New social network seeks to optimize and finance the creation of good content through unique reward system.
It has been roughly seven years since Satoshi Nakamoto released Bitcoin in 2009. And since that time much has transpired. Bitcoin has reached an impressive $9 Billion dollar marketcap, courted many venture capital firms, and expanded its brand-name globally. But the most interesting thing that has happened are the possibilities that Bitcoin has opened up. Bitcoin told the world that decentralized, internet money was possible during a time where such a sentiment might have seemed crazy to all but the most ardent security and cryptography researchers. One recent outgrowth of this movement I will be covering for the next few articles is decentralized social networking site Steemit, which is set for full release on July 4th of this year.
The Steem currency system is a strange and complicated creation. But its core message is quite simple: decentralized, paid social networking. The founders of Steem have devised a way to not only decentralize social networking, but to also pay users for contributing to it via posts or curation (voting). Reading the Steem whitepaper is a little like getting your tooth pulled in a seedy foreign country. Especially if you're not financially savy, which I'm not as my formal training is in computer science, but the gist of it is this: they have created a way to incentivize, through cryptocurrency and blockchain technology, participation and curated content. And, more brilliantly, not only that, but they have also incentivized long-term holding of their cryptocurrency, so that the network rewards actions related to long-term growth and punishes short-term speculation.
They do this through a decidedly unique cryptocurrency they call Steem. Steem is one of actually three cryptocurrencies that this new system introduces. The currencies are:
Why three? Because this way they can manage the inflation of the currency, while not allowing the kind of short-term speculation that seems to plague the cryptosphere. Steem itself is the basic unit of currency from which the others derive their value. It is also the unit which allows individuals to buy into the Steem network. Finally, it is the cryptocurrency most volatile and subject to inflation, as someone who holds Steem will be subjec to a .19% devaluation per day of their holdings. This inflationary model is more akin to a 'split' than true loss of value, however. This is because 90% of non Steem Dollar inflation is supposed to be returned to Steem holders proportional to their holdings of Steem Power, so if you're holding Steem Power your Steem inflation losses won't be so great. Only 10% of this non-Steem Dollar inflation is truly redistributed via inflation.
In this way, users who buy into Steem are incentivized to convert it to Steem Power due to Steems's inflation rate and the benefits of holding Steem Power. This pushes users to hold their Steem Power long-term due to this long period of time that it takes to convert it back to Steem. Thus, Steem creates a community which is incentivized to hold their currency, providing more than just short term funding. Steem Power is required to vote for or against content, so this provides another incentive to convert your Steem to Steem Power, further shoring up the network.
