NEM's Smart Asset System: What You Need to Know
Jul 20, 2018
NEM, which was originally meant to stand for New Economy Movement, is a blockchain platform based in Singapore and launched on March 31, 2015. NEM’s native token is XEM, and unlike many other newer ERC20 coins, this platform was written completely from scratch by the NEM.io team.
NEM’s platform can be used to create individual cryptocurrency tokens and can also facilitate ICOs. However, NEM’s real purpose is for building a so-called Smart Asset System. The Smart Asset System gives users the ability to create and implement their own unique and customizable smart contracts. This structure permits developers to build applications on NEM’s enterprise-oriented blockchain.
Smart Assets constructed on NEM’s blockchain utilize the following interconnected components:
- Addresses: unique and constantly updated “containers” for assets, i.e. a user’s account with a coin balance. Can also represent contracts, business records, property deeds, packages to be shipped, etc., these are called mosaics. Addresses are programmed into smart contracts on the blockchain do define how they control and interact with each other.
- Mosaics: fixed assets held within addresses. Mosaics can represent any asset, from stock shares, coins, and signatures to other currencies, reward points, and votes.
- Personalized Namespaces: personal places for your enterprise and assets on the blockchain. Similar to website domain names in that you can create sub-namespaces (subdomains) to make your assets secure and unique.
- Transactions: actions taken on the ledger. Can be as simple as sending messages, transferring mosaics between different addresses, or even the transfer of ownership of the addresses.
As stated above, NEM’s blockchain is extremely adaptable and has endless applications. Governments and banks can use it as their central ledger, keeping a secure record of all documents (i.e. receipts, birth certificates, etc.) and transactions. General businesses can use it for accounting purposes, loyalty programs, and even for managing their supply chain logistics. Regarding transactions between different entities, digital assets such as files or can be transferred from their own private enterprise network, through NEM’s public blockchain, and then to the recipient’s own private network, all done with the utmost security. What makes NEM even better for enterprises is the fact that transactions are 100% traceable, NEM does not use private transactions. By doing this, security features including buyer/seller protection can be applied, increasing security.
NEM’s unique flagship consensus algorithm is called Proof of Importance (PoI). Other coins like Bitcoin (BTC) and Ethereum (ETH) use Proof of Work (PoW), and Proof of Stake (PoS) respectively. PoI solves the energy usage issues of PoW by not requiring large-scale mining hardware. PoI also solves the issue PoS has where only accounts with the largest amounts of coins can validate blocks. PoI does this by incorporating other factors besides the account’s number of coins.
PoI is the algorithm used to designate which account has the highest probability of harvesting (mining) the next block, called Delegated Harvesting, the technique used for validating new blocks, considers the accounts’ XEM balances. XEM balances are split into two groups: unvested and vested. When an account is deposited XEM, these coins contribute to the account’s unvested balance. However, when an account withdraws XEM, the coins are proportionally taken from the unvested and vested groups in order to maintain the unvested to vested ratio. Every 24 hours, or 1,440 blocks processed, 10% of the unvested coins stored in the user’s Nano Wallet become vested, and only after the user vests 10,000 XEM can they be considered for harvesting. These participants are given a PoI score ranking them in order of “importance.” Those who have higher importance scores are therefore given higher probabilities of harvesting blocks. The PoI score is determined by three things: the amount of XEM vested in the wallet & how long it’s been there, the user’s activity on the network, and the size and frequencies of the user’s last 30 day’s transactions.
Supernodes, high-performing and reliable nodes, are employed to complete blocks on the network so other users and apps don’t have to process the entire blockchain when making transactions, the supernode does it for them. Supernodes are required to have at least 3,000,000 XEM and must run 24/7. Participants can then link their account to one of these supernodes, lend his PoI score to the supernode to increase chances of being chosen, and the supernode uses its own processing power to validate blocks on the participant’s behalf. This method makes harvesting XEM 100x less power-consuming than Bitcoin (BTC) mining.
NEM’s Eigentrust++ algorithm maintains this ranking system, balancing the workload throughout the network, and can even remove non-contributing nodes to increase the network’s efficiency.
NEM (XEM) is not intended to be used as a digital currency like coins Bitcoin (BTC), Litecoin (LTC), or Zcash (ZEC) are. XEM tokens are however used for the network’s transaction fees when people and institutions use the platform sending Smart Assets throughout.
- 8,999,999,999 circulating XEM supply
- 899,999 maximum theoretical accounts with non-zero importance scores
- 0.01% fee per transaction
- ~3,000 transactions per second
- ~20 seconds per transaction confirmation