History of the NEM XEM cryptocurrency

June 05, 2018
Richard Reed

NEM could be the sleeping giant of cryptocurrencies. Amid all the hiatus of the Bitcoin bubble other cryptocurrencies have been quietly gaining ground and expanding their user base. One such is NEM.

While speculators were winning and losing fortunes, NEM (its token traded as XEM) has been gaining traction as a valuable business tool, offering a private blockchain solution as well as the public offering.

NEM, designed from the ground up for speed, is now being seen as a potential rival to Ripple – which is already being trialled by banks as a secure international transaction system.

Over the past 18 months, the values of both NEM and Ripple (traded as XRP) have rocketed by more than 1,000%.

NEM is currently (25 May 2018) the 15th biggest cryptocurrency, with a market capitalisation of $2.19bn. The number of XEM in circulation is fixed at nine billion, which were all issued at launch.

However, trading in XEM has been volatile – after hitting an all-time high of $1.90 on 4 January, when cryptocurrency prices plunged earlier this year, XEM was badly hit, plunging to $0.53 on 5 February. It is currently trading at around $0.32.

A brief history of NEM

NEM started life in 2014 when a member of the Bitcoin Talk forum with the pseudonym ‘UtopianFuture’ suggested creating a ‘fork’ (a variant using the same technological base) of Nxt – an opensource cryptocurrency and payment network developed the year before as a platform for financial services.

The idea for a new digital currency quickly gained ground in the crypto community in the early months of 2014, but the decision was taken to create a completely new, community-based code to underpin it.

NEM – short for New Economy Movement – was officially launched on 31 March 2015, shunning the usual proof-of-work (POW) or proof-of-stake (POS) algorithms in favour of a consensus-based, proof-of-importance (POI) system (more later).

Proof of Importance (POI) is claimed to be a fairer way of completing blockchain transactions

Proof of Importance (POI) is claimed to be a fairer way of completing blockchain transactions

In 2016 NEM teamed up with Japanese firm Tech Bureau, owner of cryptocurrency exchange Zaif, to create an entirely new blockchain mechanism, while in 2017 an NEM incubator centre was opened in Kuala Lumpur, Malaysia, by the NEM Foundation.

However, in January 2018 another Japanese exchange, Coincheck, fell victim to a heist in which 523 million XEM tokens were stolen, worth roughly $400m, denting confidence in the cryptocurrency.

Development and growth

What does the future hold for NEM, bearing in mind there are now 25 cryptocurrencies with a market cap in excess of $1bn – and a total of 1,593 listed on the coinmarketcap.com website, with a total capitalisation of $383bn? What does it offer, both to users and traders, and how does it differentiate itself?

NEM sees itself not so much as a cryptocurrency but a transactional tool for business.

NEM claims its blockchain platform “was designed and coded from the ground up for scale and speed”. Unusually for a cryptocurrency, it offers both private blockchains that can be built into a company’s IT infrastructure, delivering “industry-leading transaction rates”, together with an open, public blockchain that can be used by anyone.

With POI, a financial reward is given to those taking part in the blockchain transaction process, and every user is given an ‘importance’ score based on the number of transactions they have completed.

The process is known as ‘harvesting’, and the more you complete, the greater your importance score. To be rated you also need to have a minimum of 10,000 XEM in your account.

Advantages of POI

NEM claims POI has major advantages over conventional POW or POS systems:

  • It requires no special hardware
  • It’s quick, with its private blockchain-for-enterprise systems able to complete 1,000 transactions per second (TPS), compared with 10-15 minutes for a POW system such as Bitcoin
  • It’s environmentally-friendly and inexpensive, whereas competing Bitcoin miners consume vast amounts of electricity to run special number-crunching computers
  • It rewards users who make transactions over those who hold coins.

In a feature known as ‘delegated harvesting’, you can even join up with an existing account to boost its chances of harvesting a block, as your extra ‘weight’ will boost its POI score.

NEM says that with conventional POW systems, “those who can afford the most powerful computing arrays have an unfair advantage over other users”, while POS “gives an unfair advantage to coin hoarders”.

“Part of NEM’s founding vision was a system that would give power to users, not to hoarders or mining farmers,” the organisation states on its website. “Keeping harvesting fair, transparent, and correctly incentivised is central to NEM’s purpose.”

Focused on business

NEM is very much business-focused, whether it be for smartphone app transactions, cloud services linking clients with web apps, or back-end record-keeping for large corporations or even governments.

NEM blockchain technology can be incorporated into any existing business platform, regardless of the programming language used to create it.

Further, its Eigentrust++ algorithm theoretically makes NEM almost bullet-proof, from a fraud perspective. If users in the peer-to-peer network deliberately send false data, then the algorithm should, theoretically, catch and exclude those peers.

Among the commercial uses being targeting are:

  • Financial services – companies can use NEM for payments and transfers anywhere in the world, while its private/public offerings mean a company can move currency or files seamlessly from an internal network onto the public blockchain, and then onto another company’s private network (assuming it’s also using NEM).
  • Mobile payments – NEM’s currency XEM can be used for mobile retail payments.
  • Equity markets – post-trade clearing, payment and settlement of equity trades can be carried out much more quickly and efficient using NEM blockchain than existing legacy systems.
  • Escrow – NEM can manage transfers of currency or any other assets using special accounts requiring multiple digital signatures.

NEM has serious competition in its business-focused approach from the likes of Ripple and Ethereum, the number two cryptocurrency after Bitcoin in terms of market cap. However its built-for-purpose architecture has led to some in the industry referring to it as the “sleeping giant”.

Key players

The NEM Foundation, based in Singapore, oversees and promotes the use of NEM blockchain technology, led by an international team with backgrounds in IT, trading, business and academia.

Leading members include:

Long Wong: Immediate past president of the NEM Foundation and a former core team member. With experience in both entrepreneurship and engineering, Wong has been instrumental in contributing to the best-of -breed design of the NEM blockchain solution.

Lon Wong, immediate past president of the NEM Foundation

Jeff McDonald: Vice-president of the NEM Foundation, McDonald is responsible for managing and overseeing operations and organising the NEM community. He is also chief technical officer for Luxtag, a company that provides digitised certificates of authenticity for products using an updatable blockchain.

Jeff McDonald, vice-president of the NEM Foundation

Ken Leng Chan: Treasurer of NEM, formerly finance director of Invensys, and prior to that GE’s financial controller for South-east Asia.

Kristof Van de Reck: Interim president of NEM, and an executive at Antwerp-based management consultants, Vocum.

Erik Van Himbergen: One of the founding members of the NEM Foundation, Van Himbergen is a freelance business analyst, also based in Antwerp.

Kailin O’Donnell: NEM founding member O’Donnell is a software developer based in Ireland specialising in blockchain technology.

Kailin O’Donnell, one of the founding members of NEM

What other people are saying

JP Buntinx, themerkle.com: “One of the main selling points of NEM is how every individual project can have its own internal blockchain tied to the NEM parent chain… Projects can consolidate users’ transactions in their own blockchains and connect them to NEM to consolidate specific information. This is very different from ethereum’s chain, which would be forced to handle all of this consolidation directly.”

Coinpupil.com: “NEM isn’t out to beat bitcoin; it’s out to conquer the economy. NEM saves power and enhances transaction speed with minimal fees. We are eager to see how far NEM can go.”

Nicholas Kith, cryptorecorder.com: “If you, too, are shopping for the next coin that could give you exemplary returns, you should probably be looking at NEM (XEM). It has a pretty good chance of exemplary value growth in the future.”

Mir Khaleq Ali, nemcoin4u.blogspot.com: “A consensus among industry watchers is that NEM (XEM) is a cryptocurrency that has the potential to go further with wider adoption. If I have to advise any investor who already holds XEM, it would be this: Don’t sell; NEM is going to be bigger this year.”

Timeline

  • January 2014 – Concept for Nxt fork proposed by user on Bitcoin Talk forum.
  • Early 2014 – Idea gains ground, but it is decided to create an entirely new opensource code to underpin it.
  • June 2014 – Alpha testing on new currency gets under way.
  • March 2015 – NEM officially launched.
  • Autumn 2015 – NEM developers work with Japanese firm Tech Bureau, owner of crypto exchange Zaif, on its new blockchain mechanism, Mijin.
  • May 2016 – NEM and Tech Bureau announce development of fast new blockchain mechanism based on Mijin, codenamed Catapult.
  • 2017 – NEM incubator centre opened in Kuala Lumpur.
  • January 2018 – 523 million XEM tokens worth $400m stolen in cyber attack on Japanese crypto exchange Coincheck.
  • February 2018 – Venezuela announces the launch of a new Petro token based on the NEM blockchain – after originally saying it would use Etherium.
  • 25 March 2018 – NEM announces beta release of Catapult upgrade that could increase transaction speeds to 4,000 TPS.

 

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