Proof of Importance

Proof-of-Importance is a consensus algorithm similar to PoS. Nodes "vest" currency to participate in the creation of blocks. Unlike PoS, Proof-of-Importance quantifies a person’s support of the network. NEM is using Proof-of-Importance.

Proof of importance is a blockchain consensus algorithm. Just like Proof of Work and Proof of Stake, Proof of Importance is another way of securing the blockchain. It was first introduced by NEM. 

Proof of Importance determines which network nodes are eligible to add a block to the blockchain based on certain properties. This process is known as ‘harvesting’. In exchange for harvesting a block, nodes collect the transaction fees that come from putting that block into place.

The higher importance score a node has, the higher probability of being chosen to harvest a block and reap that reward. If you’re interested in this, you must know that the NEM protocol requires an account to hold at least 10,000 XEM.

Proof of Importance seeks to take into account one’s overall support of the network -- and thus can be thought of as a novel way to approach staking and game theory. For example with proof of stake seems like it rewards coin hoarders. This comes from the fact that PoS nodes are limited to ‘mining’ a percentage of transactions reflecting their stake in a cryptocurrency. 

If you were a PoS miner who owns 10% of a cryptocurrency -- you would only mine 10% of blocks on the network. This means that nodes on the network save their coins, instead of spending them. This also leads to ‘the rich get richer’, since large coin holders are able to mine a larger percentage of blocks.

Proof of Importance addresses these problems by identifying an account’s overall support of the network. NEM accounts for three factors: vesting, transaction partners, and number and size of transactions in the last 30 days.

If this peaks your interest, take a look at in-depth articles about NEM and other Proof of Importance blockchain projects.