INVESTORS

HARVESTING

How Harvesting Works

Harvesting is similar to mining in other cryptocurrencies, but it uses unique methods called Proof of Importance and Delegated Harvesting to determine who gets rewards.

Harvesting has several advantages over other types of rewards.

  • It requires no special hardware.
  • It’s environmentally friendly and inexpensive since it uses no extra electricity.
  • It rewards users who make transactions over those who hold coins.
  • You can keep harvesting while your computer is off.

Part of NEM’s founding vision was a system that would give power to users, not to hoarders or mining farmers. Keeping harvesting fair, transparent, and correctly incentivized is central to NEM’s purpose.

When your account harvests a block, it confirms all the transactions in that block, adds it to the blockchain permanently, and you automatically collect all the transaction fees in that block.

Proof of Importance (POI)

Proof of Importance is one of NEM’s major innovations in the blockchain industry. It’s a novel algorithm that uses network theory to assign a rating of each account’s importance in the network. Many other blockchains use Proof of Work (POW) or Proof of Stake (POS) to allocate rewards.

With POW, those who can afford the most powerful computing arrays have an unfair advantage over other users. These POW systems also consume excessive amounts of energy, harming the environment and burdening miners with expensive power bills.

POS gives an unfair advantage to coin hoarders. The more coins they keep in their accounts, the more they earn. This means the rich get richer and everyone has an incentive to save coins instead of spending them. POI solves these issues with an algorithm that looks at 3 factors:

  • POI only counts coins that have been in the account for a number of days.
  • 10% of the current unvested amount vests each day.
  • The higher the number of vested coins, the higher the account’s POI score.
  • It takes a minimum of 10,000 vested coins to start harvesting.
  • POI rewards users who make transactions with others in the network.
  • This is part of a network theory calculation that looks at transaction behavior to assign each node an importance score.
  • Users can’t gain advantage by trading back and forth between a few accounts. The algorithm only counts net transfers over time.
  • Each transaction (above a minimum size) contributes to your POI score and increases the chances of harvesting a block and collecting its rewards.
  • Larger and more frequent transactions have a greater impact on the POI score.
  • This provides an incentive to use XEM as a currency and offsets NEM’s already low transaction fees.

You can read more about how NEM calculates POI in our technical reference document.

Delegated Harvesting

NEM is the first blockchain to implement delegated harvesting. This is an efficient way to pool account power without exposing any private keys. To do this, you connect your account to an existing supernode and use that account’s computing power to complete blocks on your behalf.

Each account has a Proof of Importance (POI) score that determines its chances of harvesting a block. With delegated harvesting, you are lending your POI score to that supernode, increasing its chances of harvesting a block on your behalf.

Some unique features of delegated harvesting are:

  • Your computer doesn’t have to be running to harvest.
  • Harvesting is available to any user who has 10,000 or more XEM in their account.
  • In order to be eligible for harvesting, the 10,000 XEM in your account must have vested. “Vested” means that the XEM have remained in your account for a certain number of days. (Usually a couple of weeks, depending on the amount.)
  • Harvesting is performed automatically through your wallet.
  • Your account’s private key is never exposed while harvesting, so there’s no risk.
  • When you harvest a block you keep all the fees in it.
  • By harvesting your block, you can collect transaction fees for both multi signature accounts and messaging.

You can read detailed instructions about how to set up delegated harvesting in our tutorials section.

Note that while the minimum harvesting balance is currently set at 10,000 XEM, this amount is potentially subject to change depending on adoption, price, and community needs.