Steem Cryptocurrency – I Bought 1 Bitcoin Worth of Steem!
My first Steem Cryptocurrency Investment
This month I signed up for Steemit.com and bought 1 Bitcoin of Steem. After a long night watching random youtube videos I stumbled onto the video below. The video is Jeff Berwicks interview with the creators of Steem and how he made over $15k from his first post on Steemit.
After watching the long video and checking out steemit I was really impressed. Overall I found it much better than Reddit to use (where I share some posts from Bitcoin-Millionaire), so I decided to comment and write some posts that I would normally do on Reddit. Overall the content quality was pretty good and it was a more positive environment than reddit.
I then read the full Steem whitepaper, and was interested more so I converted 1 Bitcoin into Steem (on www.steemit.com) and powered up my account.
If you are already (or are about to sign up) on Steemit you can follow me here steemit.com/@db-production and I will try to follow you back too
So what is Steem?
I am not going to get technical as the whitepaper is a better resource for that but I will talk high level points.
Steem is:
The first social media cryptocurrency (that I know of).
It has the ability for multiple social media platforms to be built on top of Steem (think Facebook, Twitter, Instagram, Reddit, Snapchat, Pornhub etc).
The Twitter (called Zappl), Instagram (called steepshot) & Youtube (called steemQ) versions are actually being built as we speak.
At the moment Steemit.com is like Reddit except you get paid when people upvote you.
It has instant transactions with 0 fees.
Half of the blocks released go to the miners and the other half goes to content creators and curators.
The amount of Steem available inflates at 9.5% a year.
How does Steem get paid to authors and curators?
Again the white paper is a better reference for all the details, but here is a basic overview:
There is currently about 224,000,000 Steem in circulation (from coincap.io) and Steem can be actively traded on Poloniex or another exchange for other cryptos.
Steem can also be converted into Steem power. Steem power is like owning a share in the ecosystem.
The more Steem Power you have the more Steem (or money) you give people when you like their content, comment or post your own content.
People also get a reward for curating (or liking) the good content first. This allows the best content to come up in everyone’s feed.
You get paid 7 days after you post your content in Steem dollars which you can convert into Steem Power or Steem (that you can sell for other cryptocurrencies and cash if you want).
If it all sounds confusing, setup an account at steemit.com do some posts, make some Steem and you will get a feel for it.
Remember it is completely free to join so you have nothing to lose. There is also very good content written on explaining Steem better under the tag steemit.
If quick high level videos are your thing then check this out for an intro into Steem:
Why did I Invest in Steem?
As opposed to being overly verbose here are two main reasons:
The platform is extremely useful for sharing content. There is value in getting the targeted Steem audience to your site (my site being crypto related) and maybe some value in backlinks (helping with SEO).
Speculation on the price going up in the future. Comparing the current model of social media with the Steem model I am blown away. Facebook, Twitter, Reddit and all the others basically use our content for free and sell it to advertisers, whereas Steem is kept with the content creators.
Where does the value in Steem come from?
At this stage it can quickly jump out of the screen and appear as a Ponzi scheme as there is essentially no income going into the system (like the other social media platforms) in the way of paid advertising. However, you only need to look at the early days of any social media platform and you can see the potential.
Generally only after they reached multi billion dollar valuations did other social media platforms start to monetize their platforms and bring in money from advertising. I see the same thing happening for Steem.
So then how do you value Steem?
I think the following factors need to be considered:
The number of users and the growth of the user base.
The potential of other social media platforms (currently being developed) like Zappl as the Twitter competitor for example.
The quality of the team developing the applications (I have not done enough due diligence to comment on this yet).
Once those factors are looked at it comes down to comparing them to the historical reference points for Facebook, Reddit, Youtube etc. So Peter Thiel originally invested in Facebook for around 10% equity when it had less than 1 million users for around $500k from memory and the rest is history.
From what I have found there are about 171,000 accounts on Steem as of today. The market cap of Steem is $224 million today. This means that going on the metric of users alone it is probably on the high side of price valuation. However it is growing fast and the potential for the other applications going viral is there.
Generally when evaluating the price of an asset I would add up all the potential future cash flows and apply a discount based on the minimum returns I need to invest in that asset (discount cash flow). So valuing Steem is extremely difficult as it is very early stages and the potential future cash flows are very obscure.
What is the downside risk with Steem?
The downside risks I see are:
There is currently about 171,000 users and the market cap of Steem is over $224 million meaning it is higher valued than other social media platforms at that user base level.
The growth could slow down, stop or go backwards.
Automated posting bots could destroy it.
The other platforms like Zappl might not be successful.
It may be hard to get people to change from other social media platforms to Steem.
The code may not be solid (I am not technical in this area) and it may be hacked or have issues.
How will it eventually be monetized? Will advertisers use it (or other methods)?
What is my plan with Steem?
I will record my Steem balance once a month in terms of it’s value relative to Bitcoin and the USD. This way we can see how 1 Bitcoin invested in Steem goes overtime.
I want to diversify my Bitcoin holdings and not have them all in one area. Therefore this investment made up about 2.5% of my Bitcoin holdings. As of writing this the 1 Bitcoin investment is worth 0.96 Bitcoins.
In the years ahead I will convert the Steem back to Bitcoin to (hopefully) help with the Bitcoin Millionaire target.