Just like Ethereum and many other projects created in 2015-2017, New Economy Movement or NEM is a dual-layer blockchain. However, the difference is that NEM is written in Java. NEM core team believe blockchain does not need to be complex. Blockchain can still be useful while still embracing more mainstream programming language (like Java) at the same time. NEM uses a unique consensus mechanism which is called Proof of Importance (POI).
NEM’s native cryptocurrency (it’s called XEM) used to be part of the top 10 cryptocurrencies by market capitalization but now it has fallen from its top position to the 25th ranking. With this article, we will learn what is NEM exactly, what purpose does it serve, and all the controversies around this coin. Let’s get started.
History Of NEM
A few years ago, a Bitcointalk user called UtopianFuture wanted to start a new cryptocurrency project modeled after NXT. The original idea was to fork NXT itself, but then the plan was disregarded, and NEM was started from scratch. On January 19th, 2014, a new thread was started on Bitcointalk forum. The core team of NEM project wanted to create a community-focused cryptocurrency from zero.
Just a few months later, to be exact on June 25th, 2014, the NEM project launched its initial alpha testing. The reaction from the community was mainly positive, and NEM moved ahead to beta testing on October 20th, 2014. After months and months of testing, finally, NEM’s mainnet was launched on March 31th, 2015. Around 75% of XEM crypto coins were distributed evenly to less than 3000 stakeholders. At the time, NEM core team believed the even distribution was one of the fairest in crypto history.
Not long after the launch of the blockchain, NEM foundation was finally born in 2016. NEM foundation’s goal is to promote partnerships, marketing, and to educate the community. Everything looked so good at the time. NEM core team announced that they worked together with Tech Bureau to develop a new blockchain engine called Catapult. The idea was that the use of Catapult engine would be able to optimize network communication and improve overall stability and performance.
During the peak of crypto fever in 2017, NEM became one of the most successful crypto projects from a price perspective. They enjoyed their rise to fame. However, everything started to go wrong in 2018 after the Coincheck hack incident. At the time, a hacker successfully hacked a Japanese crypto exchange Coincheck, and he stole $400 million USD worth of XEM coins. We will talk more about this controversy later in the article. But basically, they started to lose their popularity after this specific incident slowly. At the time of this article creation (September 18th, 2019), NEM is ranked 25th on crypto rankings by market cap.
Purpose of NEM
Image source: https://nem.io
NEM is another dual-layer blockchain that tries to be an all-in-one solution. It serves multi-purposes just like Ethereum or EOS project. NEM does not try to target one specific use case. As explained by its official website, NEM can be used to release your own crypto tokens, used for automatic accounting, or even to fight fake voting counts in a decentralized organization (DAO) environment. In short, NEM is trying to be the competitor of Ethereum and other similar blockchain ecosystems.
NEM believe its blockchain should be used for larger use cases rather than just for cross-border transactions. NEM’s own blog stated any type of data (from birth certificates to official documents) could be stored in the NEM blockchain. The ‘trying to be the all-in-one solution’ approach, however, can be very challenging. At the present time, most traditional corporations are still ‘testing’ blockchain to improve their systems.
And it’s not easy to ‘win’ their heart to use NEM because there are also other blockchains that try to do more or less the same thing (i.e. Ethereum or EOS). It’s up to NEM Foundation and NEM supporters to try to promote NEM blockchain technology if they want to get adopted.
What Makes NEM Unique - Proof of Importance
Image source: https://www.planetblockcha.in/proof-of-importance/
While NEM’s purposes are (more or less) the same with Ethereum and similar platforms, but NEM has several unique features that separate itself from its competitors. The most significant difference is the use of Proof of Importance (PoI) for its consensus algorithm. So, most cryptocurrency projects typically use Proof of Work (PoW) or Proof of Stake (PoS). With PoW, the miners secure the network. Meanwhile, verifies who stake their coins secure a PoS network. With PoI, someone who controls more coins and makes more transaction will become more ‘important’ in the network. And the ones who calculate the next block will be the ones who have the ‘importance’ status in the NEM network.
Let’s put it this way. In a PoS network, you only need to own a large number of coins and stake them in order to become one of the verifiers. In a PoI network, owning a large number of coins is not enough. You also need to have a lot of transactions with your coins. NEM created this Proof-of-Importance system to encourage its community to actively transact among each other (instead of just HODL-ing).
There are several controversies surrounding the NEM ecosystem. The first (and probably biggest) controversy happened when Japanese cryptocurrency exchange Coincheck was hacked, and the hacker managed to steal $400 million worth of XEM coins. While the exchange hack was not a fault of any NEM developer, but many crypto traders believed it was best to avoid investing in this coin because there were other alternatives that still had much ‘cleaner’ record. Some of the skeptics predicted sooner or later the hacker would eventually dump XEM coins in the market, and it would suppress the price.
After the hacking incident, NEM and XEM slowly lost their popularity. Once part of the top 10 crypto rankings, currently XEM is struggling to keep its place inside the top 30 rankings. The controversy did not stop there. At the beginning of 2019, NEM Foundation announced that the foundation was almost running out of money. It planned to layoff 150 employees and restructured itself.
So, why did the NEM Foundation suddenly had little to no money? Well, bad money management. One NEM developer (who refused to be named) said the foundation leadership used the funds to promote sketchy ICOs that were based on NEM like Ecobit and ProximaX. The foundation never showed full transparency regarding what they were doing with the funds.
While the NEM Foundation was forced to restructure itself and was almost running out of cash, but they clarified that they were not really bankrupt nor protection from creditors.
However, many crypto traders already felt discouraged to HODL XEM coins long term because of this reason. Because they think the project has little future due to bad management and the loss of reputation among crypto elites. At the moment, XEM has just over $10 million daily trading volume. The coin used to have larger volume when it was still much more famous. Of course, the battle is not over yet. NEM can still turn this around. Let’s see what happens in the next few years.
Partnerships and Adoption
Image source: https://nem.io/enterprise/partner-companies/
Many of NEM’s partners are startups and companies who are focused on blockchain and cryptocurrency developments. There are some non-blockchain partners such as Sumeru Inc. (a cybersecurity company) or dtk.io (IT tasks and workflows management) but, once again, the majority of partners are blockchain-focused companies. There’s no big name with a big reputation when it comes to NEM’s enterprise partners. Some crypto enthusiasts criticized NEM foundation for not doing enough to market the project. You can check the full list of NEM enterprise partners and judge by yourself whether the foundation has done a good job in NEM marketing or not.
As for adoption in the crypto market, XEM coin is available on the usual suspects like Binance, OKEx, Huobi, or Gate.io. That being said, the trading volume is ‘divided’ all over the place. There’s no dominant exchange where you can find decent liquidity except maybe on CoinEx (with XEM/BCH pair). XEM used to have better liquidity in the crypto market, but now there aren’t many big traders who love to trade this coin consistently.
Talking about competitors, NEM competes against the usual dApp platforms like Ethereum, EOS, NEO, Tron, and other top blockchain 2.0 projects. Considering NEM is another ICO platform, another dApp platform, and another ‘issue your own token’ platform, it’s not hard to see why NEM compete against these other ecosystems. NEM’s dream to be adopted by big corporations and the mainstream community will be dependent on NEM foundation and NEM supporters.
Image source: https://cryptocolumn.com/nem-coin/
NEM has a big potential, but it needs to change its marketing and PR efforts if they want to become relevant again among top cryptocurrency projects. There are a lot of newer blockchain platforms that try to chase the same market and NEM foundation along with NEM community leaders need to think more creatively if they want to lure developers and corporations to their ecosystem. After all, a blockchain 2.0 without any real adoption would mean nothing.