In recent months, a new cryptocurrency has risen to prominence—most notably for its viability as a rival to the second largest blockchain of all time, Ethereum. But if history has taught enthusiasts anything, it’s that it’s important in the cryptocurrency world not to take anything at face value, especially not an altcoin.
NEM was first an idea which popped up in a BitcoinTalk forum as a possible fork from the already existing NXT, or NextCoin. This was fork was eventually completed by a Singapore based non-profit known as NEM.io, and they still maintain the coin to this day. NEM stands for New Economy Movement, and it is designed to be an entire blockchain economy encompassing a number of uses found in both Bitcoin and Ethereum. The platform was officially launched on March 31st, 2015. In 2016, NEM decided to team up with a Japanese firm, Tech Bureau, to create a new blockchain mechanism. NEM has since undergone a number of upgrades, including one which aims to increase the transaction speed four-fold. David Shaw is the current CEO of NEM.io.
Similar to Ethereum, NEM is a blockchain and NEM is the name of the platform and XEM is the name of the currency which is used in all functions on the platform. The developers hoped that NEM would be a “better” blockchain than those which already existed on the market by using a unique proof of importance protocol. Proof of importance is a bit like proof of stake in that those who hold large amounts of the coin are randomly selected to process transactions. The main difference in proof of importance is that nodes are selected based on how many XEM the node has reinvested in the system. This was done in order to lower the perceived benefit of holding large amounts of coin as an investment and not using them within the system. Users are selected for the proof of importance process once they hold a minimum of 10,000 XEM. The system then gives the user a rating based on how long they hold these coins as well as how many they reinvest into the system. This selection process is carried out by the EigenTrust+++ Algorithm.
Because of the proof of importance process, the NEM blockchain uses a harvesting process rather than the typical mining process and this means that nodes do not need to be run around the clock in order to create new coins. This is good for the environment, as one of the main complaints of Bitcoin is the amount of power it takes to generate a single block of transactions. This harvesting process also does not require the special hardware which is needed to mine a coin like Bitcoin.
NEM is quick, much quicker than Bitcoin with a processing of 1,000 transactions per second. NEM is not only able to execute smart contracts using the same design as Ethereum, but it can also be used to build a payment processor similar to Venmo or PayPal. NEM also has huge future implications when it comes to digital identification and sovereign identity. The blockchain also has a neat feature which allows you to interact with other blockchains through the NEM interface without ever leaving the NEM blockchain. This alone simplifies the need to have numerous blockchain applications on your computer.
Of course, whenever there is a new blockchain out there, it is scrutinized and compared to Bitcoin. NEM is no exception. Although it has a number of nice features, hardcore cryptocurrency enthusiast worry about the proof of importance system, as even when using the algorithm to decide which wallet gets to harvest coins, it is too easy for large players in the market to possibly be able to influence it to make sure the generation of new coins comes from their wallet.
Support for NEM fell further in January 2018 when a Japanese exchange, Coincheck, was the victim of a theft of 523 million XEM tokens (which were at the time worth almost $400 million). This caused the price at the time to take a dive of almost 15%. There were thoughts that the heist was an inside job. Either way, the perpetrators nor the coins, were ever found, destroying much of the initial belief in the coin.
In 2019, the NEM Foundation lost what further followers remained when it announced it had bankrupted itself. They responded by laying off most of their employees and asking for 160 million XEM to supposedly fix the problem. This wouldn’t be such a big deal, except when the top 50 XEM wallets were later inspected, it was found that many of the high-ranking employees, such as the CEO, make up these top wallet holders. Thus, the fears of Bitcoin enthusiasts were confirmed, and the proof of importance protocol can indeed be manipulated in someone’s favor. Currently, 37% of XEM is owned by company executives.
Investing in NEM is an extremely risky move, even for the most seasoned investors. Not only has the proof of importance mechanism been proved to be easily manipulated, but NEM.io has also failed to prove themselves as a reliable company to invest in. Experts predict that the 2019 bankruptcy was the last hail Mary for the company, and if anything else major happens, they will be done for. Leadership has changed since the bankruptcy, but this didn’t manage to restore any faith in the public’s belief in the coin.
This doesn’t mean XEM isn’t popular, in fact, as of the writing of this article it is rated 21st on CoinMarketCap with a cap of over $2 billion. Sadly, the coin is only currently worth about $0.23, a far cry from its peak at almost $1.50. Most experts predict the coin will never be restored to its former glory. Of course, the choice to invest is always your own, but any big monetary decisions such as an investment in NEM, should always involve a bit of research as well as a consultation with someone you trust.
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