Have you had an experience when you try to explain Steemit and some people immediately respond: "Oh, that's a Ponzi Scheme". This happened to me, mainly, of my inability to properly explain economics of Steemit at that time.
Ponzi Scheme was named after notorious con artist Charles Ponzi. Charles Ponzi was born in Italy in 1882, and his birth name was Carlo. Early 1900's he moves to United States, and later on becomes a con artist with his money-making scheme as a result of his initially legit and maybe even brilliant business plan.
In those years there were these postal certificates that allowed people abroad to send their mails for free using the certificate. People in the US would buy these certificate at post office and include them with their mails sent abroad. However, most of these certificates would go unused. Realizing this Charles buys some of them for cheap in the US, and makes a handsome profit. As Chales was ambitious to become rich, he decides to go big and ask one of his friends to invent in this business. He gets a small loan, and as expected turns that money into more with great margin profits. He returns the loans with handsome profits, after that word spreads and many investers start pouring their money into Chales's "business".
Money lover as Charles wouldn't reject any incoming loans, he traps himself into trouble. Even though, initially business was going well, now there not enough certificates left to trade. Instead of rejecting incoming loans, Charles continues accepting them, and starts repaying earlier investors with new investors' money.
That seemed to be going well, everybody was happy. But the only problem was, new investerors had to be in larger amounts than the ones came before them for this scheme to continue working. Eventually, investors stop coming, and the whole the whole scheme collapsed. Charles was arrested, sentenced and sent to prison.
Now that we know the history of Ponzi scheme, lets explore how Steemit would relate to it. Just as any other social media network, Steemit it relies on its community and its growth. Unlike other social media platfoms, Steemit gives power to its community; one of those powers is the economic power. There is money involved: users get financially rewarded for creating content, for interacting with content, for engaging with the community, and also for having a stake in the network. That is where some, who dosn't have full understanding of Steemit eco-system jump into conclusion of calling is "Ponzi or Pyramid Scheme".
What makes a scheme a Ponzi Scheme is its fraudulent nature.
While it is true the value of users / stakeholders account values increases as more and more users join the platform with their contributions, engagement and interactions, this characteristic alone does not make it a Ponzi scheme. As a matter of fact his characteristic applies to all business models. Big difference is Steemit takes away control from a single entity and gives back to users the community. Users are in total control, not a single player can have a full control over the network. That's where the notion of decentralization comes in.
Everybody, even the completely new users, have a stake withot any initial contribution. Once users choose to have higher stake in the network via the process of Powering Up they could buy in, and most who buy in do so after having a clear understanding of what they are doing.
Market decides the value of Steem and SBD.Not a single entity have control over the prices of Steem and Steem Dollars. It is up to the free market to decide based on simple concepts of supply and demand.
Total transperancy in the DNA of Steemit. Everything is in blockchain, anybody can look up every users wallets and see what their account is worth and what kind of stakes they hold. One could easily see, each memebers activities: be it content creation, interactions with other, and any other engagement in the network.
There is no doubt rich content platforms have a great value in the world of internet, and that's what Steemit does. It bring people from various backgrounds from around the globe together for a common mission: Creating content that is educational, entertaining, inspirational, etc; Have fun by participating and make money along the way.
Regardless of the financial status in the network, all members realize the need in each other and work towards mutually benefitial goals. Everyday is success in Steemit. Participation is the key.
