Proof Of Importance

Proof of Importance refers to the blockchain consensus algorithm used by NEM network. The mechanism is responsible for determining which nodes on the network are eligible for adding the next Block on the network.

NEM network uses the term harvesting of the block, which is similar to mining in other cryptocurrencies, but with more variables. The nodes on the network are able to collect the transaction fee within the block.

Proof of Importance is quite similar to Proof of Stake, which requires a certain number of cryptocurrencies to generate the next block on the network. However, the protocol is not as dynamic as that of Proof of Importance.

In PoS, the ability to mine a block is dependent on the amount of asset one holds. If you are holding 10% of the total tokens, you would be able to mine 10% of the block. Proof of Stake has often been dubbed as the protocol which makes rich even richer and does not propagate a sense of opportunity on their respective networks.

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How Proof of Importance(POI) Works?


PoI solves the limitations of PoS by assigning consensus importance(trust) score. The importance score is a point system, where the more point an address has, the network trust the address more than others to verify the transactions.

You can view this importance score as the Yahoo points or even Karma points on Reddit, the more active you are on the network, the more points you would gain, which would eventually give you the power to harvest the block prior to your peers and eventually return you monetary gains in the form of Block Reward.

How the Quality of Transaction is Determined?


Once you have understood the importance of POI and how it works, the next question that would have popped in your head must be how the quality of transactions or how Importance score is determined?

As we discussed, your importance point is dependent on your transaction activities on the network. However, by simply sending a few XEM (the NEM cryptocurrency) between the addresses won’t help you. There are certain parameters set for the same.

In order to gain some importance points, you must have sent at least 1000 XEM to addresses holding in excess of 10,000 XEM in a 30-day time frame.

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How Does PoI solve the Hoarding Problem?

Proof of Stake protocol encourages hoarding and opportunity to create the next block goes to those who have the highest percentage of tokens or coins. However, PoI based on importance points eliminate the hoarding of tokens, as the importance point is dependent upon the transaction activities. Thus, people hoarding up the coins would be at the lower end of the chain and they would probably never be able to reap the riches of Block Reward.

On PoI based algorithm it’s better to keep your tokens moving rather than holding it up. This protocol might also prove revolutionary for the volatility problem the crypto market is facing.


“I think I can Cheat on the Importance Score”

What if I own a group of accounts on the network and start transferring my XEM among these accounts, won’t that increase my importance score?

Well, NO.

  • The importance score will lower if your account receives and transfer the same XEM.
  • If you use XEM over an exchange for either making purchases or converting your XEM into other currencies, it won’t have any impact on your importance score.
  • The transactions on your address made recently would be valued more than the older ones.
  • The transaction within a 30-day time period is taken into consideration while allocating importance points.

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How Harvesting on the NEM is Different From Mining?


While mining of cryptocurrencies works on the Proof of Work and help in transaction verification, harvesting on the NEM network does the same, but with a difference. The process of transaction verification is done through Proof of importance, which determines who would harvest the next block. Harvesting does the same thing as mining, i.e to maintain the authenticity and keep the network online.

Harvesting has an upper hand over mining, as it is not dependent upon the computational power one has or the Hash Power one can generate. The fundamentals of blockchain and decentralization are maintained. The power is not concentrated on mining farms or people who can afford the best mining hardware.

Let us see how harvesting trumps over other forms of verifications.

  • No external or overpriced hardware required.
  • Your carbon footprint does not get affected, as the process does not require an insane amount of electricity.
  • You can keep harvesting even after shutting down your computer.
  • Your participation on the blockchain will ensure your chances of harvesting a block, rather than the machine you own.

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