What is NEM?
NEM is a peer-to-peer cryptocurrency and blockchain platform. New Economy Movement (NEM) is an enterprise-grade solution to power the impending blockchain economy. Originally intended to be a fork of NXT, the community decided to go with a completely new codebase with an alpha version released June 25, 2014, and the first stable release March 31, 2015. The platform is currently being rewritten in C++ and will be released as the “Catapult” update sometime in early 2018.
NEM’s primary function is the implementation of what they call the “Smart Asset System”. In effect, this system gives users the ability to implement a customized blockchain for their own specific “smart contract”.
So what exactly does “Smart Asset System” mean?
Smart Assets are a way of describing the tools NEM uses to handle business data. “Smart Assets” give you the power to use NEM as if it were a custom blockchain built to handle your assets.
The “Smart Asset System” can be broken down into four components:
- Addresses: Containers that hold coins, contracts, deeds, or any business records. These are items which are unique and can be updated. These containers could be something simple like a user’s account full of coins, or something more complex like a package to be shipped, a deed to a house, or a document to be notarized.
- Mosaics: Custom tokens or other digital items. These could represent something like a coin, or items such as stock shares, reward points or even other currencies.
- Namespaces: Web addresses that prove who you are and also give your assets a home. They let you create a unique place to put your assets on the NEM blockchain, thus making your assets unique, easy to use and trustable.
- Transactions: Puts your ‘Smart Assets’ into play by allowing you to complete actions such as transferring Mosaics between Addresses or transferring and configuring ownership of Addresses.
NEM has provided a list of potential use cases for their ‘Smart Asset System’. Some uses include: voting, crowdfunding, stock ownership, keeping secure records, loyalty rewards point programs, mobile payments and escrow services. Many of these are large global industries in themselves which highlights just how huge the potential NEM customer base is.
Proof-of-Importance and Harvesting(POI)
The NEM Blockchain employs a Proof-of-Importance algorithm (as opposed to Bitcoin’s Proof-of-Work or PIVX’s Proof-of-Stake) to achieve consensus through a process that incentivizes active participation in the network. This makes for a decentralized, nimble network of well-behaved nodes. Each node has an importance score that determines how often it can harvest (think mining or staking in PoW or PoS systems) XEM, NEM’s native token.
Part of this system works by vesting coins: when you place coins in your wallet, they start out as unvested coins.
Over time, your coins will begin to vest or count toward the importance of your account. In order to be eligible for an importance score, your account must have at least 10000 vested XEM.
This part of the system acts just like staking coins in PoS setups but is only one part of calculating your importance.
In addition to tracking vesting, the transaction graph of the NEM network is constantly analyzed to provide information on which nodes are contributing and which are not. This means that the more transactions you send to other users and the more you use the network normally, the more important you become. The vesting process and transaction metrics result in an importance score for each node, and these scores are used to scale the likelihood of your node harvesting XEM.
Since PoI is not hardware intensive, it allows full nodes to be run on almost any machine regardless of power, preventing centralization of harvesting to those with the biggest machines.
Why Use NEM?
- NEM Has A Low Transaction Fee of 0.01%
-NEM utilizes a new code designed for transaction efficiency. XEM transactions take about 6 seconds to show up and about 20 seconds to confirm. On the other hand, Bitcoin can take up to an hour or more to confirm transactions. - Fees to transmit assets via the public blockchain (coins, documents, etc) are very low. Currently the transaction fee is only 0.01%. This means it costs $0.01 to send $100 worth of coins and $0.10 to send $1,000. In comparison, credit cards charge anywhere from 1.5 to 3% and Paypal charges 2.6%.
- NEM’s 0.01% transaction fee is low even compared to other cryptocurrencies!
NEM Is Very Scalable
NEM is incredibly scalable. Currently NEM has transaction speeds comparable to Bitcoin, however when the planned updates go into effect the network could handle in the hundreds if not thousands of transactions per second. In comparison, Bitcoin is only able to handle 4-5 transactions per second. This has been a huge problem for Bitcoin and is a factor which has led to the Bitcoin currency being split into two (and soon three) different currencies.
If NEM isn’t meant to be used as a currency, then why care about trading coins? The truth is: you still need the coins.
In future, if companies use NEM software, they will eventually need to send their “Smart Assets” to various places. This will require sending the documents across the public NEM blockchain. Sending documents will require the company to pay a transaction fee, which can only be paid for in XEM (NEM’s coin).
In that respect, potential investors could see gains on their investment if companies begin to adopt NEM’s software.Since there is a set number of XEM coins (9 billion), as the demand for these coins increases, so will their value.