DEFINITION of 'NEM'

NEM is a cryptocurrency and blockchain technology company launched in 2015. NEM is able to process transactions more efficiently than other networks, and is designed to compete with online payment processors.

BREAKING DOWN 'NEM'

Cryptocurrency developers can either fix supply at a specific number, as bitcoin does, or not, as Ethereum does. In either case, developers have to determine how to release altcoins into the market. Most release altcoins over time, either through a fixed schedule or a percentage.

Bitcoin, for example, halves the number of coins generated per block roughly every four years. Altcoins are released as a reward to miners, who use software to add transaction records to a blockchain.

NEM has taken a different approach to supply when it comes to its cryptocurrency, called XEM. When it was launched, all altcoins were distributed to its members. These members, in turn, distributed XEM to their communities. XEM can be earned by processing transactions, but there are no miners. Instead, there are “harvesters.” 

Local Versus Delegated Harvesting

Harvesters are paid transaction fees for generating blocks, since they aren’t creating new coins. Account holders must have a certain amount of XEM before being able to harvest, and an even larger number of XEM in order to become a super node.

There are two types of XEM harvesting: local and delegated. Local harvesting occurs when a harvester’s computer is running, as long as it is not using one of NEM’s remote servers, called NIS (NEM Infrastructure Server). The account’s private key is passed to the local NIS, and the key is signed into any blocks that are generated. This means the key remains with the harvester’s computer at all times.

Delegated harvesting is used by account holders that are connected to a remote NIS. This approach costs NEM altcoins to initiate, as it begins a new blockchain transaction. The account holder’s computer does not have to remain running once delegated harvesting has been enabled

The use of delegated harvesting, coupled with NEM having released all XEM into the market, means that it takes less electricity to process transactions. Bitcoin mining, for example, involves solving ever-increasing difficulties, which in turn requires faster computers and more power. Because NEM transactions are more efficient, payments are sent and confirmed faster than with bitcoin. This makes it faster and more scalable.

While NEM can process transactions more efficiently and has lower transactions costs, the transactions are traceable (unlike with bitcoin). This may turn off proponents of total privacy, who want to use cryptocurrencies as a way to anonymize their financial dealings. It may, however, allow NEM to compete more directly with online payment networks, such as PayPal or Visa.

Governance decisions are based on a concept called Proof of Importance, or POI. Owners of a large number of NEM are able to participate in voting, and the more altcoins that an owner has, the more votes he has. The idea behind this weighted voting approach is that individuals who own a lot of NEM have a vested interest in decisions that will improve NEM. (See also: The 5 Weirdest Cryptocurrencies.)

NEM’s blockchain software has also been used to create private blockchains for commercial ventures. Some of the features of its public blockchain technology are removed when used privately, which can increase the number of transactions dramatically.

RELATED TERMS
  1. Altcoin

    Altcoins are alternative cryptocurrencies launched after the ...
  2. Harvest Strategy

    A harvest strategy is a plan in which investments in a product ...
  3. Shitcoin

    Shitcoin is a pejorative term used to describe an altcoin that ...
  4. Blockchain

    A blockchain is a public ledger of all cryptocurrency transactions. ...
  5. Smart Assets (Cryptocurrency)

    Smart Assets are virtual representations of both physical and ...
  6. On Chain Transactions (Cryptocurrency)

    On-chain transactions occur on the cryptocurrency blockchain, ...
Related Articles
  1. Tech

    Bitcoin and Cryptocurrency Prices Recover After Coincheck Hack

    Bitcoin prices moved sideways as the markets absorbed developments in the stunning hack of Japan's Coincheck exchange.
  2. Tech

    Bitcoin vs. Bitcoin Cash: What's the Difference?

    We break down the difference between Bitcoin and Bitcoin Cash, and what it might mean for the future of cryptocurrencies
  3. Tech

    Bitcoin Price Falls, NEM Crashes After Japanese Exchange Halts Trading

    Criticism against bitcoin and Ripple intensified as bankers and world leaders piled on to cryptocurrencies at Davos.
  4. Tech

    Bitcoin Price and Altcoins Fall After Highs This Week

    The price of bitcoin, Ripple, bitcoin gold and other altcoins fluctuated wildly again this week.
  5. Tech

    Bank of America, JPMorgan Call Cryptocurrencies a Threat

    Satoshi told us bitcoin would allow payments to be sent "without going through a financial institution." Now big banks are listening.
  6. Tech

    IBM Offers Open Source Blockchain Code (IBM)

    International Business Machines Corp. (IBM) announced Tuesday that it would donate 44,000 lines of blockchain​ code to the Hyperledger Project, providing an open source foundation for building ...
  7. Trading

    4 Top-Performing Alternatives to Bitcoin

    Bitcoin's blockchain technology has spawned a new ecosystem of “altcoins.”
  8. Trading

    Bitcoin Cash: The New King of Cryptocurrency?

    Investors are wondering if the popularity of Bitcoin Cash poses a serious threat to the Bitcoin throne.
  9. Tech

    Speed Is Essential for Bitcoin Platforms

    Why does speed especially matter with Bitcoin technology? It's because Bitcoin platforms using blockchain need to meet the needs of users in times of high volatility.
  10. Tech

    Is Bitcoin Going to Self-Destruct?

    The digital currency keeps climbing to record heights, but can it maintain the momentum?
RELATED FAQS
  1. What Does the Bitcoin Blockchain Record?

    Read about the bitcoin blockchain, a public ledger shared among all bitcoin users that records the information of every single ... Read Answer >>
  2. Why do Bitcoins have value?

    Performing with transactional anonymity, Bitcoin has value as a private digital currency, investment tool and social networking ... Read Answer >>
Hot Definitions
  1. Quick Ratio

    The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.
  2. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
  3. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
  4. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
  5. Relative Strength Index - RSI

    Relative Strength Indicator (RSI) is a technical momentum indicator that compares the magnitude of recent gains to recent ...
  6. Dividend

    A dividend is a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.
Trading Center