NEM Q&A – Original, Tested Blockchain Platform, Proof-of-Importance, “Change the World, Forever” Tech


More than a year after its original call for participation on, peer-to-peer blockchain platform project NEM, short for New Economy Movement, launched on 31st of March with 100% original codebase, an original algorithm called Proof-of-Importance (PoI), and a team of over 70 active contributors.

NEM is an original blockchain technology platform that uses the POI algorithm for blockchain consensus. The PoI consensus mechanism calculates an importance score for an account by taking into consideration its balance, activity of the account, as well as the importance of accounts transacted with.

Java-based NEM also incorporates the Eigentrust++ reputation algorithm, multi-signature capabilities, encrypted messaging, and a robust client-server web architecture that accommodates encapsulation of layers within the system. (ACN) this week engaged in a question and answer session with NEM community leaders, Lon Wong and Makoto. Lon Wong is the Founder and CEO of Sydney-based Faithhill Ventures Ltd, a company investing in the cryptocurrency ecosystem. Makoto is a core developer of the Proof-of-Importance algorithm and the NEM Infrastructure Server.

ACN: I have read that the NEM is not a fork of any platform/protocol. In the beginning, the NEM project considered basing its platform on the Nxt code base, but then you decided to develop it from scratch. Why was Nxt base code not considered suitable?

NEM: When NEM first started, the Nxt code was not nearly as clean as it is now. The developers at Nxt have done a lot to clean it up and made it a lot tighter over the last year. When we first looked at the code and we thought about what we really wanted NEM to be, we soon realised that to get the feature list we wanted, we would have to alter the entire Nxt code base. We concluded that we would be better off just building the code from scratch to support the features that we wanted. These features include the client-server web architecture design, separating the NIS (NEM Infrastructure Server) and NCC (NEM Community Client), a local wallet instead of brain wallet passphrases, POI, multisig accounts, transaction spam protection, and Eigentrust++, along with a few features that are yet to be built.

The entire base code has been designed so that it can be expanded later to accommodate new features. A lot of these are to increase security, as we feel that security has been one of the sticking points with other implementations of block chain technology. Many of these features we are adding are firsts in the crypto world, like transaction spam protection, on-chain multisig, and network time synchronisation for block stamping. Even if they have been done before, nobody else is doing them with the utility and user-friendliness of NEM.

We also have a lot more features that we are working on. For instance, we have already begun testing sending transactions from cold wallets. This again, will surely redefine setups and security standards for cold wallets. There will be more later, but for now, we will continue to develop those before we announce them.

ACN: Has Nxt still had influence on the development of NEM?

NEM: No. We are totally independent of Nxt. The reality is, we are very much influenced by the industry as a whole and try to identify overall trends and develop a consistent strategy.

ACN: The NEM project has issued statements that are quite bold, for example that its platform is being launched to “rectify problems with the economy”, to “change the world as we know it forever for the better” and to help “governments, corporations, communities, and individuals to transform economies.” This definitely attracts attention but how specifically will NEM change the world?

NEM: Although debatable that other crypto initiatives may be able to do the same, we shall not claim that our ecosystem is a unique solution to alleviate world problems. As a block chain initiative, it is undeniable that it does rectify problems with many current financial and organizational systems in the real world, which is what we were referring to.

Of particular importance and interest to note for NEM, though, is the way we have built the NEM platform to be as open as possible to enable programmers and developers to have the flexibility to treat our solution as the elemental building blocks for their greater initiatives. We intend to be a generic platform solution that provides building blocks for block chain technology that can be exploited to do things that the real world can make use of.

For example, a voting system. Software developers can easily make use of our platform to do so. Another example is form submission. Although the amount of data that can be sent is limited to 256 bytes of characters currently, the type of data that can be sent is sufficient for many transactions. Alternatively, this can also be concatenated, similar to SMS messages. Form submissions allow a client to send information to an operator who would want to make use of the data to do something else. The fundamental difference between the traditional solution and this solution is that the data are stored on the block chain and the operator can actually work in stealth mode, i.e., the operator does not need to publish a website for data input and therefore become subject to hacking, DDoS, etc.

In a later release, our solution can make it simple for governments to issue their fiat currencies on the block chain if they wish to, and use that as part of their monetary management policies. This naturally will change the entire financial system. All unbanked and underbanked can immediately have their own bank accounts overnight, as the bank account is the wallet account being directly controlled by the user.

Finally, although some may beg to differ, we are not here to push libertarian political views. We are here to push the use of the blockchain technology to empower individuals. Hence, we are impartial to both sides of the political extremes. More importantly, it also allows both sides of the political extremes to participate independently of each other within the NEM ecosystem if they choose to.

With such flexibilities, we envision that wide scale adoption will indeed change the world in which we live in, forever.


ACN: Aren’t other blockchain platforms claiming to give people direct control over the transfer of value and information as NEM project has?

NEM: When Bitcoin and the blockchain technology was promoted, it mentioned that it did not require intermediaries like the contemporary financial world did. However, this is not exactly true. Bitcoin cannot work on its own without going through an intermediary that provides an easier and faster means to transact with the block chain. As it is, it requires the user to have the blockchain data live next to her wallet, without which, the user cannot transact directly. Booting up and synchronising the blockchain data are impractical to use, even so, impossible to use for the smart phone. Hence, most if not all crypto initiatives resort to intermediaries or third parties to provide faster, but not necessarily any better, than what the block chain technology can provide. Multisig and online wallets in the entire cryptosphere, particularly Bitcoin, are provided by third parties, meaning to say, intermediaries.

In NEM, “direct control” has its subtle nuances. For example, is parking your crypto with the likes of Coinbase and Bitpay considered direct control? NEM does not need a Coinbase or Bitpay in its ecosystem. Other than converting to fiat money which the aforementioned services do, NEM is Coinbase or Bitpay in itself. That is to say, you don’t need to park your money with a “crypto bank.” The NEM platform allows a user to have her own bank. With some programming on the client solution, anyone can tweak it to be a great standalone Coinbase or Bitpay solution. NEM comes with an “embedded” wallet, meaning, it does not need a third party wallet to do multisig and is inherently a thin client (thin enough to be a client to even sit on a smartphone device) that communicates directly with the block chain. Most providers of wallet use their own centralised intermediary solutions. That is not direct control nor is it direct posting to the block chain. NEM is therefore, redefining the meaning of direct control in its true sense.

ACN: There are other appcoins, platforms and forks that say they will change the world and can host a multitude of applications (e.g. fintech, smart contracts, notarization, smart property, records archives, messaging, social networks, etc). What specific distributed applications do you see NEM as platform for?

NEM: We would first like to make an analogy to give better light to what NEM is claiming to be. Java is a programming language. However, it is not the be-all and end-all software programming language for everything. Java can be put to great use for many things but, not all things.

NEM is one such analogy in the crypto world. NEM, for example, cannot be used for a decentralised storage or a decentralised VPN solution. So, NEM can be seen as a general platform solution, i.e., NEM is a building block for developers who wish to use it as a building block for their greater initiatives. To that end, NEM could do “many of the above,” but what is most important at the end of the day is the ease of doing it and the fact that it is not riding on some other blockchain. The technology behind it, although not immediately apparent, allows NEM to be used with ease and flexibility. Some features include multisig (this is the first on-chain, that is, a block chain multisig, making Multi-Factor Authentication a realistic possibility for the first time), anti transaction spam, smart property tiles (to be released), web architecture design, short and consistent block times, and ease of access to the network.

NEM in its full working state, will be able to do not only smart contracts (we call it smart business rules, which is more appropriate), but applications that use smart property tiles with the ability to have intrinsic conditions or values within it. Put simply, these tile properties can include the following optional intrinsic characteristics:

1. messages
2. smart business rules
3. inclusion of other tiles, including the base currency
4. feedback/reputation

Without anything attached to a smart property tile, it reduces itself to a standard colored coin. With intrinsic characteristics attached thereto, it opens itself up to a plethora of applications limited by creativity. It can be used for a Distributed Autonomous Corporation (DAC), notarisation, time stamping, asset management, Internet of Things, and reputation management.

Having said that, smart property tiles is what we are now working on. Although it should not be impossible to do, we may be faced with some implementation challenges as we move into uncharted territory.

ACN: You have indicated that NEM’s Proof-of-Importance algorithm improves upon Proof-of-Work and Proof-of-Stake by rewarding accounts that actively participate in the economy and thus benefiting the economy as a whole. However does this lead to aggregation of wealth and economic power based on participation level? Are people with more wealth able to participate more? Is this not a form of centralization or class stratification?

NEM: Harvesting is not meant to increase one’s wealth. It should not. That’s why it is also easy for anyone to start harvesting. It gives anyone with a $400 computer an opportunity to harvest. In a real world economy, someone who is doing business will more than likely increase the velocity of money within the business than, say, a salaried worker. In NEM, this will lead to higher POI, but the ability to accumulate wealth from just harvesting should not happen because it is based on the population at large. The pool to be shared is as big as the number of transaction fees can give. The higher the velocity, the more likely it is that the number of users will increase, and therefore harvesting spoils will also be diluted. In the end, it is not easy to just accumulate wealth by only harvesting. It will give some people an edge, but it will not give them the wealth per se.

People with more wealth may likely carry out more transactions, but these transactions will not geometrically increase the wealth of these people. Instead, these people are more likely to increase their wealth by participating in the economy, like in the real world.

Hence, our definition of being egalitarian, i.e., some fairness and equality. No one entity can get rich from just harvesting alone.

ACN: How is the Eigentrust++ reputation algorithm important to the functioning of PoI and the NEM platform?

NEM: Eigentrust++ is completely separate from PoI. Whereas PoI is the consensus algorithm for the blockchain, Eigentrust++ is a reputation system for the peer-to-peer network of nodes. Eigentrust++ helps to protect the network against attacks by malicious nodes that purposely send incorrect or invalid data.

PoI works on the account level while Eigentrust++ works on the network node level. PoI gives rise to harvesting rights while Eigentrust++ gives rise to the reputation of each and every node in the network. Having said that, a malicious node does affect the ability of an account using it to be sidelined for any harvesting. In a way, it does affect the functioning of an account insofar as harvesting is concerned but not the PoI. Eigentrust++ scores for nodes are local to the neighboring community of nodes and thus the trust scores are not global.

ACN: How secure is the NEM platform compared to others (e.g. Nxt, Ethereum, Ripple and various Bitcoin protocols like Counterparty and Omni) ?

NEM: Security is relative and rather subjective. Cryptography itself is a proven technology. Cryptography as it is applied to blockchain is a new branch of application for cryptography. Given its 8th year of existence, the blockchain is undeniably proven to be immutable and irreversible. On that basis, NEM is not reinventing the wheel but instead innovating on it. Theoretically speaking (until it is proven otherwise), NEM is as secure as it should be as a blockchain.

Security in terms of blockchain forking (therefore double spends) has been tested vigorously for more than 9 months. Our other means of showing or proving its robustness is the amount of unit testing that we have been doing, which, arguably is one of the more rigorously tested crypto initiative today (with over 2 million transactions on our test network). On that count, it is safe to say that NEM is one of the most secure solutions in the industry.

Our Proof-of-Importance algorithm as a means of harvesting (mining) was also subjected to intense tests, including running a competition to game it. It has come out unscathed in the tests and competition.

Finally, although unlikely to happen–as it costs money to spam–we have also designed into the solution a transaction anti-spam mechanism.

Overall the design team has been very happy with the outcome.

ACN: What kind of roles does NEM China have besides translating a lot of your documentation? Has the Chinese community contributed to development of the platform?

NEM: The Chinese involvement today is very much just translation and promotion of NEM in China. We are looking at seeding awareness for a start. In moving forward, we want to encourage and call upon mainstream developers to make use of our platform and ecosystem to build real world applications upon it. This will not only be confined to the Chinese market, but will be for the world at large. Creating great applications will definitely attract great developers to join the fray in improving the NEM solution platform, which is the ultimate intent of NEM.

ACN: How large is the NEM community in terms of developers, participants, countries, etc.?

NEM: The NEM initiative had the biggest number of stakeholders in its time on a fixed quantity issuance (we don’t call it pre-mine, because it was never mined, it was created instead). We had about 3,000 stakeholders initially, but this was cleaned of socks. The final number stands at around 1,500 users today, still a very well distributed number.

Participants are from all over the world as this is a global initiative. The number of people working on this initiative is closed to 70 members, many of whom are involved in marketing, testing, translation and some technical contribution. We have 5 good programmers working on the solution “full time” despite having to work on a day job. Some of these developers are world class developers as demonstrated by the code they write and unit tests that they carried out, including documentation (e.g.,

ACN: What is the next phase after the launch you just had?

NEM: Develop smart property tiles, improve APIs for platform integration, develop smart business rules, and work on the Asset Exchange.


The native currency of NEM is XEM. At launch, NEM created 8,999,999,999 XEM coins and distributed them to almost 1,500 people. Some XEM coins were put aside for rewarding future development, setting up a Decentralized Autonomous Organization (DAO), marketing, establishing a silver coin project to provide NEM founding members with limited edition silver XEM coins, and a fund that will help create a sustainable loop so that XEM coins aren’t traded back and forth for fiat. According to the NEM team, the extra funds will not be used for bonuses for NEM developers or key members.

As of 8 April 11:30 Hong Kong time, NEM (XEM) is ranked 14th on CoinGecko’s cryptocurrencies chart, and has a market capitlization of nearly $2.3 million, a 24 hour liquidity of 56.28 BTC, and a public interest ranking of 43% or around 13th on the chart.

For the NEM team though, XEM is only an incidental part of the NEM ecosystem as NIS and NCC together are key components of the decentralized blockchain platform. Future releases will apparently include smart property tiles, a decentralized asset exchange, smart contracts, and more applications that utilize NEM’s core blockchain technology.

NEM believes that another important feature of its platform is that the NEM architecture enables the use of “thin clients” that utilize NEM’s remote NIS feature. This feature allows for a broad range of devices and opens up access to NEM to a wider audience by allowing full NEM ecosystem functionality on extremely low-cost, low-power devices, like mobile phones, without any intermediary third parties required.

The team behind NEM notes that the platform is designed for simple system integration, which can enable applications like high frequency exchange trading, real-world financial integration including stocks, derivatives, options, and forex trading, social media and social networking, enhanced and user-friendly mobile applications, and many other applications.

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