When Satoshi Nakamoto wrote the Bitcoin Whitepaper, he described an algorithm called “Proof of Work” to solve the double-spending problem that had troubled previous digital digital peer to peer payment projects up til that point. More than 10 years later, Bitcoin is a household name, and the network’s Proof-of-Work transaction validation demands an unprecedented amount of energy.
Without going into the ecological debate around the network’s energy consumption, Bitcoin mining is now so expensive that it’s no longer feasible for individuals.
When consensus was reached regarding th Ethereum 2.0 update, one of the most significant changes to the network was the introduction of the Proof of Stake (PoS) validation model. Proof of stake removes expensive hardware and energy consumption from the validation process and shifts the responsibility to network participants that hold ETH.
While this will drastically reduce the energy footprint of the Ethereum network, some critics point out that the Proof of Stake model clearly favors those with a larger stake to receive block rewards.
With some criticizing the PoS system as unfair and not necessarily benefitting the network at all times, New Economy Movement (NEM) devised a unique solution to the problem of PoS inequity. Instead of the energy-intensive demands of Proof of Work, or the inequality of Proof of Stake, NEM introduced a new concept: Proof of Importance.
Proof of Importance addresses the inequality of Proof of Stake by factoring in an individual’s contributions to the network basing block rewards solely on a user’s staked coins. Under a Proof of Importance model, users can get involved by voting, transferring coins, or just by being active in the community. Rather than simply rewarding the most affluent holders of a token, Proof of Importance encourages members to be active in the community and grow the network.
The NEM blockchain is a dual-layer blockchain that is completely written in Java. NEM supports several ledgers on its crypto layer, and supports mosaics that can represent any store of value on its Smart Asset layer. To address network congestion, the NEM blockchain can handle up to 4000 transactions per second.
Powering this new network, is the the native currency, XEM. The maximum supply of XEM ever in circulation is set to 8,999,999,999. While most use-cases for blockchain looking at NEM can use the public chain, if enterprises require a permissioned solution, they can run their own permissioned NEM server as well.
Permissioned blockchains are blockchain networks that can only be accessed by parties that are granted access by a central managing authority. Often when enterprises implement blockchain, for example in supply chain, they want to remain in control and hence opt for a permissioned (sometimes also called private) blockchain.
The smart asset layer of the NEM blockchain supports the following assets:
- Address assets: similar to smart contracts, address assets can contain anything that an application needs to store, from account details to sales or shipment tracking information
- Mosaic assets: these are smart assets that don’t change. From company shares to records of ownership, Mosaic assets are similar to currency but can be created with specific rules set by the developer.
- Namespaces: these mirror domain names. They are the name given to a smart asset project, and the name must be unique across all apps created on the NEM network. Once created, a user can rest assured that they are the only one using that name.
- Transactions: Ttransfers of mosaics or addresses between users or assets. Transactions can be created with customized rules.
NEM ensures that malicious participants cannot infiltrate the network by using the Eigentrust ++ algorithm, allowing nodes to reject bad nodes through a reputation system. Additionally, NEM is balancing load across the whole network to ensure a healthy blockchain. Built-in spam protection protects nodes from spam attacks and bad transactions.
In the NEM blockchain, there are two types of nodes holding up the network.
- Supernodes: addresses with at least 3 million XEM in their wallet that act as validators. They receive XEM as a reward for validating transactions from a pool that was set aside at the Genesis block.
- Harvesters: addresses with more than 10,000 vested XEM.
Vesting is a process that happens when users hold XEM in their wallet. When a person first deposits XEM after 24 hours, 10% of that deposit will be vested. After another 24 hours, 10% of the remaining unvested balance is vested and so on. This carries on as long as XEM is held in the wallet. When users make a transaction, vested and unvested coins will be used to keep the ratio intact.
Once a user has sufficient vested coins, they can harvest these coins (basically use them to participate in transaction validation to earn rewards) or delegate them to another node to use for harvesting.
NEM has been around since 2015, and with all of its code written in Java remains a very accessible blockchain for developers looking to get started in the blockchain space. The native currency of the network XEM is now available for trading with BTC, ETH and USDT pairs on Bitcoin.com Exchange.
You can learn more about NEM by visiting their website.