Ah, Steem. More Specifically, Steemit. I have heard of it on and off again as I've made my way through CryptoLand, but I never actually gave it much thought. There's a lot of buzz on it, and I try to avoid the buzz as much as possible. Just another sub-component of DUE DILIGENCE: Avoid the Hype and Gripe. Strive for Evidence.
So, my curiosity got the best of me recently, so I went to the source; steem.com. Their site is very nicely maintained. I'm an old amateur webdev with a few simple projects under my belt, and I REALLY appreciated the layout, as well the responsive design. I know it's a little thing, but sometimes those little things add up. Shows the love, care, and most importantly the competence. Take a look:
First impressions, while superficial, do mean a lot. BUT, we don't just do superficial here. Let's delve into the whitepaper.
What The HELL Is Steem, and Why Do I Care?
So, Steem actually has two papers; one blue and one white. I went ahead and read both of them. The bluepaper is just a high level overview of the Steem ecosystem, and goes over the major features and benefits. And of course, the paper I really enjoyed reading was the whitepaper. The thing is, it is relatively short, but DENSE. There are a lot of concepts it throws at you really quickly, and it's something you have to really sit down and absorb to get a decent understanding. Kinda like a really hot bath; You don't just dunk your naked ass in there. You take it nice and easy. Like a Gentleman.
Totally a Bad Screenshot For That Last Part.
ANYWAY, The whitepaper starts off laying out the major goal, or use case for STEEM. Now if you're familiar with Brave/BAT, you know that their objective was to Science The Shit Outta The Attention/Advertsing Game. Similarly, Steem wants to do something similar and break social media and contributions down to its bits and pieces to create a fair rewarding system for its users based on that. Essentially, they wanted to tokenize popularity. What do I mean?
So, say you have a bunch of people who write posts for a social media site. Say you have several hundred more people who view these posts. Some of those folks are gonna upvote the ones they like. These upvotes are the indicator of popularity, like on Reddit. Steem is a DPoS token, or Delegated Proof of Stake. Instead of having a consensus protocol based on an objective algorithm to determine rewarding, they base it on a subjective consensus. This is where it gets simultaneously interesting and complicated. There are three major assets associated with the Steem Blockchain:
1.) The STEEM Coin. As they call it, Steem is the "fundamental unit of account on the Steem Blockchain". This is the liquid asset that is exchangeable, sellable, and buyable. This is the currency that is listed on exchanges. This is the unit that experiences the most mobility in the form in In-Flows and Out-Flows (You know, the major components of the Coveted Stock to Flow Model). It's the workhorse and the golden child of the Steem Ecosystem.
2.) Steem Power, or SP. So, in general, the Steem model has a rewards pool. This rewards pool has to be distributed via a method of consensus like voting. In fact, that is how it works, your social media upvotes are a contributor to the consensus. But, how does that work. With Steem Power. Essentially, Steem Power is clout you recieve that helps influence how your vote counts in the Ecosystem. Essentially, you can choose to "Freeze" (for lack of a better term) The STEEM that you own for a 13-Week cycle in order to get SP. They call this "Powering Up". Whenever you vote, your influence is directly proportional to your SP. Hence the name, Power. I can't help but see some similarities with TRON/TRX; while not directly comparable, you're essentially staking your coins for power in the ecosystem. Also, you can earn more STEEM by having SP, just like staking. Their paper says it is 15% of yearly inflation, and your share is dependent on your amount of SP compared to everyone else's. So more power = more STEEM for you. It is not easily traded on exchanges, and that is by design. It is less liquid than the STEEM tokens.
3.) Steem Dollars. Okay, so stability is something important that the Devs of the Steem Blockchain recognize. As a result, they invented the Steem Blockchain Dollar or SBD. Basically, it is stablecoin. It keeps its value as close as it can to the US Dollar, and retains that value over time. This one-to-one pegging to the USD is maintained by "Feed Producers" or "Witnesses" who check the prices and report/change monetary policy based on the prices. These Witnesses are voted upon by the SP holders in the ecosystem. This is what helps them to keep it as stable as they can, and there are several mechanisms that prevent abuse or fraudulent reporting of feeds.
Oh, man. That's intense. It is definitely a different type of consensus model, but the major takeaway is this. The Steem Blockchain's major philsophy is this: everyone’s meaningful contribution to the community should be recognized for the value it adds.
What Do I Think About This?
I think that in the simplest terms possible, it is a complicated, if not well thought out system. They are spot on with several of their economic principles (Such as integrating the value of sweat equity and recognizing/defining a thing called Zipf's Law, which plays a role in how they pay out rewards to users). They go into relly good detail on some relevant concepts in economics and game theory in their whitepaper, and honestly that makes me feel confident that they have thought about what they are doing.
However, I will say that what works out on paper and in principle does not always pan out in practical application. I have not yet used Steem myself (But Stay tuned; I am going to do a series of posts on a Steemit experiment) but I have heard that while they have taken many steps to make the system as fair as possible, it still falls quickly to one simple idea. If you build a currency system, there will be Whales. Meaning, there are reports of imbalance and monopolization in the Steem Community, specifically Steemit. Don't get it twisted! I was not following the Hype or Gripe by looking into this. In fact, if there is any complaints related to this, I know that they are likely true. Damn near every system like this ends up... "separating out" in a sense, where 80% of the rewards and work is in part taken and done by the highest 20%. Zipf's Law in action. It is a remarkable empirical phenomenon
But.. Here's the kicker. I don't know for sure. I never played with Steem, or what I consider its flagship product, Steemit. So, Instead of reporting the Gripe, I am going to take you through my own personal experiences in the upcoming weeks/posts. I think this should be fun for both of us.
In terms of financials, I think they have a pretty solid foundation:
That's comparable to Brave/BAT, and is impressive in its own right (as of the time of this writing). It is number 77 in the world in terms of Market Cap, and that's no small change. I think that Steem is something the developers hoped would be a long term blockchain solution to social media, and I think that their principles appear sound. BUT. I'm gonna tell you right now that this is not financial advice, and I'm only going off what I have read instead actual experience. In many cases, I'd say the analysis is enough, but in this case, a deeper dive is NEEDED.
OH I ALMOST FORGOT. The Tron/Steem partnership/buyout/late night rendezvous. That might be another interesting development. Stay on top of that. This might play an important role in my next adventure, too.
As always, thank you SO SO much for reading. If you like this post, please feel free to check out my blog and read some of my other stuff if you want.
AND if you want an easy way to earn a little extra crypto and help me out for FREE, please consider becoming my referral for the app FREE LITECOIN! They pay out like ClockWork Every Monday/Tuesday. I personally wish I could spread the little pieces of Litecoin out on my bed and roll around in them.
Until next time... Keep your eye on the markets, and don't lose STEEM doing it.