegated harvesting to reward verification efforts. When a block is harvested it is permanently added to the block and the harvester is rewarded from the transaction fees charged.
This method makes the system efficient as harvesting is an energy preserving process, unlike mining. Also because there is no incentive for compensating miners for their excessive use of power, running this system is very affordable and this, in turn, drives down the cost of transacting.
Taking away “power from the miners” levels the playing field for all network participants. NEM uses the proof of importance algorithm to enhance the capabilities of the blockchain and make it accessible to more businesses.
The POI model ensures speed and scalability for the NEM blockchain.
NEM also allows users to create highly customizable blockchain solutions for their products and businesses. With NEM namespaces, users can name their mosaics and addresses and create multisig rules for them.
These mosaics could be songs, assets or any other thing that the user may wish to place on the blockchain.
Features unique to NEM include:
Mosaics are unique to NEM and they represent assets that are traded on the NEM blockchain. NEM native token XEM, for example, is a mosaic.
Developers can create mosaics in many forms such as cryptocurrencies, a signature or status update and run them on the NEM blockchain.
2. Multi-signature accounts
This is a security feature that necessitates the need for multiple approvals for each transaction.
This is similar to an email address on the blockchain that allows you to give a unique name to your mosaics.
NEM involves the whole community in giving suggestions for updates and developments on the platform.
What makes NEM better than its competitors?
NEM competitors include bitcoin, ethereum, Ubiq, Factom and Ripple among others. Due to its infrastructure, it has the following advantages over the competition:
1. High scalability
Theoretically, NEM can process up to 3,000 transactions per second in comparison to a dismal 7 transactions/ second for bitcoin. This is due to the efficiency of the proof of importance algorithm. With this high transaction speed, NEM is highly scalable.
2. Deep customization
NEM is built from its core to be a highly customizable blockchain. Unlike other blockchains NEM allows users to focus on building their own unique blockchain solutions and give it unique namespace (similar to domain names) and addresses. By creating a simple model, developers are able to focus on creating unique solutions away from focusing on blockchain technicalities. NEM allows users to build anything starting from fintech systems and document notarizations etc.
3. Low Fees
NEM charges 0.01% transaction fee to transmit assets on its public blockchain. This can be translated to $0.01 for sending $ 100 which is very affordable.
NEM has no privacy as all the transactions are traceable to their origin. As much as privacy appeals to certain groups, traceability appeals widely to governments, real estate businesses, large corporations and other entities which may need an open record of transactions.
5. High system efficiency
Harvesting as explained earlier takes up very little power compared to mining. Harvesting can even be done offline and as a result transaction costs on the NEM blockchain are also minimal. NEM uses 100 times less power than titcoin to run a node.
6. Zero inflation
All NEM coins were mined in the genesis block, all the8,999,999,999 coins to be exact. With all the coins already in existence, NEM has zero inflation. Other coins which have ongoing mining such as bitcoin are subject to inflationary and deflationary forces.
How can NEM be categorized?
NEM is primarily a revolutionary blockchain platform geared towards a smart economy. XEM is a cryptocurrency.
NEM’s vision on security
Being built on the blockchain, NEM has the security features embedded in the blockchain which include immutability of records, decentralization, and transparency.
In addition to this, NEM is hard-wired to provide maximum security for its blockchain. It employs Eigentrust ++ and an incentivized public node to reinforce its infrastructure.
This node reputation system ensures the quality of transactions is met so that the whole network is protected. It further eliminates inherent smart contract risks by providing block customization so that security is moved away from the blockchain to the user’s control.
NEM also employs multisig rules to double check the authenticity of transactions before they are approved. With the NEM private blockchain, the user has complete control over their data privacy.
Examples of NEM’s use cases/applications.
NEM has numerous use cases based on their “Smart asset system” which include; voting, crowdfunding, stock ownership, loyalty reward programs, record keeping, mobile payments and escrow services. We shall be looking at some of these below, but first we shall start with one fintech company using NEM private blockchain to revolutionize the financial sector.
Mijin is a private blockchain built using the NEM software. With the Mijin private blockchain, banking costs may go down by a whopping 90% and the banking system could be made more secure.
Mijin is being tested worldwide for implementation in banking systems but it has a large presence in Japan. Mijin actually has higher transaction speeds than NEM. This is a pacesetter for other blockchain based solutions set to transform the banking sector.
Other than banks, other financial services companies are using the NEM blockchain for making instant payments and global cash transfers. The NEM blockchain has the ability to interface between public and private blockchains making it possible to transfer information seamlessly between different blockchains. This feature is not available in many blockchain models and may pave way for a new blockchain ecosystem where different blockchains can interact and share information.
Creation of private token
NEM allows users to create personalized namespaces and mosaics which are a representation of tokens or other digital assets that a user may wish to create.
NEM has made the process very easy and straightforward; you just need to create a name, define an amount of coins, divisibility, transferability and any other relevant parameters. Then you can start transacting with your new coin.
Make mobile payments
NEM has a mobile wallet that allows you to make mobile transactions right through your phone using the NEM native token or a coin you have created. Since NEM transactions are completed every sixty seconds, this works well for fast online transactions and making retail payments.
Also, NEM charges 0.01% transaction fees which further makes it very convenient even for micropayments.
Escrow services are becoming popular as many companies are shifting their services to online platforms. This requires a trustless system because transacting parties may not be known to each other.
Using NEM, companies can set up escrow services and use them to transfer currency, tokens, data and the parameters to be confirmed before the escrow instructions are executed.
XEM as a store of value
Unlike other cryptocurrencies, all XEM coins were created in the genesis block meaning no other coins will ever be created. This makes XEM immune to inflationary and deflationary forces.
Every transaction on the NEM network will require spending some XEM, theoretically, this will keep driving up the demand for XEM. As a result the value of XEM will keep increasing over time. For a long-term investor, this model is appealing as you just need to hold XEM for a period of time and watch the value appreciating without any much effort on your side. This makes XEM a good store of value.
NEMpay is an open source payment system based out of the NEM blockchain. It’s a very flexible system that allows users to make peer to peer payments in a seamless and decentralized fashion.
It is possible to customize NEMPay to suit your desires such as branding it and customizing your own digital assets to create your own payment app that is similar to Paypal.
With Mijin taking off considerably well, other banking institutions may also follow suit in the adoption of blockchain technology through the NEM platform. As much as this is highly speculative, NEM stands a chance to become a revolutionary force in the banking industry and other financial sectors as well.