Ever since the dawn of currency, currency was controlled by a central entity. This central entity could decide to do whatever it wanted with its currency. It could weaken it, strengthen it, take it away from you, anything. The money was only valuable because this central entity said it was. The sad part is, we're still using this form of currency today - in the form of your dollars, euros, yen, or anything of that sort.

In 2008 a man calling himself Satoshi Nakamoto decided he wanted to fix all this, and created the original cryptocurrency - Bitcoin. Bitcoin was a great and innovative idea, and it created the idea of the blockchain. The blockchain is a public ledger of every transaction that ever occurred, and as such could be verified by anyone.

Now it's 2016, and there are hundreds of other cryptocurrencies out there, so I'm going to explain to you the pros and cons of the larger ones, and why XEM is really the way to go.

Bitcoin Logo


Bitcoin was the original. As we have seen, the original is not always best - but it still was innovative. It uses a public ledger called a blockchain for security, but that's about the only security measure added.

The ideas in Bitcoin are applied to both Ethereum and NEM, and a simple rundown of all of this can be found in this video, created around the time bitcoin started becoming popular.

The ideas behind bitcoin have been used in every cryptocurrency since, so it’s important to understand how a transaction in Bitcoin works.

Transaction Infographic

As far as all the advantages of Bitcoin, NEM and Ethereum both do whatever Bitcoin can, but better.

Ethereum Logo


If you want to know how a transaction works in Ethereum, look at the infographic about Bitcoin, it works the exact same way.

Ethereum is really big right now because it includes two main features over Bitcoin.

  • Smart Contracts allow you to write applications in the blockchain that usually run as programmed.
  • 'ASIC-proof' algorithm makes it profitable to mine for people without expensive hardware.

The asic-proof algorithm is still proof-of-work however, and so it suffers from the same exact pitfalls that Bitcoin suffers from.

The cryptocurrency community really loved smart contracts for a while. The way it was advertised was absolutely brilliant. "World Computer." "Applications that run as programmed with no possibility of downtime." Except, maybe it works a little too well.

Recently the largest smart contract in Ethereum was hacked, due to a fatal flaw with Solidity and how smart contracts work. This guy explains it well, which notes that if there is a smart contract vulnerability (which we just saw happen in an audited smart contract) - the hacker can legally take off with the funds. This is absolute heaven for a hacker.

NEM Logo


NEM uses PoI, also known as proof-of-importance. This means that (unlike Bitcoin and Ethereum), NEM is environmentally friendly, and more secure. Unlike mining Bitcoin and Ethereum, network upkeep does not require hundreds and thousands of electricity hogging mining machines. A NEM node can be run on a computer as simple and cheap as a Raspberry Pi, which is only $35 and takes up very little electricity. PoI also encourages people to actually use NEM, rather than just hoard it. For a more detailed explanation, check out the previous article comparing PoW, PoS, and PoI.

NEM is also superior in security. It uses EigenTrust++ for node reputation, which is not used in any other cryptocurrency, and strengthens the security of the network considerably. It also uses localized spam protection, which shuts down spammers, and only the spammers, when the network is at full capacity. Both are only found in NEM.

NEM was built with a two tier design in mind as well. If you want a wallet, you don’t need a full node and a copy of the blockchain. Instead, you can just connect to any node, and have access to all the same features without trusting it. Even a malicious node has no access to your funds, and the worst it can do is just not work. In order to make sure that nodes continue to operate, the developers created a supernode program, which gives a greater incentive for people to maintain the network for years to come.

NEM isn’t only better in the security aspect, however. It also brings a lot of new or improved features to the table. Unlike Bitcoin, multi-signature accounts are on the blockchain, and do not require trusting a third party in order to have a multi-signature account. Ethereum does have contracts, but you need to write it yourself, which means that pretty much only developers can do it. As mentioned in the Ethereum section, this can be very, very hard to do right due to the language in which smart contracts are written. NEM has made making or editing multi-signature contracts as easy as a few clicks.

Another advanced feature is mosaics. This works similar to colored coins (custom currencies) in bitcoin, but is done completely on chain, rather than requiring the trust of a third party. The names of these colored coins are based off of namespaces, which are similar to how domain names work on the internet. Once a namespace is created, no one can claim the same one, and the owner can make unlimited subdomains.

A platform is never complete without messaging, however, and NEM includes either encrypted or unencrypted messaging between addresses, completely through the network. There’s even hex messaging for developers.

While Ethereum and Bitcoin are rewarding miners for making blocks, they aren’t giving incentives for running full nodes and supporting network throughput. NEM has a program called Supernodes that rewards people for running high powered nodes that serve light wallets with data quickly and securely. These rewards were set aside during the first block of the NEM network and are planned to last for years. In the event that the supernode funds do run out, there is always incentive to maintain the network. Anyone with 10,000 XEM can make a harvesting node, and collect transaction fees based on their PoI score. And instead of having to buy powerful and expensive mining equipment that uses high amounts of electricity, NEM harvesters can run a node on a computer as simple as a Raspberry Pi.

We are the first private/public blockchain, which is the same system that was used to create Linux, widely accepted as the most secure OS in the business world. NEM was built by experienced developers and was built for scalability and stability from day one. We are also currently the only platform that has been stress tested by banks and approved for financial use. Other currencies have been tested, but haven’t shared any proof, but all of our tests are open for anyone to see the results for.

NEM also has tried to make it as easy as possible for third parties to build on the blockchain. In platforms like Bitcoin most third party developers are locked into using one centralized service like Coinbase or Bitpay to build their ecosystem. This means that they rely on these services to build, update, and maintain APIs. And at Ethereum each developer will write their own code for contracts, which is much more versatile and flexible but as mentioned before comes with a risk that the developer must know exactly what they are doing. NEM on the other hand offers a full set of rich and easy to use JSON/restful APIs that work across the entire network with any node, and work with a large variety of calls including all transaction types.

All of this was built from 100% new code, and as such does not hit any of the pitfalls of the other two platforms. However, it can still benefit from the advantages of the other platforms, as it also uses the blockchain.

If you skipped all of that because you don’t like giant walls of text, here’s an easier to digest infographic.

NEM Infographic

The NEM Team would like to thank Nikhil Jha for contributing this blog.