Over the last year, I have been asked multiple times about the source of Steem and how upvotes work by people new to Steemit. Since we have seen a large increase in the number of new Steemians recently, I thought it would be a good idea to update and repost my answers to the most asked questions by new users. I hope this helps you to better understand Steem.
Question 1
It seems like everyone is making money out of thin air, where does the money in Steemit come from?
Everyone IS making money out of thin air. Just like Bitcoin and the US Dollar, Steem springs to life out of thin air. When 12.5 new Bitcoins are mined every 10 minutes, they just appear out of thin air. That's approximately $33,000 of new Bitcoin being created every 10 minutes or almost 5 million US dollars every day. The price of Bitcoin doesn't go down because of the newly created Bitcoin because people want to buy the newly created coins. There is a demand for the new Bitcoins.
The Federal Reserve does essentially the same thing when it creates new US Dollars. Only it's network of miners are the Big Banks who take the Dollars the Fed created out of thin air and loan it out to businesses and consumers who want it to buy goods. Their demand for the new Dollars to make purchases is what gives the Dollar it's value.
The only real difference between Steem, Bitcoin and the US Dollar is how it's distributed. Because Steem is distributed to people who earn it by using Steemit, you are the miners and bankers of Steem. Since Steemit is a sort of feedback loop (the more Steem you have, the more Steem you can earn) demand for Steem is created. And like other currencies or coins, where there is demand, there is value.
Question 2
When I upvote a post, am I giving them some of my Steem?
When you upvote someone's post, or your own post for that matter, you are rewarding them with Steem Power (SP) and Steem Dollars (SBD) that will be newly created at the scheduled 7 day payout. The amount of the reward your upvote is worth is based on the amount of SP you have.
For example, I have about 4800 SP and when I upvote a post at 100%, the reward jumps about $1.00 because of my SP. That reward comes out of the "Reward Pool", not out of my wallet. The reward pool has newly created SP and SBD added to it every day at a fixed rate. As you get more SP, your votes will be worth a bigger reward of the newly created SP and SBD.
Question 3
Should I upvote every post I see?
Upvoting everything is not a good idea. Steemit is designed for 10 upvotes a day. You can give up to 10 daily votes at full power and every vote over 10 would weaken the reward for all your votes. So voting for only the best content is better.
But remember, hoarding your upvotes does not work either, because any unused votes below 10 a day are wasted, you cannot save them up for a week and then make 70 votes in one day. So try to vote at least 10 time a day and it nevers hurts to vote a few more when you find really good content. Just remember to vote a little less the next day or two to recharge your voting power. An easy way to view your voting power is go to steemwhales.com and enter your id.
Bitcoin Image
For those who are interested, the Bitcoin token pictured above was 3D printed by my son using copper infused filament. I'm working on a 3D model for Steem tokens that hopefully we can use to reward Steemit users.
