NEM is a blockchain platform and cryptocurrency launched in 2015. Find out everything you need to know about NEM today in our review.
What is NEM?
NEM, or New Economy Movement, is a community-oriented cryptocurrency that goes by the symbol XEM. NEM originally launched as a fork of Nxt, but its creators eventually coded an entirely new platform from the ground up. The alpha version of NEM launched on June 25, 2014, while the first stable release took place on March 31, 2015.
NEM is unique for its 1 minute block time, its proof-of-importance (POI) algorithm, and its multisignature accounts, among other unique innovations.
Today, the NEM blockchain software has been implemented in uses beyond cryptocurrency. It’s best known for being used in a commercial blockchain called Mijin, for example, which is currently being used by financial organizations in Japan and around the world.
The words “New Economy Movement”, by the way, have fallen out of fashion, and the organization only ever refers to itself as NEM.
How Does NEM Work?
NEM has a unique design architecture consisting of two components: the node (also known as the NEM infrastructure server or NIS), and the client (which interacts with the nodes).
To use NEM, you originally needed to download the NEM Community Client, or NCC. The NIS is connected to the P2P network and acts as a gateway for the NCC. The NCC comes bundled with a wallet. Today, however, most NEM users just download the NanoWallet.
Both the NCC and NanoWallet can be run away from the internet. Many users take advantage of this to provide enhanced security using an airgap system.
Another advantage of NEM is that it provides rock solid protection from external attacks. If the wallet is only connected to the NIS through a firewall, then it’s practically impossible to break in. Furthermore, wallets can be used on any computer, while the NIS represents a node on the NEM network and can be hosted from remote locations. So even if you have a cheap, low-power computer or mobile device, you can still interact with the NEM blockchain if you have internet. Furthermore, if the public-facing NIS is hacked, the attacker does not have a direct line of attack into the NEM wallet software from the NIS, which gives the platform an extra layer of security.
Some of the key features of NEM include:
New Codebase: NEM was originally designed as a fork of Nxt, similar to other blockchains and cryptocurrencies. However, the creators eventually decided to create an entirely new codebase.
Proof of Importance: Instead of using a proof of work (POW) algorithm, NEM uses a proof of importance POI) algorithm. NEM uses a client-server model where the NIS (NEM Infrastructure Server) runs independent of the NCC (NEM Community Client), allowing light clients (i.e. clients with low-power computers or cheap smartphones) to operate without running a full copy of the NEM blockchain. Proof of importance is used in NEM to time stamp transactions, and each user’s “importance” is determined by the number of coins they have and the number of transactions going to and from their wallets.
Open Source and Closed Source: The NEM client is open source and available on GitHub. However, the NEM server-based component (the NIS) is closed source and has an obfuscated binary. This is done to prevent decompilers from determining how it works. The soon-to-be released Catapult update, however (scheduled for 2017) will be open source.
Namespaces: NEM has a domain naming system called Namespaces. The Namespaces system is similar to the internet’s centralized ICANN domain name system. Users can register higher level domains and subdomains, which allows one person with one domain to create many different subdomains for their different projects or outside business accounts. If you have enough XEM in your account, there’s no real limit to how many domains and subdomains you can create.
Mosaics: NEM has a unique system called mosaics, which are custom assets on the NEM blockchain. Mosaics can be customized to be transferable or non-transferable, divisible or non-divisible, and have personalized descriptions. Mosaics can also be customized by amount in either a fixed capped or mutable quantity. Mosaics get a name under the NEM Namespaces system, where they’re labeled as subdomain.domain:mosaic.
Node Reputation System: NEM uses the Eigentrust++ reputation system to ensure the health of the blockchain. This ensures that nodes aren’t just measured by the amount of work they do – they’re measured by the quality of work they do as well. This is done to protect the network, and it’s one of the reasons why NEM is different from proof of work systems.
Harvesting: The act of forming blocks is called “harvesting”. A harvester needs to have at least 10,000 vested XEM in an account and be running a booted and synchronized node. This ensures the quality and security of the network. After a harvester forms a block, a new block is added to the chain. Fees are delivered to the harvester’s account. Interestingly, NEM has a feature called Delegated Harvesting where users can request others to form blocks and process fees on their behalf.
Supernodes: Supernodes are NEM’s built-in rewards program designed to reward those who contribute processing power to the platform. Through this system, the NEM Foundation can reward people who run very active nodes. Users with a minimum of 3 million XEM get paid 140,000 XEM (recently doubled from 70,000 XEM) divided by the total number of supernodes every day for running a supernode, provided the user’s supernode meets the NEM Foundation’s minimum technological requirements. This supernode system is the reason NEM can support light wallets, mobile wallets, and third party apps.
Messaging: Users can include messages in NEM transactions in three different forms: encrypted, unencrypted, or hex messages. You do not need to transfer any XEM to the recipient in order to send a message on the XEM network, although you do need to pay a fee. Right now, that fee is 1 XEM for every 32 characters, while encrypted message rates vary.
Multisig: Multisignature transactions are available on NEM. Like other multisig-enabled platforms, NEM require multiple users to sign a transaction before it can be broadcast onto the blockchain. This is important in the case where wallets get lost through a hack: in that case, no money can be spent unless another wallet signs the transaction. A multisig account prevents community-held funds from being abused. This security is particularly important on NEM, where approximately one third of all XEM in circulation is held in community accounts.
What is Mijin?
Mijin is a private blockchain built using the NEM software. The blockchain is being explored for use in a number of areas of the fintech industry, where companies claim it will reduce the costs of banking by up to 90% while making banking more secure.
Mijin is being tested worldwide, but it has a relatively large presence in Japan. Multiple financial institutions have added Mijin to their online banking services.
All of the features available with NEM are also available with Mijin. However, Mijin has the additional advantage of smart contract support.
The biggest advantage Mijin has over NEM is the transaction speed. Soon after launching in 2015, Mijin achieved 25 transactions per second on a global network. By 2016, it had achieved 5000 transactions per second. By the end of 2014, Mijin had achieved 10,000 transactions per second (local network) and 100 transactions per second (global network).
Mijin has made it a goal to reduce the cost of banking infrastructure by 90% by Q4 2018.
About the NEM Foundation
The NEM Foundation, or NEM.io Foundation, is in charge of the NEM project. The company is registered as a non-profit organization in Singapore. The official goal of the company is to promote the NEM blockchain technology globally. Today, NEM is one of the most funded and successful blockchain technology projects in the cryptocurrency industry.
The first stable build of NEM was launched in March 2015. The Foundation is preparing to release its next Catapult update sometime in 2017 (it was originally scheduled for launch in 2016).
Stay tuned for more information about NEM and their distributed ledger technology as the company continues to roll out its blockchain and expand the use of XEM.