Understanding STEEM, Steem Power Delegation and Steem Dollar (SBD)
Being an entrepreneur for 20 years and working with Internet and technology companies since 1995, I have an personal fit and preference toward the Decentralized Digital and Social Media sector, its decentralized applications (dApps) and their potential to be disruptive.
What is decentralized digital and social media?
A decentralized digital / social media application looks a lot like a “traditional” social media platform where users post, share and engage around various forms of both user generated and professionally produced content. Other than a platform supported by a company that must, for example, sell advertisements to generate profits, on a decentralized platform every user of the service is inherently a stakeholder in the service.
Different engagements between users and the platform and between users and users can be executed through and / or incentivized by the exchange of the platform’s native tokens. Users of these applications must therefore own and transact in the service’s tokens in order to engage in the core activities of the service. The content around which users interact may also be stored across a decentralized network of servers rather than on those owned by the platform provider itself.
Steem Introduction
The concept of Steem is confusing. You have Steemit, a blogging and social networking website on top of the Steem blockchain database that pays users with digital currency for posting and upvoting good content. The general concept is similar to other blogging websites or social news websites like Reddit, but text content is saved in the blockchain. Using a blockchain enables rewarding comments and posts with secure tokens of value.
The Steem blockchain produces STEEM and Steem Dollars which are tradeable tokens users obtain for posting, discovering, upvoting, and commenting on interesting content. There is also a vested or stored interest known as Steem Power. Steem Power is strictly for internal use in the Steem community, while the tokens are used for stored value and trading. The Steemit platform has grown immensely in the past few months, according to Alexa’s web ranking:
As of Feb 2018, there are more than 750,000 Steem accounts that can upvote posts and comments, and the authors who get upvoted can receive a monetary reward in STEEM and the US dollar-pegged tokens called Steem Dollars. Account holders are rewarded for voting and comments and post submissions. Vote strength and curation rewards are influenced by the amount of Steem Power held by the voter.
Steemit operates on the anarchist principles of self governance and community policing. An excellent ideal that in theory would promote the best content based upon user curation. However, this has failed to some degree with the inclusion of vote selling bots and potential bullying by wealthier members of the site that use their influence to set policy, control and censor content at will.
The two building blocks of this protocol, both blockchain and token, depend on each other for security, immutability and longevity, and are therefore integral to each others’ existence. Steem has been successfully operating for over a year, and has now exceeded both Bitcoin and Ethereum in number of transactions processed.
Two new and unique features of the STEEM token make it both “smart” and “social” compared to others, such as bitcoin and ether. The first is a pool of tokens dedicated to incentivizing content creation and curation (called the “rewards pool”). The second is a voting system that leverages the wisdom of the crowd to assess the value of content and distribute tokens to it. These two unique properties when combined are referred to as Proof-of-Brain, which is an entendre based on Proof-of-Work, meant to emphasize the human work required to distribute tokens to community participants.
In addition to these advancements in blockchain and token technology, Steem as a system provides advanced features to enhance the user experience, such as Stolen Account Recovery, escrow services, user promoted content, a reputation system, and savings accounts. This is all done while providing users with three second confirmation times and zero fees on all transactions.
STEEM, STEEM POWER (SP) and STEEM DOLLAR (SBD)
The digital token STEEM should be held for short periods of time when liquidity is needed or to enter or exit the Steem platform. Once STEEM has been purchased it should be converted into Steem Power (SP) or Steem Dollar (SBD) to mitigate the impact of dilution over the long-term. STEEM is constantly increasing in supply at a rate that was set in December 2016 to 9.5% per year and decreases at a rate of 0.01% every 250,000 blocks, or about 0.5% per year. Of the supply of new tokens created by the Steem blockchain every year, 75% of those tokens compose the “rewards pool” which are distributed to content creators and content curators.
Steem operates on the basis of one-STEEM, one-vote. Under this model, individuals who have contributed the most to the platform, as measured by their account balance, have the most influence over how contributions are scored. Stake can be bought or earned. Furthermore, Steem only allows members to vote that committed their STEEM to a 13 week vesting schedule called Steem Power (SP). Under this model, members have a financial incentive to vote in a way that maximises the long term value of their STEEM. Users of Steem create content and interact with one another with posts via upvoting or liking content and users allocate Steem Power to the content creator, comment poster, etc.
Steem Dollars (SBD) are created by a mechanism similar to convertible notes. A blockchain based token can be viewed as ownership in the community whereas a convertible note can be viewed as a debt denominated in any other commodity or currency. The terms of the convertible note allow the holder to convert to STEEM with a minimum notice at the fair market price of the token. The blockchain rewards users that produce content and adding value to the network as well as users that take time to evaluate and vote on content with Steem Dollar (SBD) relative to their value based on the collective wisdom of the crowd collected through the stake-weighted voting system.
Further Reading and Updates
Steem blue paper (simplified version of white paper) and Steem white paper.
Official Steemit blog: https://steemit.com/@steemitblog
Steem developer blog: https://steemit.com/@steemitdev
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