This Cryptocurrency Doesn't Want to Beat Bitcoin, It Wants to Beat the Economy
The New Economic Movement created a cryptocurrency. Now they want to create an economic revolution.
Nemcoins. Image: NEM
Hoping to level the economic playing field, a group called the New Economic Movement (NEM) aims to develop a thriving and open digital economy that's outside of the realm of current power brokers. Powered by its new cryptocurrency, Nemcoin, NEM says it plans on building a "new economy based on the principles of financial freedom, decentralization, equality and solidarity."
The brainchild of UtopianFuture, the pseudonym of the individual or people behind the cryptocurrency, Nemcoin and the NEM movement is very much in its infancy. Conceived in January 2014, Nemcoin's creation was partly a response to the perception that Bitcoin had gone mainstream, especially after regulators began to signal their interest. UtopianFuture, as his name suggests, also professed the libertarian ideals that have found traction within the Bitcoin community.
Not much else is known about UtopianFuture, apart from organizational skills that helped him or her put together a team quickly, while also organizing thousands of stakeholders to join the fray. But UtopianFuture's ability to inspire and organize was soon overshadowed by revelations that he was controlling multiple BitcoinTalk accounts to attack other AltCoins. Soon after, he was gone.
NEM is a movement to create a new economy for the digital age.
None of this seems to bother Nemcoin's developers. In fact, Makoto characterized UtopianFuture's departure as planned. As with Bitcoin's creator Satoshi Nakomoto, UtopianFuture's sudden digital vanishing didn't cripple the movement. Too many people had already bought in.
Makoto, like the other NEM stakeholders, envisions Nemcoin as not so much as a coin but a "vibrant ecosystem." They weren't about to scrap all of the groundwork.
So, how do the developers think that NEM can do that? Two of the most intriguing arrows in NEM's quiver, as Makoto explained to me, are its Proof-of-Importance method of securing the network and the fact that it isn't mined like Bitcoin and Dogecoin.
To craft its economic ecosystem and secure the Nemcoin blockchain, NEM's stakeholders developed the concept of Proof-of-Importance as an alternative to Proof-of-Work and Proof-of-Stake, two other concepts for securing relationships in a decentralized network.
In Proof-of-Work, a user earns coin and transaction fees by mining coins—they are rewarded for their investment in the ecosystem—whereas in Proof-of-Stake users must own a certain amount of coins to mine new ones. Neither mining method really encourages users to spend their coins.
Proof-of-Importance is fundamentally different. This method uses information about how much and who users transact with in order to determine how important they are to the overall economy. So, as Makoto put it, it's not enough to just have lots of Nemcoin. Users really have to transact with others to build up a healthy economy. (A forthcoming whitepaper will detail the specifics of Proof-of-Importance and other NEM concepts.)
NEM's Proof-of-Importance concept might be its greatest strength. It certainly sets it apart from Bitcoin, which is dominated by early adopters, many of whom hoard instead of spend.
"With Proof-of-Importance, we hope to rectify [hoarding] by rewarding those who support the NEM economy by transacting with others," Makoto said.
As for the distribution of Nemcoins, approximately 75 percent of the coins were doled out evenly among close to 3,000 stakeholders. All told, NEM will be created with a maximum of 4 billion units.
"By evenly distributing NEM among stakeholders, it is guaranteed that no one has a huge advantage over others, since each stake holder only controls 0.025 percent of the currency," Makoto said. "Decentralization like this has never been seen before in the launch of a cryptocurrency. The remaining 25 percent of NEM is being used to fund marketing and development, with 10 percent of that usable after NEM V1 is launched."
Makoto believes that this and other initiatives will help NEM surpass Bitcoin. While the initial even distribution of coins for a level playing field is inspired, that balance might not hold. It's a free market, so at some point a few users will be able to control a lot coins, though exactly how NEM will play out is hard to predict.
Another big problem with cryptocurrency's popular viability, as Makoto sees it, is that it is too complex for the average person to use.
"The man on the street doesn't care about the technology of making payments anymore than a car driver cares about the alloys of metal used in their engine," he said. "So long as everything works, the technology should be transparent. By focusing on simplicity and technology that 'just works,' NEM can break out to the masses through a user-experience revolution."
What will the NEM user experience be like? In a Medium post, NEM's de facto publicist xtester wrote that many projects can be launched with the NEM ecosystem; anything from e-commerce sites and secure messaging platforms to social media and digital asset management. Makoto elaborated on this by saying that the NEM cryptocurrency is comprised of a NEM Infastructure Server (NIS) and NEM Community Client (cryptocoin wallet), which will theoretically allow it to evolve into a digital economy.
"In the future we will have a decentralized asset exchange and other features that can be used to create platforms on top of NIS," he said. "NEM has a secure and distributed peer-to-peer blockchain, so it could be used to build anything that requires a distributed ledger."
Granted, this is similar to the functionality and flexibility of Bitcoin, but at this point it's hard not to replicate its blockchain in creating alternative cryptocurrencies. NEM's novelty, as noted above, lies elsewhere.
Makoto noted that NEM's usage needn't be limited to financial instruments. It could apply to other areas of life as well, such as notarizing documents with a timestamp for everyone to see, or sending secure and encrypted messages to friends and family.
The NEM asset exchange will also be designed so that it can, like eBay, support the trade of real, physical goods. Ambition is one thing, but how this asset exchange will play out in reality is quite another.
As xtester explained in his Medium post, users can participate in NEM in a variety of ways. If there expertise lies in development, they can contribute to the NEM code. If one has a talent for marketing or graphic design, they contribute in those fields within the NEM community.
Those with special entrepreneurial spirit can help with NEM's organizational tasks, or by encouraging its adoption in new e-commerce platforms. For those unsure of how to begin working with NEM, xtester said they can participate in "swarms" that create economic activity. Think of them like investment groups.
NEM uses Eigentrust++, an algorithm for establishing trust on peer-to-peer networks. If some peers become hostile and purposely send false data around the network, then Eigentrust++ should theoretically exclude those peers from the network. It also applies a trust rating to peers in a way that is hard to scam.
"To our knowledge, NEM is the only cryptocurrency to include an advanced algorithm like this to protect the network," Makoto said.
What's next for for the crypto movement? In September, NEM Beta will go live, with official release set for November. More features, such as the colored coins will be added during the NEM roll-out.
Makoto said that there are plans for AltNemo, a company that will develop mobile apps and a fast trading exchange for NEM. AltNemo will, according to Makoto, be "vital to jumpstarting the NEM environment."
NEM developers' ideas and ambitions are big, but the task will not be easy. Very few people are aware of NEM's existence at this point, and it will have to compete with Bitcoin and Dogecoin's familiarity in the minds of cryptocurrency users.
"There is a huge ocean of altcoins being released right now," Makoto said. "We hope that through innovative technology and by creating a movement, rather than just another altcoin, that NEM will not only attract many users, but that we will be able to drive a positive change in the world's economy."