A simple, easy to understand guide to Steem for anyone new explaining how it works and why with no assumed prior knowledge.
I've been spending some time trying to get to grips with Steem and I suspect many others will go through a similar process of liking the concept, but finding the complexities difficult to grasp.
I thought (hopefully contributing in the spirit of Steem) I'd try out a first post by making what I hope will be an easy to understand guide for anyone new to Steem.
I've written this as I thought about it, going through a logical progression of starting at the beginning then trying to answer the obvious questions that arise as hopefully the progression will make sense to other people that are completely new to it.
I am not an expert on Steem, so if I get something wrong here then let me know in the comments and I'll fix it.
First off we'll run through the basics of what each is. It won't make much sense now but don't worry, it will later.
This is what you can buy on an exchange like Bittrex.com.
Its not meant to be a way to store value in the way that Bitcoin is, it's just a means to buy into Steem (the organisation / website). The total number of Steem doubles each year.
Steem (above) can be converted to Steem Power and are then locked. To convert them back to Steem takes two years.
(clarification required: how does this process of conversion back to Steem work exactly?)
Why would you do this? Because by holding Steem Power you are given some of the Steem that are created each second as more Steem Power.
When you vote for a post, the more Steem Power you have, the more you are rewarded by the creation of new steem.
For example, if you see a post with an estimate of $1000:
A stable store of value (relative to most of the real world) where each Steem dollar is worth about $1 USD
Steem is just a way to facilitate the site working, and to move real dollars into Steem Power or Steem Dollars. Nobody would want to hold Steem for any length of time because it will lose value, instead they would make a decision to either:
This may sound complicated but you can think of it as these mindsets:
The doubling will cause Steem to lose value, but not Steem Power and Steem Dollars.
But thats OK, because (see above) nobody would want to hold Steem, its just a way to switch between options 1,2 and 3.
The number of Steem will double every year which would imply that it should be worth half as much every year (unless a lot more new people buy in).
However, every 3.32 years a 10:1 reverse split will occur (each 10 Steem become 1 Steem, effectively resetting the clock on the amount of Steem in circulation).
This sounds complicated but its not. For example:
(note that the numbers here aren't accurate, there are more like 500 million to 5000 million steam, not 500)
The point is that:
The value within Steem (i.e. Steem Power) isn’t diluted and forced to drop in the long term because it will ultimately just cycle around 500-5000
but the value within Steem can be redistributed to different Steem users, and is distributed more to those that are more committed, and more active.
The value in Steem is redistributed to:
those who have committed to Steem Power long term
those who are contributing posts and curating them by voting
All the above stuff is this way for good reason. What you end up with here is something where:
So everyone is heavily incentivised to make the site very active, to keep it stable in terms of value and trading, and to make it a huge success however they can, including telling others about it and encouraging them to participate too.
If you spend your time on Reddit and other social media sites contributing content and upvoting posts (curating for everyone else) then at the end of the month you get a warm feeling knowing that you spent that time building value for the shareholders and employees of Reddit or Facebook and that they can buy carbon fibre toilets for their yachts and fuel their Bugattis for another month thanks to you.
If you spend your time on Steem you are rewarded with real value - something that is effectively a slice of the organisation.
The more you commit and contribute, the more valuable you are to the organisation and the more you are rewarded with a larger share of it. As it grows you don’t just get a warm feeling, you get genuine rewards.
No, you can just sign up and start contributing and curating by upvoting.
If you think Steem is a great idea you could buy Steem and then convert it to Steem Power, effectively buying into the Steem organisation and network, but it's not necessary to do any of that. You can get rewards just by signing up and contributing to it like any other social media site.
