What is NEM (XEM)?DownloadSubscribe
What is NEM (XEM)?

What is NEM (XEM)?

The XEM coin is one of the older batch of cryptocurrencies on the market, and the NEM blockchain was created well before the 2017 ICO craze. But what is NEM? And what is the function of the XEM cryptocurrency?

Similar to Ethereum, NEM is a platform that offers multiple features and the XEM token is designed to be part of a new, smarter economy.

This article will explain more about NEM’s use case, how it’s technically different from other blockchains and what the historical price action for the XEM coin tells us about the network’s usage.

    The NEM Blockchain

    NEM was created in 2015 as a fork of the NXT blockchain, although eventually the NEM developers created their own code for NEM to run on.

    Just like Ethereum is primarily managed by the Ethereum Foundation, NEM is managed by the foundation. The foundation is based in Singapore and is a not for profit organization.

    NEM blockchain and XEM coin
    The NEM Foundation’s website 

    NEM was one of the first projects to recognize that a cryptocurrency could be more than just a means of payment. From the beginning, the goal of NEM was to become a platform that would support everything from custom tokens to supply chain tracking protocols.

    The NEM team refers to this as the Smart Asset System (SAS). With SAS anyone can use NEM to create a token, publish data to the blockchain, create custom infrastructure like supply chain tracking, or set up multi-signature security systems. In other words, SAS enables developers to create all sorts of digital systems on top of NEM, leveraging the network for security and value transfers.  

    The Proof of Importance Consensus Mechanism

    The Proof of Importance (POI) consensus mechanism is one of NEM’s most unique features. POI is a completely different system than POW on Bitcoin or POS on Ethereum. Unfortunately, as is the case sometimes with blockchain technology, POI is relatively complex.

    The basic idea is that to vote to approve transactions on the NEM blockchain, an investor must hold at least 10,000 XEM. However, they cannot simply buy those XEM and then start approving transactions. Rather, they must hold the XEM for a certain amount of time.

    Each day that an investor holds XEM, 10% of their XEM becomes “vested.” Once the vested amount exceeds 10,000 XEM, the investor can start harvesting (harvesting = mining). As an example, if an investor is holding 20,000 XEM it would take 7 days to reach a point of having 10,000 vested XEM.  

    When it comes to the likelihood of a harvester being selected to validate a block, the POI system rewards network participation. The more that a harvester uses the network, the greater the chance they’ll be selected to validate a block.

    Put simply, the POI system is designed to give validating power primarily to investors who actually use the network. Currently the staking reward for harvesting XEM is about 4.6%. More information about the POI consensus mechanism is available here.

    Use Cases for the NEM Blockchain

    NameSpaces is a NEM naming service that records a name to the NEM blockchain and associates it with a wallet address. For example, let’s say that Tesla had a wallet on the NEM blockchain. Instead of having users send XEM to a long, randomly generated address, Tesla could register the “Tesla” domain name. Once the name has been registered, users could send XEM to “Tesla.”

    One of NEM’s most important features is that it makes it easier for developers to interface between public and private blockchains. Private blockchains can connect to NEM. From there, they can interface with the NEM blockchain as well as other public blockchains. This connectivity can simplify token transfers or data sharing between smart contracts.

    The XEM Coin

    Somewhat confusingly, the NEM token is called XEM. As with any other blockchain, the primary function of XEM is to transfer value in the NEM network. Besides transferring value, XEM can also be used to vote on governance decisions, and to pay harvesters for validating transactions.  

    There is a maximum supply of 9 billion XEM . Since an investor has to hold at least 10,000 XEM before they can harvest, theoretically there is a maximum upper limit of 899,999 harvesters that could ever exist on the network. Of course that number assumes the unlikely scenario that all of XEM in existence will be equally distributed.

    Having been around for more than 5 years, investors have many options to store their XEM safely. The Exodus wallet supports XEM, although unfortunately it’s not currently possible to use Exodus and the Trezor hardware wallet to store XEM.

    Investors who want to store their XEM on a hardware wallet can use the Ledger Nano S or Nano X.

    The XEM crypto Hack

    XEM was at the center of one of the largest single hacks in crypto history. In January of 2018, hackers compromised the cryptocurrency exchange Coincheck. They were able to make off with 523 million XEM. At the time of the hack these coins were worth approximately $400 million.

    This hack was especially unfortunate for NEM since it gave the project a bad name and adversely affected tens of thousands of investors.

    The Multi-Function Currency

    The NEM network features a lot of functionality that cryptocurrencies like Litecoin and Bitcoin lack. Developers can build all sorts of interesting protocols on top of NEM, as well as create their own custom tokens.

    The main advantage that NEM has over smart contract platforms is speed, since NEM is capable of clearing an estimated 4,000 TPS. Although Ethereum has become the number one smart contract platform, there’s still plenty of room for a protocol like NEM to offer a good set of features to its users.

    NEM does however, lack user activity, with an FCAS utility score that bounces between five and six hundred (out of one thousand).

    NEM's Developer Behaviour score is much higher, and the developers have dedicated a lot of time to constructing their new ‘Symbol’ blockchain with the aim of enterprise adoption.

    But large companies do tend to be risk averse and don’t move fast, and this could prove problematic for NEM as more active platforms overtake it going forwards.

    This content is for informational purposes only and is not investment advice. You should consult a qualified licensed advisor before engaging in any transaction.

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