NEM Technical Reference

1 Introduction

"He’d say hello and introduce himself, but most of the cats turned a deaf ear,
pretending they couldn’t hear him, or stare right through him."

Haruki Murakami

NEM, in its most basic form, is a crypto currency that is built on block chain
technology. The NEM block chain is an improvement on existing block
chain technologies. It integrates concepts from other cryptocurrencies (e.g.
Bitcoin) and academic research in network theory.
NEM’s primary contribution to the crypto currency landscape is a new consensus mech-

anism called Proof of Importance (PoI). Unlike Proof of Work (PoW), it is environmen-

tally sustainable and does not require large scale computing resources in perpetuity. PoI
is similar to Proof of Stake (PoS) except that it is not solely derived from the size of an
account’s balance. It incorporates other behaviors that are believed to be positive for the
holistic economy. In this way, it attempts to reward active economy participants at the
expense of inactive ones and dampens the rich getting richer effect that is inherent to
PoS.
NEM’s vision is to be the foundation of a vibrant crypto currency ecosystem that
emphasizes security and trustless computing. NEM was launched with built-in support
for multisig transactions and encrypted messages. Additionally, the peer-to-peer (P2P)
NEM network implements a modified version of Eigentrust++ to identify and minimize
the impact of malicious nodes.
NEM is evolving and this is just the beginning. Stay tuned for more things to come.

2 Accounts and Addresses

"No wind serves him who addresses his voyage to no certain port."

Michel de Montaigne

NEM uses elliptic curve cryptography to ensure confidentiality, authenticity
and non-repudiability of all transactions. Each account is a private+public
Ed25519 keypair (section 3: Cryptography) and is associated with a mutable
state that is updated when transactions are accepted by the network. Ac-

counts are identified by NEM addresses, which are derived in part from one way mutations
of Ed25519 public keys.
2.1 Account state
The state associated with each account includes the following items:
• account balance
• number of harvested blocks (see subsection 5.3: Block creation)
• height of the first transaction that referenced the account
• list of multisig accounts and list of cosignatories (see subsection 4.3: Multisig related
transaction types)
• information about delegated account status (see subsection 4.2: Importance transfer
transactions)
• importance and NCD aware rank (see section 7: Proof-of-Importance)
• vested balance (crucial for PoI and NEM itself)
The underlying crypto currency of the NEM network is called XEM. Each account’s
XEM balance is split into two parts: vested and unvested.
Whenever an account receives XEM, the new XEM are added to the account’s unvested
balance. When an account sends XEM, XEMs are taken from both the vested and the
unvested balance, to retain the vested to unvested ratio
. Additionally, every 1440 blocks,
1/10 of the unvested balance is moved to the vested part.

NEM Technical Reference