NEM (cryptocurrency)

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 0.000001 µXEM (microXEM) - smallest unit
 0.001 mXEM (milliXEM) - thousandth unit
Plural XEM
Symbol XEM
Date of introduction 2015
User(s) Global
Issuer Fixed Decentralized
peer-to-peer consensus
 Website NEM
Genesis Block Production Fixed 8,999,999,999 XEM total
Block time                     1 minute
Technology                  Blockchain

NEM is a peer-to-peer cryptocurrency and blockchain platform launched on March 31, 2015.[1] Written in Java,[2] with a C++ version in the works,[3] NEM has a stated goal of a wide distribution model and has introduced new features to blockchain technology such as its proof-of-importance (POI) algorithm, multisignature accounts, encrypted messaging, and an Eigentrust++ reputation system. The NEM blockchain software is used in a commercial blockchain called Mijin,[4] which is being tested by financial institutions and private companies in Japan and internationally.[5]

History[edit | edit source]

The NEM developers are pseudonymous.[6] NEM was started by a Bitcoin Talk forum user called UtopianFuture who was inspired by Nxt.[7] The initial plan for NEM was to create a fork of NXT, but this was eventually dismissed in favor of a completely new codebase.[8] Starting on January 19, 2014, an open call for participation began on the Bitcointalk forum. The goal of the call was to create a community-oriented cryptocurrency from the ground up.[9]

In April 2016, Tech Bureau, the operator one of Japan’s largest cryptocurrency exchanges, Zaif, formed a partnership with NEM for a new blockchain engine.[10]

On 26 January 2018, Japanese cryptocurrency exchange Coincheck, was the victim of a massive hack resulting in a loss of 523 million XEM coins, the native token of NEM, worth approximately $534 million. The hack only involved NEM, because the security breach was caused by the lack of strong security measures of Coincheck with regards to their implementation of NEM, lacking the use of mutlisignature support or a cold wallet. The NEM development team refused to conduct a hard fork. Instead NEM is created an automated tagging system. This automated system followed the money and tagged any account that received tainted money.[11] The result of these actions was that NEM stopped tracking the stolen coins approximately mid-March 2018, after concluding that enough data was provided to the law enforcement authorities. [12]

Architecture[edit | edit source]

Overview of the NEM Architecture

NEM's design architecture consists of two components. One is the node or NEM Infrastructure Server (NIS). The second is the client used for interacting with the nodes.[13] Its cryptocurrency wallet is the NanoWallet built with HTML and Javascript.[14]

Another client was the NEM Community Client (NCC). The NIS is connected to the P2P network and acts as a gateway for the NCC. The NCC is client software that includes a wallet. The NCC has since been deprecated in favor of the NanoWallet. Both NCC and the NanoWallet can be run isolated from the internet, providing security through an airgap.[15]

Features[edit | edit source]

Source Code[edit | edit source]

While the "light" NanoWallet portion of the NEM project is written primarily in JavaScript, NEM's core code base is written in Java. It uses a "Proof of Importance" (POI) algorithm instead of Proof of Work (POW). NEM uses a client–server model where the NIS (NEM Infrastructure Server) runs independent of the NCC (NEM Community Client).[16]

Although the NEM client is open source and available on GitHub,[17] the NEM server based component, or NIS, is closed source. The pseudonymous developers of Catapult say that the C++ rewrite, Catapult, will be open source.[3]

As of February 2018, maintenance of the open source portions of NEM's core has been sparse. With a short-lived exception of some moderate code revisions made in mid-2016, only minor changes have been made to nem.core on GitHub since late December of 2015 (e.g., comment sections in code, single line additions or changes).[18]

Namespaces[edit | edit source]

Namespaces on the NEM system are a domain naming system similar to the internet's centralized ICANN domain name system. Within namespaces, there are higher level domains and subdomains. This allows one person with one domain to create many different subdomains for their different projects or outside business accounts. It also helps to build and maintain a reputation system for Mosaics.[19]

Node reputation system[edit | edit source]

NEM employs an Eigentrust++ as a reputation system.[20] NEM ensures the health of the blockchain by monitoring past behavior of nodes within the network. In proof-of-work, the amount of work a node does is used as a measure for its ability to protect the network. But, with Eigentrust++, it is the quality of work that is important. This adds to the NEM network's ability to be run and maintained efficiently.[21]

Proof-of-importance[edit | edit source]

POI is the algorithm used in NEM to time stamp transactions. A NEM user's importance is determined by how many coins they have and the number of transactions made to and from their wallet. POI uses the NCDawareRank[22] network centrality measure, the topology of the transaction graph, as well as a number of other relevant signals to achieve consensus.[23] POI is different from other initiatives which use a fee-sharing model that does not take into consideration one's overall support of the network. In proof-of-stake systems a person needs to have large numbers of coins to form a block, but in NEM transactions volume and trust become factors. This was designed to encourage users of NEM to not simply hold XEM but instead actively carry out transactions.[24]

To be eligible for entering the importance calculation, an account must have at least 10,000 vested XEM. All accounts owning more than 10,000 vested XEM have a non-zero importance score. With a supply of 8,999,999,999 XEM, the theoretical maximum number of accounts with non-zero importance is 899,999. In practice, the number of actual accounts with non-zero importance is not expected to approach the theoretical max due to inequalities in held XEM and also the temporal costs associated with vesting. If NEM becomes very popular, a threshold of 10,000 vested XEM could be undesirable. If necessary, this number could be updated in the future via a hard fork, which is the same procedure for adjusting transaction fees and other parameters related to harvesting.[25]

Harvesting[edit | edit source]

Harvesting is the act of forming blocks. A harvester must have at least 10,000 vested XEM in his/her account and be running a booted and synchronized node. Once a block is formed by that harvester, a new block is added to the chain and all the fees collected from that block will be delivered to the harvester’s account.[13]

NEM also has a feature called delegated harvesting which allows people to request others to form blocks and process fees for them, but done in a safe and secure way so that a person’s funds are not ever locked up, and fees are always given directly to the person that activated delegated harvesting, not the person that was harvesting for them.[23]

Messaging[edit | edit source]

Messages can be included in transactions in either encrypted, unencrypted, or hex messaging forms. No XEM needs to be sent in order for a message to be sent on the XEM network. This can be used for secure communication to any XEM address, as well as blockchain based applications. The fee for sending unencrypted messages is currently 1 XEM for every 32 characters, while encrypted messages will vary.[26]

Multisignature transactions[edit | edit source]

NEM implements multisig (short for multi-signature) technology on its platform. Specifically, NEM implements m of n multisignature, where mn. This means that m out of a total of n signatories must sign a transaction before it can be broadcast onto the blockchain. NEM's multisignature works by making a contract on chain so that the "m" accounts have full transaction privileges over the account that has been turned into a multisig account. Since the contract metadata is on chain, it can easily be updated by adding or subtracting additional signers given that the required number of parties agree on it.[27]

Multisignature accounts require that another user or users sign a transaction before it can be broadcast onto the blockchain. This means that if one person loses their wallet through a hack, no money can be spent unless another wallet (or wallets if m is more than 2) signs it. Multisignature accounts also help protect community-held funds, in that a majority of designated users must agree before a transaction can be spent from a community-held wallet. This is especially important considering over a third of all XEM in circulation is held in these community wallets.[28]

Mijin[edit | edit source]

Mijin is a private blockchain that uses the NEM software. The developers claim that it will reduce banking institutional costs by 90% while making banking more secure.[29] Sakura Internet is partnered with Tech Bureau to offer 6 month free trials of Mijin for people to try.[30] It was tested in December 2015 by Japan's largest trust bank, SBI Sumishin Net Bank, owned by Sumitomo Mitsui Trust Holdings, to add to their online banking services.[31]

Choice[edit | edit source]

Built on NEM, Choice is a payments provider in New Zealand that reduces and redistributes transaction fees for businesses.[32]The founders hope to use the platform to put New Zealanders interest first and give back the majority of their earnings to charity.[33] In 2018 they were accepted into the Kiwibank Fintech Accelerator program[34] and also raised NZ$1 million capital in the form of non-equity funding from NEM.IO foundation.[35]

Global expansion[edit | edit source]

The Foundation launched NEM's Blockchain Center in a 10,000-square foot facility in Kuala Lumpur, Malaysia to serve as an accelerator, incubator and coworking space.[36][37]

References[edit | edit source]

  1. Beikverdi, Alireza. "NEM Launches, Targets Old Economy with Proof-of-Importance". CoinTelegraph. CoinTelegraph. Retrieved 1 April 2015. 
  2. "GitHub - New Economy Movement". GitHub. Retrieved 4 January 2015. 
  3. 3.0 3.1 "Tech Bureau partners up with NEM for new blockchain engine". The Merkle. Retrieved 2017-03-23. 
  4. "How Japanese Blockchain Technology Revolutionizes Municipal Government in Belgium". CoinTelegraph. Retrieved 2017-03-23. 
  5. Maras, Elliot. "Japanese Financial Institutions Partner With Technology Startups To Utilize The Blockchain". CryptoCoinsNews. Retrieved 21 December 2015. 
  6. Tanzarian, Armand. "An Introduction to the New Economy Movement". Cointelegraph. Retrieved 4 January 2015. 
  7. "Top Ten Cryptocurrency NEM Catches on in Japan - CryptoCoinsNews". CryptoCoinsNews. 2016-11-24. Retrieved 2017-03-23. 
  8. Warner, Matthew. "ChronoBank partners with NEM to create ChronoNEM wallet –". Retrieved 2017-03-23. 
  9. Mikha, Sean. "How I Got $1500 for Commenting On an Article". Lets Talk Bitcoin. Retrieved 4 January 2015. 
  10. Dob, Daniel. "Tech Bureau partners up with NEM for new blockchain engine". The Merkle. Retrieved 10 June 2016. 
  11. "$530 Mln in XEM Stolen From Coincheck Can Be Traced, NEM Team Confirms". Cointelegraph. 26 January 2017. 
  12. Review, Binary Options Trading (2018-03-22). "Crypto News | What will happen to Coincheck hackers in the end?". Binary Options Trading Review. Retrieved 2018-03-24. 
  13. 13.0 13.1 "NEM Technical Reference Introduces Reputation-Enhanced 'Proof of Importance'". CoinTelegraph. Retrieved 2017-03-23. 
  14. Warner, Matthew. "New NEM Features in September –". Retrieved 2017-03-23. 
  15. Lombardo, Hans. "NEM Q&A – Original, Tested Blockchain Platform, Proof-of-Importance, "Change the World, Forever" Tech". allcoinsnews. Retrieved 9 April 2015. 
  16. Lombardo, Hans. "NEM Q&A – Original, Tested Blockchain Platform, Proof-of-Importance, "Change the World, Forever" Tech". allcoinsnews. Retrieved 9 April 2015. 
  17. "NEM client published source code". 
  18. "Code frequency graph on Github". Retrieved 02/04/2018.  Check date values in: |access-date= (help)
  19. "NEM Project Releases Hard Fork with Domain-linked Digital Assets –". Retrieved 2017-03-23. 
  20. "Blockchain Project Thinks Microsoft Azure License Agreement Goes Too Far - CryptoCoinsNews". CryptoCoinsNews. 2016-04-15. Retrieved 2017-03-23. 
  21. Pangburn, DJ. "This Cryptocurrency Doesn't Want to Beat Bitcoin, It Wants to Beat the Economy". Motherboard. Retrieved 4 January 2015. 
  22. Nikolakopoulos, Athanasios N.; Garofalakis, John D. "NCDawareRank: A Novel Ranking Method That Exploits the Decomposable Structure of the Web". Proceedings of the Sixth ACM International Conference on Web Search and Data Mining, WSDM 2013. ACM: 143–152. doi:10.1145/2433396.2433415. 
  23. 23.0 23.1 "NEM Technical Report" (PDF). pp. 30–47. Retrieved 1 September 2016. 
  24. "Proof-of-Importance: How NEM is Going to Add Reputations to the Blockchain". CoinTelegraph. Retrieved 2017-03-23. 
  25. Beikverdi, Alireza. "Proof-of-Importance: How NEM is Going to Add Reputations to the Blockchain". Coin Telegraph. Retrieved 13 March 2015. 
  26. Author, Author Guest (2016-09-22). "NEM Blockchain Platform Doubles the Rewards for its Supernode Program". NEWSBTC. Retrieved 2017-03-23. 
  27. OConnell, Justin. "Blockchain Project Thinks Microsoft Azure License Agreement Goes Too Far". CCN. Retrieved 18 April 2016. 
  28. "NEM - Top 200 accounts". Retrieved 2017-03-19. 
  29. Holmes, B. "Japanese Company, Tech Bureau, Launches Private Blockchain Project". Bravenewcoin. Retrieved 21 December 2015. 
  30. Redman, Jamie. "Mijin: 'Offering Blockchains To The World for Free'". The Bitcoinist. Retrieved 21 December 2015. 
  31. Rizzo, Pete. "Japan's SBI Sumishin Building Blockchain Banking Proof-of-Concept". Coindesk. Retrieved 21 December 2015. 
  32. "Choice - Make A Difference Every Time You Pay". Retrieved 2018-04-12. 
  33. "Kiwi startup revolutionises payments using NEM blockchain - 61-Bit". 61-Bit. 2018-04-04. Retrieved 2018-04-12. 
  34. "Team Focus: Choice". Kiwibank Fintech. Retrieved 2018-04-12. 
  35. "CHOICE :: A Liberated Payments Protocol - NEM Community Fund Proposal". NEM Forum. Retrieved 2018-04-12. 
  36. "VCs target Australian blockchain and cryptocurrency firms with new funds worth $44m". Financial Review. 2017-11-28. Retrieved 2017-11-30. 
  37. "Australian startups to share in $90 million NEM blockchain investment fund - SmartCompany". SmartCompany. 2017-11-29. Retrieved 2017-11-30. 

External links[edit | edit source]