While we all live in societies where money is mostly considered as a mean to bring wealth and prosperity, there are other factors and aspects in life that all people appreciate. One of these elements is reputation.

Reputation is defined as an overall quality or character, as seen or judged, by people in general. It is totally relative among people in a society and has properties of decentralization.

Unfortunately, reputation has never been considered in any monetary system and its value has never been appreciated as it should be.

However, once again, cryptocurrencies, with their open and liberate innovations, are offering services that were not possible before. One of these new innovations is New Economy Movement (NEM), which, despite having a quite ambitious image, has a lot to offer in the altcoin scene, notably by adding reputations to the blockchain with a decentralized algorithm called proof-of-importance.

It has been a while since we last heard about NEM in crypto 2.0 space, so we recently talked with Makoto, one of the projects top five developers, to get updates and more information about their mysterious and interesting algorithm.

How NEM Determines the Importance Score

NEM is said to be NXT superior by solving some issues of the proof-of-stake protocol in NXT.

One typical argument against proof-of-stake protocol is that those with higher stakes are richer. By doing a small amount of effort (forging in case of NXT), these people can add new blocks and repeat the familiar story of "rich man gets richer."

However, NEM added the importance factor to the network in addition to the stakes. This means that an individual with only high stakes, do not necessarily have a higher change of finding the next block in the blockchain.

Makoto described the protocol by introducing its three main components that determine the importance score in the network:

  1. Stake;
  2. Net outflow of NEM;
  3. Functions of who sent you XEM (NEM currency).

Stake is how many XEMs a user has. The more XEM a user has, the higher his/her reputation is. This is how the whole NXT concept can be summarized.

The second and third components are tied to each other and are calculated based on a user’s interactions and transactions with other users. This, however, does not mean that a user who transfers XEMs between his accounts, would get a higher score, explains Makoto.


XEMs that are transferred should be vested, because unvested coins do not add any importance score to the user. The vesting process requires time and protects the system against Sybil attacks, he indicates.

Finally, with NEM’s algorithm, which will be released in their white paper in the near future, each node receives an importance level based on these three criteria and creates a graph of importance for all users.

Makoto continues by saying:

“This algorithm gives a pretty good approximation for the graph-theoretic importance of a node in the transaction graph.”

Nodes are graphed based on their importance level. It is worth to mention that these scores are a number between 0,1 and infinite, meaning that they cannot be created. Therefore, a user gains more importance at the expense of other users.

NEM already released their testnet and part of their open source project on github. According to Makoto, NEM dev team has been heavily testing to provide a safe and reliable service. They are going to release the software by this month, but had not fixed a precise date yet. Anyone can follow them through their website, Facebook, Twitter and forum.

Proof-of-importance seems to have a lot to offer with its reputation-based service. With its promising ideas, NEM needs to take some big steps this month and pass big challenges. However, if they succeed in providing what they are claiming, I assume some bright days are going to be ahead of this new cryptocurrency during the year. 

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