Blockchain is at its nascent stage where most projects are still in experimental mode including bitcoin. It is also at this stage where people introduce so much innovation to this space. With the introduction of blockchain 3.0 frameworks, it is a good idea to have a background on New Economy Movement (NEM) because it has started to gain more traction in the Philippines this year. In this article, we will attempt to give you a comprehensive overview of NEM, and how its architecture is different from Ethereum.
What is NEM?
NEM is a blockchain platform that allows one to build customizable assets. XEM is the native currency in NEM, and it is also an example of an asset. It is, essentially, a movement backed by the NEM foundation that fosters economic growth by allowing businesses or entities to build customizable solutions based on its platform. Technically, it is an improvement of existing blockchain platforms such as bitcoin and Ethereum, with additional features that emphasize security and optimized performance.
NEM vs Ethereum
While Ethereum is a platform for hosting and processing smart contracts – wherein all nodes in the Ethereum network agree on the state of a specific smart contract; NEM, on the other hand, has decoupled its blockchain from processing smart contracts by exposing APIs to interact with NEM’s blockchain. Following this, developers can use these APIs in their smart contracts. Since the smart contracts are processed outside of NEM’s blockchain (aka off-chain), it is not dependent on a particular programming language. Thus, developers can choose whichever programming language they prefer.
Each account in NEM has a vested balance and an unvested balance. Unvested balance is the total amount of XEMs you have received in your wallet. Vested balance is the assigned amount in an account to qualify for creating new blocks, which is called harvesting. 10% of the account’s unvested balance will be assigned to its vested balance every 24 hours.
NEM is the first and only blockchain to use Proof of Importance (PoI). In fact, this is one of their innovations in the blockchain industry. In bitcoin, mining is used to secure the network, create new blocks and reward miners, while in NEM, importance score is used to determine who will create or harvest the new block.
An account’s vested balance is the basis of eligibility to harvest new blocks, enabling it to earn from transaction fees. An account should have more than 10,000 XEMS in its vested balance to be included in the importance calculation for a new block creation.
Importance score is calculated based on how often the account uses the network to send transactions to other eligible accounts (accounts that have more than 10,000 XEMS) within the past 30 days, combined with a ranking algorithm similar to page ranking.
A good analogy for PoI is how social media influencers build their followers. The more activity they do within the platform, such as post, like and share, the more followers they gain and the more relevant they become. In the same manner, the more you transact in NEM, the more important you become. The chances for you to earn the reward of collecting the transaction fees from harvesting a new bloc become higher.
Blockchain revolutionized the peer-to-peer network system by inherently embedding trust into its architecture; thus, removing the need to trust each peer (node) in the network. We leave it to the system to reject malicious transactions and actors. NEM went a step further by incorporating a reputation algorithm which is used when nodes interact with each other. Node interactions are crucial in propagating, validating and synchronizing information in the blockchain.
In NEM, a node has an experience map that contains a record of all of its previous successful and failed interactions and it builds a local trust from there. It can be analogous to trusting people, you can gauge a person’s credibility by his achievement, his activities, and his words. These are some of the factors which determine if a person is trustworthy or not. The reputation system in NEM works in a similar manner, where nodes can decide whether an interaction with another node is a success or a failure based on its trust value. To calculate the trust, NEM uses an algorithm similar to the EigenTrust++ reputation system.
Mosaic is an asset in NEM. In general blockchain term, it is a token. XEM is the native currency in NEM and it is also a mosaic. Mosaics can be used to create and customize any financial assets like cryptocurrencies, stocks, bonds, etc under a registered namespace. A namespace is a domain identifier in the NEM blockchain; hence, it is similar to having a domain name for your website on the internet.
Performance and other features
NEM’s architecture is crafted to focus on scalability and speed. It can process up to 4000 transactions per second. It also has built-in support for multisig transactions. Multisig is a feature that can be used to add multiple signatories to an account to fulfill a transaction. NEM was built from scratch using Java and has been rewritten in C++ which was called project Catapult. Catapult’s source code is compartmentalized into different layers to mitigate the need for hard forks.
Layer 1: Core blockchain server for P2P transaction
Layer 2: Mongo DB and API Server
Layer 4: Nem Apps
Transactions and fees
There are different types of transactions in NEM.
A transfer transaction is the most common type of transaction and the fee is divided into two parts:
• .05 XEM per 10,000 XEM transferred, capped at 1.25 XEM
• .05 XEM per commenced 32 message bytes (messageLength / 32 + 1)
In NEM, accounts are allowed to delegate harvesting via importance transfer transaction. This means that you can assign or lease your harvesting power to another account. The fee for an importance transfer transaction is .15 XEM.
In multisig related transaction, any transaction type with the exception of multisig can be wrapped into a multisig transaction. To send XEM from a multisig account to another account, a transfer transaction must be wrapped. The multisig wrapper transaction has a fee of .15 XEM. This fee is added to the usual transfer transaction fee.
NEM’s technical reference has a detailed explanation of the transaction fees.
How to use NEM
XEM is the currency used in the NEM blockchain. You can send and receive XEM using the the NEM Nano Wallet which can be downloaded from the NEM’s official website. Once installed, you can create your account and start sending and receiving funds. For an more information on how to use XEM, visit the getting started to XEM page.
What’s next for NEM?
NEM is obviously becoming a significant contender of Ethereum and other blockchains with similar propositions. The number of projects built on the basis of NEM will drive its success. Recently, we have seen how LoyalCoin could potentially dominate the realm of loyalty and rewards system. We are also seeing more projects coming into the platform, i.e, CEstates, PundiX, Coinexis to name a few, which puts XEM in one of the top 20 coins in CoinMarketCap. These can be considered as good indicators of NEM’s success. Because of its features and innovations, NEM is definitely a blockchain platform that will help drive forward an economy or a community at the very least.
To know more about other cryptocurrencies and blockchain, visit our education page here.
Disclaimer: BitChikka makes no representations or warranties as to the accuracy or timeliness and completeness of the information contained herein.