Steemit is a social news service[2] which runs a blogging and social networking website on top of a blockchain database, known as Steem. The service produces STEEM and Steem Dollars which are tradeable tokens users obtain for posting, discovering, and commenting on interesting content.
HISTORY
The project was founded in 2016 by Ned Scott and Dan Larimer, creator of BitShares.[3][4] The two are founders of the Steemit Inc. company, which runs the Steemit website and funds ongoing development of the platform. On March 15, 2017, Larimer announced his resignation from the company.[5]
CONCEPT
The idea was described in a whitepaper released in March 2016.[6]
The general concept is similar to other blogging websites or social news websites like Reddit, but the text content is saved in a blockchain. Using a blockchain enables rewarding comments and posts with secure tokens of value. Images can be uploaded and hosted on Steemit. Other multimedia content must be embedded from other web hosts. For formatting, there is a WYSIWYG editor. Users can also opt to use Markdown formatting with HTML elements.
User accounts can upvote posts and comments, and the authors who get upvoted can receive a monetary reward in a cryptocurrency token named STEEM and US dollar-pegged tokens called Steem Dollars. People are also rewarded for curating (discovering) popular content. Curating involves voting comments and post submissions. Vote strength and curation rewards are influenced by the amount of STEEM Power held by the voter.[4]
Steemit has a reputation system, where new accounts start with a reputation of 25. An account's received votes can influence its reputation up and down, incentivizing online etiquette and interaction with the community.
STEEM BLOCKCHAIN
Steemit runs on top of a decentralized network named Steem. Like Bitcoin, Steem is a blockchain with transferable tokens. In addition to moving tokens from one place to another, Steem is also a text content and metadata database that applications or websites can connect to. Through these apps, Steem users can transact and interact with the Steem database. Instead of using cryptographic hashes as addresses like many blockchains do, user-chosen alphanumeric account names are used. With human readable account names, transactions can be made directly from an identity to an identity, making them easier to understand than hexadecimal hashes.
Steem also reaches decentralized consensus differently than Bitcoin. It uses a method called delegated proof of stake where block-creating accounts, called witnesses, are elected by Steem users. Instead of relying on proof of work to find blocks, the Steem network actively schedules blockchain transactions to be processed in blocks every 3 seconds. Block producers are given a small part of the rewards created in each block; the rest is paid to authors and curators.
Unlike Bitcoin, Steem has no transaction fees for rate-limiting or to pay its block producers. Instead, accounts use bandwidth, which replenishes fast enough that a typical user is not affected or limited.
While steemit.com (owned by Steemit, Inc.) is the first and reference front-end website interface for the blockchain content of Steem, the network's open and permissionless nature allows third-party websites and apps to connect and interact with the Steem database and blockchain. A frontend website portal is known as a faucet. Several faucets have been created by third parties. These offer alternative interface designs or features such as Instagram-style image posting. Busy.org is a Steem faucet and website with an alternative user interface. eSteem is a Steem faucet app for Android and iOS. A forum-style beta app called chainBB is also available.
Non-Steemit apps and websites use the same Steem user credentials as used on Steemit. This is possible because the user account and password are part of the network database, using public-key cryptography. Only the user who owns an account can authenticate actions such as commenting, voting, or transferring with their password or appropriate key. Each account has a set of private keys with different access privileges. The lowest security level key allows posting, commenting and voting, but not transfers of currency. Therefore, with a hierarchy of keys, it is possible to use other Steem faucets without risking a loss of funds or account control.
MONETARY SYSTEM
The Steem blockchain has two tokens: STEEM and Steem Dollars. 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.
Steem began with a highly inflationary supply model, doubling roughly every year.[4] However due to community demand, on December 6th, 2016 the inflation rate of Steem was changed to 9.5% per year, reducing by 0.5% per year.[7]
STEEM
The STEEM token is the network's base token. It is traded on multiple cryptocurrency exchanges and markets. Its market value determines the value of the pool of rewards paid by Steem. Its value also backs the value of Steem Dollars.
STEEM POWER
STEEM Power (commonly abbreviated SP) is STEEM that has been entered into a smart contract and represents the amount of influence an account has compared to the rest of the network. The more STEEM Power an account has, the higher influence its vote has on posts or comments. STEEM Power also determines an account's weight for witness approval voting.
Accounts are created with a small amount of deposited STEEM in the form of STEEM Power. Content creators have the option to choose post rewards of 100% STEEM Power instead of the default 50% liquid currency (a combination of STEEM and Steem Dollars) and 50% STEEM Power. Users and investors also have the option of converting liquid STEEM into STEEM Power, called powering up.
STEEM Power cannot be transferred or traded directly, but the account owner can choose to withdraw liquid STEEM in weekly payments at a rate of up to 1/13th of the account's total STEEM Power. This is called powering down. The account will lose its voting influence in proportion to the STEEM withdrawn.
STEEM DOLLARS
The Steem Dollar or Steem Based Dollar (abbreviated SBD) is an asset intended to be pegged to the United States dollar. Steem Dollars can be traded at cryptocurrency exchanges, and used for payments for goods and services.
There is an internal market on the Steem blockchain and integrated in the Steemit website where STEEM can be traded with Steem Dollars and vice-versa. Steem Dollars can also be converted into an equivalent-value amount of STEEM in a process that takes 3.5 days.
Steem Dollars which are held receive an interest rate. This rate is set as a variable collectively by Steem witnesses. This rate is often 0%, but it may fluctuate. If Steem Dollars are being traded below parity with the US dollar and the supply of Steem Dollars is not too high relative to the liquid STEEM supply, the interest rate may rise.
While nominally "pegged" to the US Dollar, the Steem system along with the volatility of cryptocurrencies make this goal difficult to maintain. Witnesses are empowered to manipulate the value of the SBD currency to return it to the peg; however, dips above and below USD parity are common.
WALLET
The Wallet page on Steemit shows the tokens and the voting power belonging to an account. Unlike Bitcoin wallets, every Steem wallet is publicly visible and tied explicitly to a particular account name. For the owner of a wallet, transactions of Steem Dollars and STEEM can be initiated from the Wallet page. Additionally, the owner controls powering up or down, transferring liquid tokens to and from savings balances, and conversion of Steem Dollars to STEEM. Savings balances are provided as a security measure and take 3 days for a withdrawal. Powering up is immediate, but powering down can take weeks. Buying or selling STEEM (converting to or from SBD) can be initiated using the Market by creating Buy or Sell orders.
REWARDS
Post and comment rewards are split 75% to the author and 25% to the curators. A 50/50 split of STEEM Power and liquid tokens are awarded to authors and commenters 7 days after a post or comment is made. 100% STEEM Power rewards are optional for posts. Post authors can also choose to decline payouts.
USAGE AND MEDIA COVERAGE
As of May 2017, there are more than 170,000 Steem accounts. After an initial public beta for which no payments were made, the hard fork on July 4th, 2016, saw $1,300,000 of STEEM and Steem Dollars paid out to Steemit users.[8]
The exchange rate of STEEM compared to Bitcoin rose continuously during July 2016, peaking at a price of over 4 US dollars.[4] In most of July 2016, Steem had the third largest market capitalization of all cryptocurrencies monitored by the website Coinmarketcap.com, reaching a first notable peak at July 20th, with about 405 million US dollars.[9] As of May 25th, 2016, its market cap is 258 million US dollars.
Steemit was described as a novel and "disruptive blockchain-based media community" by Adam Hayes (Investopedia) in July 2016.[4] It got media coverage in cryptocurrency- and business-related media.[10][11] Author Neil Strauss, a Steemit member, wrote an article for Rolling Stone calling its reward distribution "particularly clever" and echoing the sentiment of its disruptive potential.[12]
CRITICISM
Some industry experts question the need for a unique token specific to steem when bitcoin or ether could be used.[13] Others point out that steem might be a Ponzi scheme, predicting that the digital currency "will grow and grow until there are no fresh users to suck in and then quickly collapse".[13]
REFERENCES
Source: Steemd (Steem blockchain explorer)
^ https://steemit.com
^ Steemit Social Media Platform Pays Its Users, Sees Massive Growth; bitcoin.com; June 9, 2016
^ a b c d e Steemit: The Disruptive Blockchain-Based Media Community, Investopedia, July 26, 2016
^ "Today I submitted my Resignation to Steemit, inc". Steamit. March 15, 2017.
^ "Steem White Paper" (PDF). Retrieved 23 March 2017.
^ "Final Review of Steem Economic Changes". Steemit. Retrieved 8 December 2016.
^ "Social Media Blockchain Steem Issues $1.3MM Payout To Steemit Users". THE DASH TIMES. 2016-07-05. Retrieved 2016-08-10.
^ Steem, coinmarketcap.com.
^ New Social Media Platform Steemit Experiences Growth Since Launch, Coindesk, June 9, 2016
^ Steemit cypto-currency sees huge boost in market cap, The New York Business Journal, July 13, 2016
^ Strauss, Neil. "Can This Social Media Site Make You Rich?". Rolling Stone. Retrieved 8 December 2016.
^ a b New Digital Currency Steem Provokes Doubt of Market Observers; coindesk.com; July 23, 2016