How many times have we heard this question? Usually presented in an antagonistic way against Steemit… Well, I’m no cynic, but even I would agree that money doesn’t grow on trees… image
In this post, I thought I would explain exactly where the money does comes from (and why the money comes), in a simple and easily digestible way.. I am however from a financial background, so if I have used terms that you don’t understand, let me know and I would be happy to talk you through it.
First, we need to go back to basic to understand the economic system of Steem, and how ‘money’/’cryptocurrency’ flows through it..
STEEM Economic System
The White Paper is the best place to start. Here are some extracts defining each of the 3 crypto-currencies based on the Steem Blockchain.. (feel free to skip this section if you are a well read user)
What is Steem:
"Steem is the fundamental unit of account on the Steem blockchain. All other tokens derive their value from the value of STEEM. Generally speaking STEEM should be held for short periods of time when liquidity is needed. Someone looking to enter or exit the Steem platform will have to buy or sell STEEM. Once STEEM has been purchased it should be converted into SP or SMD to mitigate the impact of dilution over the long-term."
Simply: Steem is the cryptocurrency that ‘fuel’s’ the Steem Blockchain. Most similar to Bitcoin out of the three.
What is Steem Power:
"‘1 SP’ can be viewed as a share in a pool of STEEM. The network automatically adds STEEM to the pool every block. At any time users can convert their STEEM into SP at the same ratio as STEEM in the vesting pool to total SP. Converting STEEM to SP does not dilute existing holders of SP. Likewise, every time SP is converted back to STEEM it is done at the current ratio. Individuals are guaranteed to have more STEEM in the future than they have when they first convert from STEEM to SP.
SP balances are non-transferrable and non-divisible except via the automatically recurring conversion requests. This means that SP cannot be easily traded on cryptocurrency exchanges.
SP is a requirement for voting for or against content. This means that SP is an access token that grants its holders exclusive powers within the Steem platform."