A Critical Evaluation of NEM and its Catapult Update
Often called a sleeping giant NEM is moving slowly but has some interesting aspects that we’ll discuss in the article below.
NEM: A SLEEPING GIANT?
Established in 2014 NEM is now worth $2 billion as a foundation and is one of the biggest technology foundations that is both non-profit and completely self-funded. NEM‘s native currency is called XEM and its foundation is centered in Japan and Malaysia. NEM is taking aim at companies, especially banks and other big corporations, by offering easy integration and compatibility with their current systems. Often called a sleeping giant NEM is moving slowly but has some interesting aspects that we’ll explore in more detail in the post below
The most promising and long-awaited update of NEM is called Catapult. It should start the new era of NEM 2.0, however, currently, not all things are going well. Promised to be released before the end of 2017, it is still in beta and hasn’t been released on the public chain yet. Surprisingly, the interview with Lon Wong, the president of NEM foundation, where he speaks about the release of Catapult, is no longer accessible (however you can still find the transcription on the Internet). The same goes for Catapult’s whitepaper which was available several months ago but now displays an empty page. Still, why should we care about the Catapult update?
Firstly, with this update, NEM will be able to achieve over 1000 transactions per second (TPS). It is huge compared to the current 7 TPS on the Bitcoin or 15 on the Ethereum network. However, other projects are also preparing their scaling solutions. Bitcoin is working on Lightning Network implementation and Ethereum is focusing on Sharding & Plasma upgrades (which will allow them to reach 1 million TPS). Secondly, NEM will be a multiple ledger solution allowing for the holding of multiple assets (one account will be able to hold USD, EUR, Gold, Interest Rate Swap, ETFs, etc). Users will also be able to reverse their transactions even after the full audit trail (decentralization fans will probably view this as a disadvantage).
Catapult will also offer some interesting integrated functionality like namespaces, mosaics (ability to create your own token), messaging and multisignature wallets. NEM is trying to be developer friendly by allowing devs to use any technological combination through their API. Giant monolithic systems cannot easily be converted and adapted to today’s new blockchain standards. For instance, it would take ages for banks to convert all of their centralized logic into Ethereum smart contracts. And then ages more to test to make sure everything is 100% safe and secure. NEM understand this need for bulletproof security and has an integrated a spam protection and node reputation system (Eigentrust++).
PROOF OF IMPORTANTCE: PoI
NEM’s consensus mechanism is called Proof of Importance (PoI) where a higher importance score means a better chance of harvesting the next block. However, to get a PoI score, you need 10‘000 XEM vested (the more XEM you have delegated, the higher the chance you’ll have of hitting a block), otherwise, your PoI score is 0. This amount can be changed in the future. When a new block is created, harvesting account gets the fees (no new coins are created, XEM has a fixed total supply of 8‘999‘999‘999 coins). With delegated harvesting, you can even turn off the PC and no extra hardware is required. This is much more environmentally friendly, especially compared to the Proof of Work (PoW) algorithm which is used by Bitcoin and other popular currencies (Ethereum is currently migrating to Proof of Stake (PoS)).
There are certain things that frighten off some Blockchain enthusiasts and investors. NEM has no official roadmap, the updates are delivered without any notice and very little information is passed to the community. Overall, there is no active communication with the community on channels like Slack (around 200 members) or Reddit (about 18‘000 subscribers). Currently, there are only a few secure ways to store your XEM: NEM NanoWallet, NEM Mobile wallet, and Trezor (hardware wallet). Other popular wallets like Exodus have not yet implemented support for XEM.
Speaking about the technology side, there will be no private transactions (this could be viewed as both positive and negative and may be implemented in the future), it is not a Turing complete, and the smart contracts are off-chain (which increases centralization). Their own blog posts like this: „Ethereum Versus NEM – The Obvious Choice“ does not add the reputation for the project, as criticizing another project and putting your own on the top in your own blog post is not the right way to defeat the opponent. NEM should put efforts into delivering their project and then let the community decide.
The lack of transparency and broken promises have had a serious impact on NEM and it clearly reflects on CoinMarketCap. Ranked #7 in January, NEM rolled down to #16 in July. It’s worth mentioning that at the time of writing, most of the daily trading volume (almost 30%) is coming from the exchange called Zaif which is based in Japan. Although we must take into consideration that the hack of Coincheck exchange (when $500 million worth coins of XEM were stolen) also had serious implications for the price of XEM. It was Coincheck that was hacked (not NEM), but unfortunately, XEM was the only cryptocurrency that was stolen.
Because NEM is mostly targeting the finance industry, it could still co-exist with platforms like Ethereum, EOS, NEO, Cardano, etc. Also, if they are thoroughly testing everything and do not want to give fake announcements just to boost the price, in the end, it will benefit everyone (especially those real HODLers), but we cannot make assumptions on what is really happening. Interesting partnerships and extensions may strengthen the ecosystem and help to wake up the sleeping giant (let‘s hope it won’t be too late). One of the most promising partnerships is probably with a social media app called WeChat which has 1 billion daily active users. The most promising extension could be ProximaX, which may also help to kick things off. The future is unpredictable. Let’s see what it brings to the NEMbers and let’s hope that this sleeping giant wakes up soon.
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