Blockchains 101: NEM

3 min readDec 21, 2020

Built like internet

Introduction

XEM is the cryptocurrency of the NEM Network, a dual layer blockchain having similarities with Ethereum but developed in Java. NEM relies to a Proof of Importance (PoI) consensus with new XEM being obtained through a process called harvesting, similar to Staking.

NEM (New Economy Movement) Network has launched in March 31 2015.

Description

Erik Van Himbergen, Jeff McDonald, Leon Yeoh and Lon Wong created the NEM.io Foundation in 2015 and emitted the first XEM mostly through giveways via the Bitcointalk forum as a “call to participation” in order to build up an initial network of Stakers.

In late 2018, the group launched the NEM Blockchain Hub, an incubator program to incentivize projects for building on NEM as well as NEM Ventures (VC).

NEM works on a dual layer blockchain as an operating system and virtual machine (VM), with similarities with Ethereum and NEO/Gas but built to mimic the current internet with domains and subdomains. Other main characteristics include:

Hybrid Staking (harvesting) accounting for balance, time held and participation with a minimum required balance of 10,000 XEM and a vesting schedule.
The Network is built with Java and communicate via API calls, meaning any language can interact with its blockchain.
Processing Nodes (validators) are selected and verified via a custom reputation algorithm (Eigentrust++).

The NEM Network also supports Multisignatures (multisig), is open source, and has been developed partially by the blockchain community.

Hack

In January 2018, hackers breached the Tokyo-based Exchange Coincheck through an exploit and stole 523 million XEM stored by the exchange in a hot wallet, worth around $530 million at the time.

The hack lead to an internal crisis for NEM, leading to a restructuration of the development team and the resignation of its Founder Leon Yeoh as president in April 2018 (later Founded ProximaX).

Hackers have been identified and prosecuted since then, and the funds partially recovered.

NEM Foundation update to community after near-bankruptcy announcement

Governance and near bankrupcy

In January 2019, the NEM Foundation made a public announcement bad Financial results and a possibility for a bankrupcy of the Foundation. To overcome it, it proposed a community vote via validators to unlock 160M XEM held in other wallets and initially allocated for other purposes (3B XEM was still allocated to diverse other Funds).

The community eventually responded favorably to the proposal, saving the NEM Foundation.

The price of XEM dropped 20% at the announcement date before recovering.