The best way to think of NEM is that it’s THE Japanese version of Ethereum. Like Ethereum, NEO, and Waves, NEM is actually a blockchain-based platform for financial services that includes a cryptocurrency.
The centerpiece of NEM is not the cryptocurrency, but a Smart-Asset blockchain that sounds a great deal like Ethereum’s Smart Contract. Both are efforts to create transparent, secure, encrypted, and tamper-resistant digital investments on the blockchain.
Both Smart Contracts and Smart Assets are designed to create permanent records of financial transactions that cannot be erased. Beyond that NEM is designed to be a blockchain-based financial services platform for business.
Like Ethereum, the NEM blockchain is supposed to work like the internet providing both data storage and data transmission. NEM’s creators hope it will become compatible with existing mobile apps, business infrastructure, and computer programs.
The long-term goal is to create a large-scale ecosystem in the cloud that will provide a wide range of blockchain-based services and applications. The first of those applications is the XEM cryptocurrency.
Meet the NEM Cryptocurrency XEM
The NEM project began with a cryptocurrency spun off from NXT, another altcoin in 2015. During the fork, the NEM developers decided to rebuild the cryptocurrency as an Ethereum-like solution.
The cryptocurrency used in the NEM blockchain is called XEM. A good way to think of XEM is as a piece of software that operates on NEM’s operating system. Like Ethereum, XEM can be used on or off the NEM blockchain and traded or bought and sold like other altcoins.
XEM has a number of interesting features including harvesting which is supposed to be an alternative to cloud-based mining. Theoretically, harvesting is supposed to enable anybody with access to the NEM blockchain to generate new XEM. That creates an Ethereum-like altcoin with no Maximum Supply, which means the potential number of XEM is unlimited.
That creates a number of problems including vulnerability to hyperinflation and inflation which can result from oversupply. The danger is that if XEM becomes widely accepted greedy people would simply generate unlimited amounts of it and drive the value down to zero.
This is similar to the hyperinflation that occurs when politicians use the government printing press to make unlimited amounts of money. The money eventually becomes worthless and the economy collapses in the worst case scenarios, such as the one occurring in Venezuela right now.
How much is XEM Worth?
Despite all the hype about it, XEM is not worth that much. On November 27, 2017, it had very low Coin Price of just 22¢.
The price was low because of a very high Circulating Supply of XEM, 8.99 billion on November 27, 2017. That led to a low price because XEM had a Market Capitalization (Market Cap) of just $1.98 million on November 27, 2017.
Nor was there much interest in XEM, on November 27, 2017, Coinmarketcap reported that it had a Market Volume of only $12,096.9. That meant just $12,096.9 was invested in the currency on that day. In contrast, $1,388,730 million was invested in Ethereum (ETH) on the same date.
These numbers indicate that there is very little interest in XEM despite all the hype about it. They also suggest that XEM has a long way to go before it can be called a credible competitor to Ethereum.
Ethereum had a Market Cap of $46.233 billion and a Market Volume of $1.388 billion on November 27, 2017. That means there is real market interest in it, there appears to be little or no market interest in XEM. Although like XEM Ethereum has no Total Supply which led to a Circulating Supply of 95.993 million on November 27, 2017.
This means XEM is cheap, but it is not necessarily a good investment because there might be no market for it. Investors might be better served by Ether (Ethereum) for which there is a lot of market interest right now.
NEM as a Past Investment
NEM was one of the best returning crypto investments if you got in during the ICO stage several years ago. You would have seen staggering levels of return at current NEM valuation.
So who is Behind NEM Anyway?
There is another fascinating similarity between NEM and Ethereum; both cryptocurrencies are maintained by private non-profit foundations.
Ethereum was partially developed and is promoted by the Ethereum Foundation, based in Zug, Switzerland. Ethereum creator Vitalik Buterin serves on the Foundation’s governing board or council.
The NEM Foundation is based in Singapore but it has members all over the world. Like the Ethereum Foundation, NEM is an open sourced effort to build a blockchain-based financial services platform and other solutions.
The ultimate goal of both organizations is to create a “Linux of blockchain” an open-sourced operating system that will become the standard architecture for blockchain technology. The hope is that corporations, banks, and other organizations will use the operating system to build solutions and systems, the way companies and other entities use Linux to build internet solution.
Google used Linux to build its Chrome browser and Android operating system for smartphones for example. Such open-architecture systems are designed to make it easy for people to create apps to operate in the ecosystem.
What is the Purpose of NEM?
An interesting goal of NEM is to create a blockchain ecosystem that can be used by universities and other educational institutions. There are also plans to create a blockchain for governments which might lead to official cryptocurrencies that would be widely used and worth a lot of money.
Some uses for government blockchain that might generate big revenues include tax collection, benefit payments, and use in national cryptocurrencies. Governments and central banks in several countries including the People’s Republic of China and Estonia are researching the possibility of national cryptocurrencies.
The problem with NEM is that no government appears to actually be working it, at least officially. A major problem with government cryptocurrency efforts is that a lot of them might be disguised as private enterprises.
An interesting possibility here is that the NEM Foundation is a front for some government or central bank. Officials might use a front in order to avoid popular criticism if the press or politicians discovered they were trying to develop an altcoin.
The Problem with XEM
The obvious drawback to XEM is that almost no merchants are accepting it right now. That means you would have to sell XEM coins if you needed money for some other purpose.
There appear to be no XEM crypto-debit cards available and few wallets to convert it into other currencies. A major drawback to XEM right now is that you will have to use Bitcoin to purchase it.
XEM can be purchased with Bitcoin at a variety of exchanges including Poloniex, BitTrex, and HitBTC. There is a full list of those exchanges available at the NEM website.
Unfortunately, there are only a handful of exchanges that will let you purchase XEM with fiat currencies. None of the major U.S. or European exchanges sells XEM, instead to buy it with U.S. dollars you will have to go to such lesser exchanges as LiteBit.eu, and Changelly.
Another big drawback to XEM is that it can be only purchased with three fiat currencies; the U.S. Dollar, the Japanese Yen, and the Euro. Oddly enough, XEM cannot be bought be with British pounds. There is one major advantage to XEM – it is one of the few cryptocurrencies that can be purchased with yen.
This means that XEM would not be a good cryptocurrency for traders, speculators, and persons looking for an investment. Another obvious drawback is that XEM seems tied to the economy of one country: Japan. That defeats one of the major purposes of cryptocurrencies to create a medium of exchange not vulnerable to the problems of the national economy.
Many people are buying Bitcoin and Ethereum, because they do not trust their countries’ fiat currencies or the governments that issue them. A lot of cryptocurrency geeks also distrust central banks for a wide variety of reasons. Others fear that stock market downturns, inflation, and real estate bubbles might sink their national economies.
Are XEM and NEM an Experiment?
Some of the features on NEM’s website raise the intriguing and bothersome possibility that XEM and NEM are an experiment to create new financial technology rather than a solution.
An example of this is the nanowallet a browser for XEM. The Nanowallet lets you access NEM’s Mainnet or regular network which uses regular XEM, and something called the Testnet which uses test XEM. That sounds like somebody is using XEM to monitor user’s behavior to gather data.
The most obvious purpose for such data would be to monitor users’ behavior in an attempt to create a better cryptocurrency or blockchain. This should teach cryptocurrency users to be leery of new products and solutions. The real purpose might be to track users or at least monitor their behavior.
Investing your money in an experiment might not be a good strategy. A smarter move might be to watch XEM and see if it gets widely adopted before putting your money in it.
NEM vs. Ethereum
At the end of the day, XEM seems to have no advantage over Ethereum. A wide variety of banks and large companies are openly and actively experimenting with Ethereum.
There are actually two competing efforts to commercialize Ethereum, the Hyperledger Project, and the Ethereum Enterprise Alliance. A wide variety of big companies and major financial institutions are participating in those efforts. For example, America’s largest bank JPMorgan Chase, Cisco Systems, Airbus, CME Group, Intel, IBM, Hitachi, Fujitsu, Daimler (owner of Mercedes Benz), and American Express are members of Hyperledger.
The members of the Ethereum Enterprise Alliance (EEA) include the Bank of New York Mellon or BNY Mellon, Centra, Credit Suisse, British Petroleum (BP), Cisco Systems, Deloitte, Intel, ING, MasterCard, Samsung, Santander, TenX, Toyota, UBS, and CME Group. There is no such list of members at NEM’s website, which seems to indicate big business is not interested in.
It looks as if Ethereum is winning the race to create a widely used cryptocurrency and a universally-accepted blockchain solution for financial services. Investors would obviously be better served by the solution that big business and big banks are showing interest in.
It should be noted that none of the financial institutions or companies participating in the EEA or Hyperledger Project appears to be accepting Ether payments. Nor have any of them announced plans to accept Ethereum in the future.
Beyond that, no government seems to be participating in the EEA or Hyperledger. That alone might limit Ethereum’s value at some point in the future.
How to Think of XEM
The best way to think of XEM is a potential technological solution rather than a currency. Since it is not widely accepted XEM is a purely speculative investment that might never pan out just like a technology stock. That means only people with extra cash they can afford to lose should invest in it.
Most investors would be better served by Ethereum which is widely accepted as a cryptocurrency right now. There are even a number of crypto-debit cards that are supposed to help you make purchases with Ether in the real world planned. Some of those cards even feature the capability to make fiat currency cash withdrawals of funds converted from Ethereum at cash registers and ATMs.
Average people should invest in Ethereum, and ignore XEM until the market starts showing real interest in it. Until then XEM and NEM will be nothing but interesting experiments about which there are too many unanswered questions.