STEEM is the currency used on the content sharing platform Steemit. Content creators and contributors are rewarded to help facilitate a social network on the Steemit platform. Working on the simple idea of information value, the more the content is found valuable by the community, the more the contributor will earn. The value of the content is determined by community votes. Aiming to change up what we think of social media, the Steemit community is growing quickly. Currently users on the traditional platforms only generate value for the shareholders of the underlying large centralized companies, such as Reddit or Facebook. Steemit is working to change that. Using newly created value, cryptocurrency is distributed directly to the content creators and users themselves.
Steemit works with distributions of the three different currencies native to the platform. STEEM, Steem Dollars (SBD), and Steem Power are leveraged to power the created user content. STEEM and Steem Dollars are liquid and can also be spent off the platform. Creators, site visitors, and STEEM miners are incentivized with these currencies.
The STEEM blockchain is based on a Proof-of-Work (PoW) algorithm called Graphene. It differs from Bitcoin when it comes to distribution of the mining rewards and blocktime. STEEM has a scheduled blocktime of 3 seconds, while Bitcoin’s is 10 minutes. Mining is done by a set of 21 miners (called “witnesses”) in rounds of 63 seconds. Creating a unique version of Delegated Proof of Stake (DPoS), witnesses are selected by an approval rating system of the users. Another large difference from Bitcoin is that only 10% of Steem block rewards are actually awarded to these witnesses. The other 90% is distributed among two groups. Content creators are allocated 75% with Steem Power token holders receiving 15% of that 90% total.
Users can receive the native currencies in three different ways: posting, voting and purchasing. When a new post is created, users can upvote and downvote. Depending on the number of upvotes the post receives, the user that posted the content can receive a portion of the STEEM reward pool (that 90% mined as mentioned above). The users upvoting these new posts are also eligible for a reward depending on how early they upvoted it in comparison to others. This is called a “curation” reward. Users that upvote and help facilitate the growth of content the community finds valuable gets this reward.
Separate from participating in the content community, users can purchase STEEM on a third party exchange and hold the asset in the platform wallet to earn interest and increased voting power. There are incentives in place to lock up the tradable STEEM and turn it into Steem Power. This Steem Power is a separate, untradeable version of the STEEM token with a 1:1 ratio value. Users can “power up” and “power down” their STEEM by choice with a time-gated process. Voting weight is increased for holders of Steem Power as well. The Steem Power holder will have greater influence on post voting compared to those that do not hold as much. Simply put, their vote will count for more.
When upvoting is done, Steem Dollars (SD) are what is actually being sent to the original poster. While STEEM is the liquid currency in which users can transfer, spend and Power Up, Steem Dollars are the price-stable currency in the platform. Steem Dollars are used to bridge the platform with other outside applications with a stable priced currency.
As well-thought-out as the foundation platform is, when it comes to social media and sharing, issues arise in the community’s self-governance. Whether that is the monopolization of influence by large Steem Dollar holders, vote-selling, shilling, or forced censorship, there will be problems. As the platform continues to grow, it will be interesting to watch how these issues are handled and if they can steer away from the need for an increased centralized authority.
Another consideration is the limited revenue streams on the platform. The only one now is through post promoting focused around the Steem Dollar. The introduction of additional streams for the Steemit economy might be needed to push the platform into more widespread adoption and sustained growth. An ad network and a more direct STEEM to dollars exchange would allow for more value, versus the more speculative value the economy currently relies on.