DIGITAL ASSETS ON THE MOVE
NEM Foundation Nearly Broke
NEM (XEM) is a relatively unknown cryptocurrency in the West, as its community is more concentrated in Asia. Among the features of the network, the most distinctive is their Proof-of-Importance (PoI) algorithm, which differs from PoS in that it takes the number and size of transactions made by a block producer into account, instead of only the size of their stake. It also features asset issuance, but this is possible on many different public blockchains, including Bitcoin.
On Jan 31, the NEM Foundation posted a message to the community explaining that “Crypto Winter” might lay the foundation for a financially unsustainable situation as early as next month due to unreasonable management by the previous governance council. The Foundation was established by the NEM community in order to promote the NEM blockchain and is now requesting the community to fund them with 160M XEM coins (~$7.5M) in order to continue operating and avoid planned layoffs across their 150 employees. According to Alex Tinsman, the newly elected president of the Foundation, expenditures during Dec 2017 and Jan 2019 were 80M XEM ($24.5M; average XEM price), most of which was spent on marketing.
The XEM price has generally been very similar to the general crypto cycle movement of 2017/2018 and is still correcting from the new highs achieved during the cycle. After the community message, XEM decreased by 13% against bitcoin. NEM was one of the most dominant cryptocurrencies by network value (ranked the 6th largest) until just before the crypto crash in the second half of January 2018.
The NEM Foundation’s irrational marketing spending is something very common in the crypto space: many projects focus extensively on achieving awareness and recognition via marketing efforts, airdrops, and being present at way too many conferences instead of directing the majority of their spending on developing the product. NEO and Tron are definitely the first two projects that come to mind as operating in a similar fashion, while XRP is probably the king of public opinion manipulation and creating an illusion of value through a constant stream of partnerships, conferences, and similar social sentiment defining factors directed toward an ignorant public looking for the next 1000x asset. What is common to all of these projects is that their organizations, founders, and team members hold a large percentage of the asset’s emission, meaning they have a direct incentive to inflate the price as well as their project runway. They tend to maximize the illusion of value instead of creating value.