Steemit is a public content platform where users gain ownership of the platform by generating or curating content (voting or commenting on the content). The site is designed as a hybrid between facebook, reddit and medium. The blockchain uses a DPOS consensus algorithm.
The product of regular social networking sites is the data generated by the users. This model means content generators, reactors and commenters are not rewarded for their work. Looking to improve this model, the Steem platform financially rewards participators in the network. The founders of the platform developed the hypothesis that there are 3 stores of value required for such an ecosystem to thrive. A currency with price stability, one that reflects short term value and one that reflects long term value. To do so, the network has three currencies. Steem (short term), Steem power (SD; long term) and Steem dollars (SBD; price stability).
Steem is the fundamental unit of account on the Steem blockchain. All other tokens derive their value from the value of STEEM. It is a liquid currency, and therefore can be bought or sold on exchanges, as well as transferred to other users as a form of payment. Contributors do not get paid in Steem, however, parties looking to buy the other 2 currencies can use Steem to that end.
Steem dollars (SBD) are the price stable currency tokens in the Steem ecosystem. It’s called the Steem Dollar is because 1 Steem dollar should represent any amount of Steem required to buy about 1 USD. Holders of SBD can also earn an annual interest rate of about 10%. However, these numbers are not guaranteed. Interest rates on SBD are adjusted based on supply and demand. When the demand is too high, interest rates are decreased and vice versa. This mechanism is designed to ensure that the price of steem dollars remain constant. Contributors to the network are partially paid in Steem dollars.
Steem power is a reflection of the influence of different participators in the network. It can be thought of as hash power. With more hash power, miners get the chance to validate more transactions and therefore get more tokens. In the case of steemit, users with more steem power get more views and upvotes for their content. Steem power can also be bought and sold. This allows users to gain a larger reach without spending months or years building a following. However, to make sure influence does not change hands too rapidly, Steem Power can only be sold over the course of 13 weeks. This ensures people on the network are actually committed to the platform. Contributors to the network are partially paid in Steem Power. Finally, buying SD with SBD is called powering down, and the opposite is called powering up.
Since the value of the Steem platform lies in continual engagement with the platform, users have to be incentivized to engage instead of simply holding on to the tokens they’ve earned. To this end, the currencies underlying the platform are inflationary. This means the ownership of the overall platform decreases with time for people who already hold the tokens. The inflation rate of Steem is about 9% a year as of December 2017. That rate gets cut by .01% blocks every 250,000 blocks (or approximately by .5% every year). That rate is set to continue until the end of 2033 where the inflation rate becomes fixed at .95%. 15% of the inflation goes holders of Steem power, 10% to the witnesses for producing blocks. The remaining 75% goes to the rewards pool. 60% of the rewards pool (45% of the overall pool) is distributed to authors of content and curators in the form of Steem Power. The remaining 40% (30% of the overall pool) goes to authors in the form of Steem dollars. The cost of SD will affect the extent of inflation as SD is used to buy Steem tokens. The higher the price of Steem dollars, the less inflation there will be. Inflation is also affected by how many people choose to convert Steem dollars to Steem. The lower that amount, the less inflation there is.
Steem is a new attempt at a social media model where the product is engagement and not data that can be used for ads. The incentives of the platform are still fairly complex, however this is not necessarily a bar to adoption. They are also building a video platform called “dtube” to add to the site. I will be carefully monitoring the evolution of the platform.