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How does NEM works? – Which Blockchain

The NEM blockchain platform has a number of features that distinguish it from many of the other cryptocurrencies out there, such as built-in messaging and multisignature transaction support. It also employs an innovative consensus protocol known as proof-of-importance (PoI), which provides some some advantages in efficiency versus proof-of-work (PoW) protocols, such as the one that secures transactions on the Bitcoin blockchain. While PoI might at first glance seem similar to proof-of-stake protocols, like the one Ethereum employs, it is actually quite different, having been designed to incentivize behavior that supports healthy activity and a more level playing field on the blockchain. Let’s look at some of the factors that influence PoI.

Vested vs. Unvested XEM

When an account on the NEM blockchain receives XEM (the native token), the cryptocurrency adds to the unvested XEM balance of the account. As time passes, and blocks of transactions are validated and added to the chain, that XEM balance gradually vests–more precisely, every 1440 blocks, 10 percent of the unvested balance moves to the vested balance. In practice, that means that after approximately one week from receiving XEM, about half of it will have vested. In two weeks time the percentage vested approaches 80%, then draws closer to 90% at the three-week mark.

When one account sends XEM to another, the transaction debits from both the vested and unvested XEM balances, the protocol having been designed to attempt to preserve the ratio of vested to unvested tokens. An account needs to have a minimum of 10,000 vested XEM in order to have a non-zero importance score, which is in turn necessary to have a chance of harvesting block rewards.


Accounts with at least 10,000 vested XEM can attempt to add new blocks to the chain, and will receive all of the transaction fees on that block if successful. This incentivizes harvesters to include as many transactions on each block as possible. The importance of an account, along with the difficulty of creating the new block and the time elapsed since the last block was added to the chain are all factors that influence the odds of harvesting a block. The higher the importance score of an account, the better the chances of harvesting.

NEM permits delegated harvesting, in which an account with a high importance score designates another account to form blocks and process fees on its behalf. The importance score of the original account is used, giving the delegated account better odds of harvesting.

Multisignature Transactions

Wallets with multisignature confirmation enabled require multiple private keys to sign off before sending XEM. The number of users required to authorize transactions from such accounts is stipulated in smart contracts stored on the blockchain. These tools help users secure funds from loss or theft, and also permit community accounts to regulate access to their funds, as a predetermined majority of users must agree to any transaction. The rules established by the contract allow for cosignatories to be added or removed according the criteria they have previously agreed upon.


NEM incorporates a messaging protocol that uses Bouncy Castle block cipher encryption. The message sender uses an algorithm that combines their private key and the recipient’s public key, along with a 16 byte initialization vector (IV) and 32 bytes of random data known as the salt to encode the message contents as a shared secret. The recipient uses the sender’s public key, their own private key and the salt to derive the shared secret, which is then decrypted using the IV, revealing the message contents.


The suite of features provided by the NEM blockchain protocol allows users to design customizable smart assets which can take almost any form. This allows enterprises to focus on creating the tools and functions they need, without having to worry about designing their own blockchain architecture.

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