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NEM: Barriers to attaining mass adoption
Summary:
A deep dive into the barriers to attaining mass adoption pertaining to NEM’s ecosystem.
Table of contents:

1.     Inefficiencies of Peer-to-Peer Networks

2.     Market Barriers

3.     Lack of Governance

4.     XEM Token Volatility

5.     Limited Scalability

6.     Lack of Formal Contract Verification


1.   Inefficiencies of Peer-to-Peer Networks

NEM is a platform that is impacted by a multitude of barriers to mass adoption commonly associated with the peer-to-peer (P2P) networks - such as anonymous participation.

One of the main issues to deal with in this type of networks is the inserting of hostile nodes into the network that spread invalid information or attempts to disturb it. NEM obviates this barrier by identifying hostile nodes, reducing communication with them and implementing and developing a reputation system. For this reason NEM has deployed a similar algorithm to the EigenTrust++ reputation system. The EigenTrust++ algorithm ensures every peer in the network with a unique global trust value according to the peer's history of uploads. 


2. Market Barriers

The number of ledgers and applications is growing exponentially and reconciliation is forecasted to represent a significant issue.

This becomes compounded and risk increases as banks transact heavily and incorporate a plurality of systems that do not comprise guaranteed compatibility. There exists a requirement to ensure the existing core banking solution is standardized for enhanced efficiency. Standardization currently occurs at the middleware layer and systems rely on this to interact with one another.

NEM provides a solution that can be integrated within existing platform solutions binding a monolithic construct as traffic and information traverse across different ledgers, applications, and services.
  

3. Lack of Governance

NEM’s lack of governance consists of a plethora of legislative inefficiencies such as limited transparency, misaligned incentive structures and reputation management.

NEM is also affected by limited governance that is representative of every decentralized environment. It may be unfavourably influenced by any upcoming stricter official government policies. Such possibilities, as seen in China, are not to be neglected. In countries where the official power is trying to retain the status quo, more centralized blockchain projects are more likely to be embraced. In more democratic states, however, this may not be seen as a threat.
                       

4. XEM Token Volatility

NEM implements the XEM token, which represents a store-of-value, based on reflexivity. According to the reflexivity theory investors don't really base their decisions on reality but on their perceptions of reality. The actions that result from these perceptions influence reality (or its fundamentals) which then affects investors' perceptions and thus prices. It actually causes exponential volatility and therefore instability.

The store-of-value theory is applicable when XEM’s price appreciates yet when it depreciates the token’s underlying value induces an organic price floor.

XEM encounters deflation and timing issues regarding locating a block that may provoke users to migrate to additional currencies offering increasingly efficient services.

NEM utilizes smart contracts that underpin simple value transfers. Its privacy can evidently be compromised, as coin signature and identity verification data can be publicly associated with easily traceable addresses.

NEM has implemented a unique Proof-of-Importance consensus algorithm. The algorithm constitutes assigning each account a score determining its significance that proxies aggregate importance concurrent with the NEM economy.


Each transaction (above a minimum size) contributes to a user’s POI score and increases his chances of harvesting a block and collecting the block’s rewards. This way the assets’ turnover is being promoted.


5. Limited Scalability

NEM is a classic public blockchain consensus protocol that comprises significant limitations including each participating node in the network verifying the process of every transaction.

NEM’s scalability subsequently becomes difficult as the number of transactions each single fully participating node the network can process is limited. NEM’s scalability is also impacted by slow transaction times (compared to traditional credit card operations) regarding processing a block of transactions. 

Furthermore, public blockchains are pressured to balance low transaction throughput while maintaining a high degree of centralization.

 

6. Lack of Formal Contract Verification

For greater security, NEM must assure its smart contracts are formally verified to determine whether the program behaves according to a specification and prove that statement. Without such a verification process all the parties involved in these smart contracts are put at risk.

NEM’s smart contracts, just like Ethereum’s, are an attractive target for hackers. Due to their immutability, abusing any code flaws cannot be impeded.


Conclusion

NEM evidently must contend with a horde of barriers to attaining mass adoption - from the platform’s hacking heists exposure to XEM’s fluctuations. At the same time there many positives about this project. The number of transactions per second is greater than that of most blockchains. Its consensus algorithm is not energy-consuming and it promotes expenditures within the system.

Moreover, NEM offers a synchronized mechanism to ensure all nodes mutually agree to utilize an existing protocol such as NTP (a protocol used to synchronize computer clock times in a network). NTP can be employed easily allowing network time to remain near real-time while relying on outside servers.


Always remember that investing in cryptocurrencies involves risk. Over time you may gain or lose funds.

The information provided by us and our contributors should not be considered as a financial, legal or tax advice and is general in nature.

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