NEM

DIGITAL ASSET REPORT:

XEM Update

Crypto Briefing Research Department

February 21, 2020
Grade-C

Quick Facts

TickerXEM
Current Price$0.062166
Market Capitalization$559,492,982
Funding Information
ICO DateNo ICO
ICO PriceN/A
Public AllocationN/A
Private AllocationN/A
Total Supply8,999,999,999 XEM
Maximum Supply8,999,999,999 XEM
Top 10 Addresses52%
ATH Price$1.87 (07 Jan 2018)
Sharpe Ratio-0.39
30-Day Average Price$0.054738
24H Volume$34,559,797
30-Day Average Volume$39,501,947

Contents

Fundamental Factors

Market Opportunity 55;
Ecosystem Development 60;
Token Economy 67;
Token Performance 40;
Core Team 65;
Underlying Technology 69;
Roadmap 60;

Combined Score: 6.0

Summary of the Grades

Market Opportunity

Downgrade from 60% to 55%. There is a growing competition in the space and NEM continues to fall behind. 

Ecosystem Development

Upgraded from 55% to 60%. NEM Studio and NEM Ventures have started to work on building adoption of the protocol. It is still unknown whether the current initiatives will lead to big success, but they should definitely help to move the progress forward. 

Token Economy

Downgraded from 70% to 67%. The introduction of a new token might bring a lot of confusion in the community. Moreover, it will likely be less liquid and have fewer listings. There is also a lot of uncertainty on how the project is planning to manage two networks, creating the utility for both tokens. 

Token Performance

Maintained 40%. The price of XEM is still 96% down from its ATH

Core Team

Upgraded from 55% to 65%. The New Foundation team has been much more successful in building a concrete strategy for the project and delivering on its promises. 

Underlying Technology

Upgraded from 60 to 69%. From the technological standpoint launch of Symbol is a positive factor for the ecosystem. It should make the network stronger from a technical standpoint. 

Roadmap

Upgrade from 20% to 60%. Prior to the new Foundation, NEM did not have a set goal to where it is heading, there was no roadmap and no vision, to what the project is trying to achieve. However, with the new team, there is a new roadmap, and much better understating to what the project is doing.

Introduction

Since our initiation report on NEM, the project went through a process of financial and organizational restructuring. The New Foundation has tried to solve many internal issues that the project has previously struggled with. 

The New Foundation updated the project’s mission, strengthened its operations, released 30+ new governance policies and a long-awaited Catapult roadmap. Moreover, it started to work on ecosystem expansion and established NEM Ventures, which invested in several projects that could potentially help bring more users to the ecosystem. 

Overall, it is hard to argue with the fact that the New Foundation is much more effective and transparent than the previous foundation. However, having a more effective team might not be enough to significantly move the project forward.

NEM brands itself as a blockchain for business. However, the 2015 project launch did not come close to mass adoption of its solution and ongoing delays have been hindering its development. The release of its new Catapult update was initially expected in 2018, but the new Foundation moved the deadline to Q4 2019. However, the deadline was missed and now the expected release date is Q1 2020. 

Nevertheless, even if the team releases the Catapult update, it is unlikely to bring significant changes to the project’s adoption prospects in the short to medium term. Enterprise integrations usually take years before some meaningful results can be seen. 

Given the current competition level in the enterprise space, as well as its slow adoption progress, NEM will likely have a hard time finding meaningful use cases for its technology in the foreseeable future.

Organizational Restructuring

NEM’s organizational restructuring started with the appointment of a new president of the NEM foundation. Alex Tinsman began her role in Jan 2019, after being elected by the project’s community. Prior to becoming NEM’s president, Tinsman was in charge of the North American regional division of NEM. She also has a great deal of experience in consulting, software analytics, marketing, and product and community development.

The first goal of the newly elected president was to optimize the team. The foundation laid off around 100 people and had to admit that the existing structure failed. The project decided to eliminate regional teams and created product-focused teams with set KPIs. 

After major cutbacks at the foundation, Tinsman had to also solve financial issues that NEM was facing at that time. The New Foundation realized that it had funds for just one month to operate “due to the mismanagement of the previous governance council.”

The new Foundation submitted a funding request to the NEM community for 160M tokens (around $8M). This proposal was approved in Q1 2019. 

The foundation declared one goal: to make NEM product oriented. Since 2018, the community has been waiting for the launch of the protocol update Catapult, which should significantly improve the performance and functionality of NEM’s network. With the old Foundation, there was a lot of uncertainty as to when the update would be released. 

For the new Foundation, it took several months to publish the Catapult roadmap. However, while the public release was planned for Q3-Q4 2019, the deadline was missed. Now the release is planned for H1 2020, which again shows that the team is not quite effective when it comes to developmental planning.

In order to move the project forward, the NEM Foundation has also worked on strengthening its team by hiring C-suit executives. Grég Saive joined the team as Head of Development. Pedro Gutierrez was appointed as a Head of Business Development. Nate D’Amico joined the team as CTO and has a lot of experience working with enterprise-grade software companies such as SugarCRM and Apache Bigtop. Lei Dong joined the team as a CFO and previously worked at Huobi. 

Another notable hire was Adele Rom, who was appointed as strategic Organization and Leadership Advisor. She has over 20 years of experience in talent management and operations in organizations such as JP Morgan and Riot Games.

Although NEM did not attract any big public names to its team, the new team should be a much better fit for what the project is trying to achieve. Still, even for the present team, much of the work remains in progress and it is too early to make any conclusions on the team’s success or failure.  

Overall, the organizational restructuring that NEM went through during 2019 was a much-needed step to keep the project alive. With the launch of Catapult in the upcoming year, the team will have to show that it is able to attract meaningful adoption to its protocol in order for the project to remain relevant in this competitive environment.

Ecosystem Development

In 2019, NEM has taken a few steps in an attempt to expand its ecosystem. The project has established two ecosystem entities that should help drive the adoption of its protocol.

The first one is NEM Studios, which has been contracted by the NEM Foundation to create the go-to-market strategy for Catapult. It also acts as a back-end development unit for the project. Since its creation, it has hired 4 full-time developers and a COO, Victor Ruscitto, who has 20+ years of technology and commercial experience. NEM Studios is also responsible for hiring the external agency to work on the rebranding of the protocol. 

Overall, the establishment of NEM Studios is definitely a positive factor for the community, given that previously NEM did not have anyone inside the project that would work on the Catapult upgrade and on the go-to-market market strategy for the project. 

The second important ecosystem player that has been actively working on expanding NEM’s ecosystem is NEM Ventures

This is officially a venture capital and investment arm of the NEM blockchain ecosystem.

NEM Ventures announced its first official investment in March 2019,Vimba, a platform that allows buying cryptocurrency in New Zealand and the UK. According to the project, it is “one of just two cryptocurrency exchanges that connects to the UK’s FPS (Faster Payments Service) bank network.” In addition to XEM, Vimba supports cryptocurrencies such as Ethereum and Bitcoin. 

NEM Ventures' Second Portfolio Investment was Mobi. Mobi is a carpooling application that allows individuals heading in the same direction to share rides. According to the team:

“XEM will be incorporated into the application in line with Catapult mainnet launch as it requires the use of aggregate transactions as escrow to protect the driver and passenger. Any payment made with XEM will have a 20% discount over fiat payments.”

During 2019, NEM Ventures made several other investments:

Cyclebit - provides services for retailers to accept digital currencies, credit/debit, and cash transactions

Techemy - The holding company for an industry-wide blockchain and DLT enterprise ecosystem, with subsidiaries including Brave New Coin (a research company), Blockchain Lab (a development company), Techemy Advisory (a blockchain investment company), and Sphere Identity, (a digital identity).

IoDLTan IoT startup that aims to utilize NEM Catapult to secure and verify data coming from IoT devices.

All of the above services will be integrated into the NEM ecosystem, which should help drive the adoption of its technology. However, given that most of these projects are still in the startup phase, their survival rate remains highly questionable. 

Besides investing in ecosystem projects, NEM Ventures and the NEM Foundation have also been working on building partnerships with other projects.

In January 2020, NEM has partnered with Travala, which will let users of XEM book over 2M guests,  where Travala offers accommodation booking services with a 40% discount rate. Travala operates in over 230 countries across the globe. 

NEM has also joined Decentralized AI Alliance (DAIA), an alliance of more than fifty diverse organizations that is aiming to join forces to democratize the use and control of AI. 

Overall, in terms of ecosystem development, NEM has taken concrete steps over the past year that should move the ecosystem forward. However, it could still take time before we can start seeing meaningful results of these initiatives.

Catapult Update

Catapult has been a key factor for NEM over the past year. Although it was not launched in Q4 2019 as promised at the start of 2019, the team is actively at work and is planning to launch its mainnet in H1 2020. 

However, if Catapult was initially planned as an upgrade for NEM projects, the team is now planning to launch an entirely separate blockchain. Therefore, the old NEM blockchain will co-exist with the new Catapult network.

According to the team, this was a complex issue to consider. Catapult’s technology stack is not compatible with the NEM blockchain. Also, the team cannot simply shut down the old network since it does not have entire control over the current NEM blockchain. 

Catapult will also be rebranded to Symbol, and will have its own token. According to the new Token Economics Proposal:

“Following the launch of the SYMBOL token, the XEM token will remain as a functioning currency on the NIS1 platform. SYMBOL will coexist alongside the original NIS1 chain—a token allocation opt-in process is currently underway. Current XEM token holders may elect to opt-in on a 1:1 basis for their SYMBOL tokens before or after the snapshot of XEM balances is taken. After the snapshot has occurred, the opt-in period will be several years.” (source: businesswire.com)

So, after the launch of Symbol (aka Catapult) the team will have to deal with two separate blockchains, which adds another layer of complexity. 

XEM holders will receive the same amount of Symbol tokens (XYM). However, it is likely that the original XEM token will start losing its value after the Symbol launch, since the major focus of the team will be on the new chain and its adoption. 

XYM token might also have some issues since its liquidity (at least at the start) will be much more limited in comparison to XEM token. 

Even after the launch of its new blockchain, adoption is not guaranteed. Similarly to NEM, issues with adoption will likely continue hindering Symbol's development.

Things to Think About

Although Symbol might bring some interesting features to the space, the adoption of its technology will likely be a slow-moving process. Even if the project achieves its goals, it will likely take years, due to the fact that it is targeting enterprises that, by design, are slow when integrating new technologies.

Also, the adoption strategy of the project has been quite vague. The project has focused on development for too long, so NEM will have to answer a tough question: “Is there  life after the mainnet?” Given that the majority of all enterprise-focused public blockchains are now facing difficulties in selling their solutions to companies, NEM will likely have the same issues.

Competition in the space will likely grow, and NEM does not have a favorable chance to gain a first-mover advantage given its slow development and inflexibility when there is a need to implement changes. 

Overall, after the launch of Symbol, the current team will have to put a lot of effort into changing the negative perception of the project in the crypto community. Thus, the possibility for real adoption of the project still remains uncertain.

Conclusion

Over the course of 2019, NEM’s team has significantly restructured its approach to how the project is managed and what goals it is trying to achieve. This has helped bring some vision to where the project is heading. However, from an adoption standpoint, it did not really move the project forward. 

Launch of the Symbol Network will likely have a positive short-term marketing effect on the project. However, on a fundamental level, the team will still have to show that it is able to drive adoption of this technology. 

Since our initiation report, almost a year has passed. The project has shown some progress, but this is still not enough to receive an investable grade. 

However, the grade is revised and NEM receives an upgrade from D+ to C.