Do you blog? Write articles or essays? Poetry? Journalism? Today there are a plethora of outlets on the internet to get your voice heard, many of which will even pay its freelance writers. Steemit takes the concept of getting paid to write a step further by decentralizing and democratizing the process using blockchain technology and its own internal digital currency, called Steem. Since its official beta launch a few weeks ago, Steemit has grown in community size and content, and the value of one Steem has risen to just over $4, giving all Steem an aggregate mark cap of over $350 million - which can be used to donate to Steemit's content providers as reward for a job well done. (See also: The Six Biggest Misconceptions About Bitcoin)
Steemit is an online community that rewards its users for their efforts in generating and adding content. Users create an account with the platform, but there is no central database or server farm. Instead, the content exists over a distributed, decentralized network based on blockchain technology, the same technology that powers digital currencies such as Bitcoin and smart contract platforms like Ethereum.
Steemit uses an algorithm to determine the value of each user's contribution, the more often a user contributes to the platform, the more their influence grows. Users can be curators, contributors or both; curators read, comment on and vote for content and contributors create content, either original or externally linked to. Steemit users can write about most any topic, from mainstream to niche subjects. Authors get paid when people like what they've written and upvote their post.
To recap, Steemit differs from blogging sites or forums such as Medium or Reddit in that Steemit is decentralized, and that writers can get paid by the community in the form of Steem, the internal digitial currency of the Steemit blockchain.
While Steemit is the user community and content platform, Steem is the digital currency that powers and incentivizes the whole thing. Steem comes in three forms. Steem itself is the digital currency that can be exchanged for dollars or Bitcoin on various cryptocurrency exchanges (currently valued around $4 per Steem). The number of Steem available is set to double annually, making its supply growth exponential - a possible drag on its future value in the market - but there is a catch in that every 3 1/3 years, there is a self-generated 10:1 reverse split in the supply, resetting the process. For example, if the total money supply where the following: (See also: Bitcoin Extends Rally)
Year 0: 500 Steem
Year 1: 1000 Steem
Year 2: 2000 Steem
Year 3: 4000 Steem
Year 3.32: 5000 Steam (reverse split now occurs, and the number of Steem goes back to 500 and the process starts all over again)
Steem can also be converted into "Steem Power," which locks up their value for a two-year period. During this time, the Steem Power in your account grows through a process known as staking, a method for validating and confirming data on the Steemit blockchain. There are also Steem Dollars, which is a version of Steem that is pegged in value to 1 USD.
This might all sound complicated, so here is an excerpt from a Steem FAQ talking about 1. Steem, 2. Steem Power and 3. Steem Dollars:
1: Convert Steem back to USD and spend it on groceries or whatever
2: Convert it to Steem Power, thereby making a commitment of value to the Steem network for 2 years (because once you convert your Steem to Steem Power, you can’t just get it back right away)
3: Convert it to Steem Dollars, keeping the value committed to the Steem network (rather than selling it on an exchange), but also keeping it liquid so you can take it out if you like. Because you did commit value to Steem though, you get some reward, but not nearly as much as if you converted to Steem Power.
[Y] ou can think of it as these mindsets:
1: I’ve had enough of Steem, I just want to get my USD back and not be a part of it any more
2: Wow Steem is cool! I really think this is a great system of rewarding content creators and curators, and I want to commit my cash for the next 2 years with the expectation that it will grow and I will be rewarded by that growth
3: I like Steem, but I’m not sure if I can commit this money yet for 2 years. I’ll hold it here ready and when I make decision between mindset (1) and (2) I can take it out as USD if I want (mindset 1) or I can easily commit it as Steem Power if I choose to (mindset 2).
The Bottom Line
Steemit is a novel use case for blockchain technology - a decentralized social media platform that rewards its users in its own digital currency, Steem, for publishing content based on upvotes. The value of one Steem is currently just over $4, giving the system a value upwards of $350 million. As blockchain and digital currencies gain wider adoption, more novel use cases such as this are likely to follow suit. (See also: Does Ethereum's Hard Fork Undermine Smart Contracts?)