Cryptocurrencies have grown to include a wide array of uses, some far more creative and legitimate than others. One unique implementation of blockchain technology can be seen in Steem, a blockchain-based social media platform.
What is STEEM?
Steem is a custom blockchain responsible for rewarding content creators and site participants of steemit.com. Through a complex algorithm, the site’s participants, content creators, and miners receive some combination of payouts from the platform’s three currencies: Steem (STEEM), Steem Dollars (SBD), and Steem Power (SP).
Steemit.com has grown tremendously since launching on July 4, 2016, now recording close to 1 million unique users daily and about 10 million unique users monthly. While much of the content on the platform is related to cryptocurrency, there have also been a number of very popular accounts dedicated to topics such as gaming, travel, lifestyle, and artwork. The unique and highly incentivized nature of the platform has caught the interest of thousands of content creators, including individuals both highly involved and completely oblivious to the overarching cryptocurrency community.
How does it work?
The distribution of the three currencies mentioned above incentivizes all participants in the network – from visitors to miners and creators. Similar to Bitcoin, Steem’s blockchain is based on a Proof-of-Work (PoW) algorithm. However, it differs greatly in the distribution of the mining rewards. Unlike Bitcoin and many other PoW coins, only 10% of Steem block rewards are awarded to miners. The remaining 90% are distributed among two groups: content creators, which include original posters along with thread commentators, and holders of Steem Power. Content creators receive 75% of all minted coins, and SP holders are granted the other 15%. The current inflation rate of Steem is 9%, and will decrease by .5% every year until the rate reaches .95%.
Steem Power is the main component that drives the system, as the worth of content is decided by voters who hold Steem Power. Steem Power acts as a locked variant of Steem. When users “power up”, they are transferring their Steem funds to SP at a 1:1 ratio. To power back down, they must enter a “power down” phase, wherein Steem Power is converted back to Steem, with one-thirteenth of the SP being unfrozen once a week over a 13-week period.
Users are rewarded for powering up to Steem Power because it gives weight to their voting. Each Steem Power holds an equal amount of weight, so a vote from a user who holds, for example, 100 SP carries ten times the influence as a vote from a user who holds 10 SP. The larger the weighted vote (the number of votes multiplied by the influence of each vote), the more compensation the comment or post receives.
Rather than keep investments as liquid Steem, supporters of the platform have an incentive to lock up their holdings as illiquid Steem Power because they are rewarded, first and foremost, with 15% of the newly minted supply. Beyond this, SP holders play the role of determining what content gets rewarded. The better they are in rewarding better content, in theory, the greater their investments will be worth, as more people will interact with the platform and invest in Steem if better content is shared.
Lastly, content creators share 75% of generated coins. The amount earned is distributed partially as Steem and Steem Dollars, and is directly proportional to the number of votes they receive. Content creators are encouraged to share fewer, high-quality posts rather than a slew of garbage, as compensation is entirely based on community reception, with each post earning a base amount of $0.
STEEM is different from most other cryptocurrencies in that users do not need to sacrifice money or hardware to earn a significant profit. Anyone who puts in the time and effort to contribute meaningful and interesting content has the ability to potentially earn thousands of dollars. Top posts have earned more, reaping rewards well into the five figure range. Such posts can encompass any and all topics; well-received posts in the past have included everything from make-up tutorials to chalkboard cryptocurrency analyses.
Furthermore, crypto knowledge is absolutely not a requirement to use the platform or be successful. Becoming an active member on Steemit.com is as straightforward as running your own Tumblr blog or Medium account. Anyone with the knowledge of or desire to blog is invited to join the hundreds of thousands of individuals actively participating on Steemit right now.
What’s to Come?
Steem’s developers are actively working on a major addition to the custom blockchain: Smart Media Tokens. Smart Media Tokens represent a highly intuitive, content specific alternative to Ethereum’s token protocol. With these tokens, existing forums and other content creation platforms can create their own tokens to be distributed to community users, supporters, and creators.
Smart Media Token issuers will have the ability to run ICOs, sell tokens, or freely distribute them (as with Steemit.com) to members of their communities. Additionally, forums and other groups will be able to incorporate any number of Smart Media Tokens to create an immersive, multi-token environment, with each Steem-based token being highly specified for the exact role its creators seek for it to play.
Shortly after the launch of Steemit.com, STEEM saw a massive explosion in price, touching a market capitalization of almost US$400 million in mid-July 2016. During this period, STEEM was the third highest valued cryptocurrency, behind only Bitcoin and Ethereum. However, this massive explosion brought out a number of inherent flaws in the system. Most importantly, a handful of Steem Power whales had almost complete control over the distribution of coins and direction of content, as the weight of their holdings gave them total power to vote any post to the top, thus rewarding the poster (oftentimes themselves) with thousands of dollars worth of Steem and Steem Dollars.
The massive hype, combined with the exposure of flaws, led to a market cap devaluation of over 95% between July 2016 and March 2017, when Steem reached an all-time low market capitalization of just over US$15 million. Fortunately, this trend reversed during the overall altcoin explosion in June and July of 2017. While Steem appreciated modestly relative to many others, it maintained the uptrend through January of this year. At that time, the coin experienced an explosion even greater than the first one, and Steem achieved a market cap of almost US$2 billion. Currently, one STEEM is valued at US$4.07, and the market cap of the coin is just over US$1 billion.
Steem and its platform, Steemit.com, represent a massively used, pragmatic utility that continues to grow. Despite its early flaws, its developers have undertaken over a dozen forks of the blockchain in order to improve the fairness and efficiency of the platform. At rank #26 on coinmarketcap.com, Steem is certainly not an unknown or highly undervalued currency, but it does still have plenty of room to grow.
If speculators like the concept of Steem but are concerned about the price or other factors, there are a couple of smaller, newer alternatives worth looking into. One is Simdaq, a social media platform allowing traders to communicate and buy/sell trading algorithms and bots. This coin has only just completed its crowd sale and is traded on the Waves Decentralized Exchange. Another is Scorum, another social media platform that is dedicated to sports and sports wagering. This project is currently in the main stage of its crowdsale, and has sold just over US$5 million worth of tokens, with a hard cap of US$17 million.