Steem fashions itself as more of a company than a cryptocurrency. They focus on getting the community involved by creating incentives for monetary investment. Here's how it works: I can buy STEEM with dollars (USD, GBP, JPY, etc). I can then convert that STEEM into STEEM power (SP). Doing that means my money will be invested for at least 13 weeks before I can take it out. However, that investment gives me more influence over voting in the community.
In addition to STEEM and SP, there are STEEM dollars (SBD). STEEM dollars (SBD) are debt instruments that pay interest to users and are tightly bound to the United States dollar. Interest payments will be determined by how the SBD performs against the US dollar. They determine this with a price feed.
The price feed is determined by witnesses. Those who hold SP can elect the witnesses who decide the price feed. The price feed is decided by taking a rolling average of what the witnesses decide the SBD price should be. This average is made over a period of 3.5 days. The fundamental question is: Are STEEM dollars trading higher or lower than the dollar? If SBD is trading lower interest payments will go up. If it’s trading higher, interest rates will go down and may even stop. SBD holders can trade them for STEEM at any time; however, no more than 10% of Steem market cap can be used for conversion. Traders will have to wait 3.5 days to convert as this is the average window for the price feed. The waiting times are to ensure that people do not abuse short term price discrepancies.
Witnesses also are responsible for verifying transactions. 20 witnesses are voted for every round by SP holders, and 1 is decided at random. You do not need to rely on these witnessed to verify your transactions. You can choose to be verified by others, but your transactions will take longer. There is no fee, but users are required to maintain a minimum balance. Most blockchains will run into network congestion issues. Steem plans to limit bandwidth of all users to alleviate any congestion.
Voting for currency distribution is based on how much of a vested interest users have. Those with more invested in Steem will have a more voting power. However, smaller stakeholders can mitigate the influence of larger stakeholders with negative voting if needed. Also users can only vote a certain number of times in a day. Each vote costs them some amount of voting power. Users receive payments from the new coins that are created. Steem follows Zipf’s Law for content distribution. Zipf’s law is a distribution model that has been used for examining the most used words in language. In language, there are some words that are used more than others. Similar to word usage in language, a small portion of the available content will receive the majority of votes. While the vast majority of content will receive smaller payments.
The Steem network is able to process 10k transactions per second. They are built atop the Graphene network and make use of Intel’s new Optane memory technology. They say this gives them the ability to scale with little optimization.
