Bitcoin has been the first blockchain-based network and blockchain-based peer-to-peer currency that gained a large following and popularity. Some people think that Bitcoin became what it is today because of the superior technology, which is true, but there’s much more to Bitcoin than just technology. Bitcoin is not just a cryptocurrency. It is also a philosophy. Bitcoin is based on the principles of decentralization, anonymity, transparency and personal responsibility.
Most of the other blockchain networks that have achieved significant market capitalization, such as Litecoin, Ethereum, Ripple and Dash, also have a philosophy behind them. Steemit is not an exception.
The most important principle of Steemit is that all contributors to the platform should receive value for their contributions. Steemit doesn’t limit contributions to posting, sharing or liking content.
Existing social media platforms often view contributions very narrowly. They operate on one-user, one-action principle, be it likes, shares, posts or comments to the posts by others. This approach creates an environment prone to platform abuse and manipulation.
For example, many of the Twitter and Facebook accounts have thousands and even tens of thousands of followers that they buy in countries such as India and Philippines, where people build entire “like farms,” rooms full of smartphones on which employees of the farms click like buttons. The platforms then need to figure out how to identify and block abusers. Taking action against users who interact with service abusers may also pose a challenge.
The idea behind Steemit is that a cryptocurrency can introduce economic incentives to a social media platform and allow the platform to grow in a way that is completely different from the growth path of traditional social media platforms such as Reddit, Twitter, and Facebook. It is the synergy between a cryptocurrency and actions of users on social media that gives Steemit a really powerful advantage.
The challenge of Steemit has been to solve the issue of assigning value to various user contributions on the platform. In a perfect world, users rate each other fairly and cooperate with each other, leading to a social media platform growing in an organic and healthy way (meaning no service abuses and no advertising). However, in the real world a platform needs algorithms to deal with intentional manipulation and service abuses.
Instead of relying on “one-user, one-action” principle, Steemit bases its algorithms on “one-Steem, one-vote” approach, where “one-Steem” is one unit of Steem cryptocurrency. In this framework, users get financial rewards in Steem cryptocurrency for contributions to the platform. Contributions include posting, voting, curating and capital contributions.
Capital contributions on the Steem platform
Steemit looks at capital contributions in a very broad way. It recognizes that capital contributions can exist in a form of ownership and in a form of debt and both forms offer their own unique sets of benefits. Owners profit when an asset grows and experience losses when the asset shrinks. Those who invest in debt get their investment back with interest but do not benefit from the growth of an asset associated with the debt.
In turn, owners can have liquid ownership and vested ownership. Vested ownership is a form of ownership that many companies in the business world use to keep employees for certain periods of time. Employees get vested stock options, meaning that an employee will get stocks after spending a certain fixed amount of time with the company. With many startup businesses, employees have to work and wait for years before they can convert their options into shares. Selling shares can also mean additional wait time. The goal of this process is to allow new companies raise additional capital from investors without having to compete with existing shareholders looking to sell their shares. Smart investors want capital so that they can grow the company. Steemit sees itself as such an investor and admits that without vesting, new capital is often exchanged for shares of those who are looking to exit and the company doesn’t benefit when such as exchange occurs at an early stage.
Steem Network offers all of the above forms of ownership to its capital contributors. On the network, these options are Steem currency (STEEM), Steem Power (SP) and Steem dollars (SBD) (Steem dollars (SBD) are a currency that is different from Steem currency (STEEM) ).
Steem (STEEM) is the main cryptocurrency of the Steemit network. It is a liquid currency, meaning that you can buy and sell it on cryptocurrency exchanges just like you would any other digital currency. For a list of exchanges that currently trade STEEM, see https://www.coingecko.com/en/coins/steem/trading_exchanges#panel. In January of 2018, the value of STEEM token was fluctuating between USD$4 and USD$8. All other tokens on the Steemit network derive their value from STEEM.
Steam Power (SP)
Steam Power (SP) is a vested version of STEEM. Steam Power is STEEM committed to a vesting schedule that lasts thirteen weeks.
Steemit introduced SP because it recognizes the value of vested capital and wanted to provide investors who commit to supporting the platform in the long-term with additional benefits. Another reason behind introducing SP was awareness on the behalf of Steemit about the fact that many cryptocurrency speculators jump from currency to currency depending on which currency they expect to go up in the next day or two. Steemit wanted to avoid this kind of behavior and instead build a community of people passionate about the project.
The main benefit of owning SP is having influence over the value of post and comments on the Steemit network. SP holders also receive interest payments based on the vested balance. The interest is equal to 15% of annual inflation.
Committing to SP is known on the network as “powering up.” To “power up,” all you have to do is transfer your STEEM into SP. When you have an SP balance, you can’t transfer it, divide it or trade it. If you want to exchange an SP balance into STEEM, you “power down.” After you inform the network about your decision to power down, you receive your balance in thirteen equal installments that will be paid to you weekly, starting 7 days after you initiate the power down process.