Steemit is a great place to blog, connect and learn, and like everyone here I too like the idea behind Steemit (plus all the Dollar signs everywhere). But the rules and terminology of Steemit can be quite confusing - and this even for experienced users.
Therefore, I would like to shed some light on the main driving elements of the Steemit environment, but without going too deep into details (and create even more confusion). Overall, there are only a few terms that are important for everyone who is using Steemit and I think, they need some clarification:
- Steem/Steem Power
- The Blockchain
- The Witnesses
- Steem Dollar (SBD)
Of course there are plenty of other Steemit-specific terms like MVEST, delegation, rsteeming and upvoting and their bots, reputation, the bandwidth per user, the Whitepaper (and I just discovered: The "Bluepaper") plus the specific arithmetics of payouts for rewards and articles. But they are either self-evident or only important for advanced users and in most cases not even for them.
You can easily ignore the bulg of terms and get along successfully on the platform. Important for the understanding of the platform are only the following...
1. Steem/Steem Power
Steem is the main thing here on Steemit. It is the currency of the platform and as you surely know, Steemit is part of the cryptocurrency/blockchain universe. The best known currency of this universe is Bitcoin. Steem is a bit different to Bitcoin, but the two also have something important in common.
The difference is that every unit of Bitcoin gets calculated. There is an algorithm which needs to be solved and the result is one Bitcoin. For every next Bitcoin, the calculation is a bit more difficult to make sure there is only a limited number of Bitcoins. In analogy to the "creation" of gold, the process of solving the algorithm is called mining. The computers on which the Bitcoin mining takes place are called mining rig and the people/corporations who own such a rig are called miners.
In the case of Steem on the other hand, the miners are the users (hence: you). The mining rig is your computer along with your Steemit account, and the process of mining is writing a blog post or a comment. It is your activities on Steemit which trigger the creation of a new unit of Steem.
For triggering the creation of new Steem, the system rewards you. You get some of the new Steem, plus some Steem Dollar, a bit of reputation and all that depending on the popularity of your post, your previous activity and the amount of Steem Power you have acquired so far.
When you get your new Steem, you can sell it or you can keep it in your wallet without doing anything with it. But you can also power it up and turn it into Steem Power. It is only Steem in the form of Steem Power, that increases the value of your votes and helps increasing the rewards you receive.
Powering up Steem is also necessary if you want to delegate it. But this is more something for users who have so much of it that they don't know where to put their Steem - and that's probably not you. :-)
What you can take away from this passage is that if you don't want to sell your Steem, then you should power it up and turn it into Steem Power.
2. The Blockchain
While Bitcoin and Steem are being produced (or mined) in different ways, they have in common the method in which they are stored and transferred: With the help of the blockchain technology. If you are interested in how it works, there are plenty of simple (and not so simple) explanations out there explaining it to you.
For this overview, it is enough to state that while in the case of Bitcoin, the result of the algorithm is stored in the blockchain, the Steem blockchain stores the content of the posts and comments you make in the blockchain. And while the blockchain for Bitcoin has been optimized to "feel" like a value storage as it is gold (just in a digital manner), the Steem blockchain has been optimized to "feel" like a Social Network or Blogging Platform.
Think of both as automobiles and while Bitcoin is the collectors Lamborghini which the owner only drives once per year, Steemit is more like a Bus that gets you from A to B. At the end though, both work with the same principles and have a comparable purpose.
3. The Witnesses
The witnesses are basically the developers of the Steemit environment and they are responsible for maintaining and developing Steemit and the Steem blockchain which stands behind it. In total, there are 20 witnesses and each one of them has a computer connected to the Internet used as server (called node) on which the entire Steem blockchain is running. This is the element of decentralization, which is a core element of the blockchain technology.
The details about how it exactly works is again irrelevant for this overview. What is important is that the witnesses are responsible not just for keeping the system running and free from bugs and attackers, but they are also in charge of changing the functionality, the design and the rules of Steemit if deemed necessary. The rules include the way of how users can get payouts and how much they can get, how many posts and comments users can make and all other aspects that make up Steemit.
This is particularly interesting for you in case you want something to be changed or found a bug. You can contact them via the Steemit Chat, or you can contact them directly by writing a comment under one of their articles in case you have a suggestion or complaint about the system (here is a list with the current ones). Some of them also publish regular reports about their activity as witness.
And you cannot just contact them directly and complain, you can also vote for them - or for someone else as witness, if you aren't satisfied with their work. But don't expect too much from that specific voting power for voting witnesses, Steemit is more like a stock based corporation than a democracy: The amount of Steem you have determines the weight of your vote.
An interesting "fun fact" about the witnesses is that most of them too only have a rudimentary understanding of how the economics of Steemit work. So, it's not too embarrassing for you if you don't understand all the details.
4. Steem Dollar (SBD)
Steem Dollar - or in its entirety Steem Blockchain Dollar (that's why the "B" in the middle) - is an artifact and shouldn't be there. Artifacts can be ancient goods or creations that someone digs out and doesn't really understand the origins or the purpose of it. That's the archaeological definition of the term artifact. But there is also a negative definition of it, like when there is a spot on a picture and you can't be sure if it was a bit of dirt on the lens, an insect or an UFO.
For Steem Dollar, the label artifact has the latter meaning and I should add that this is impart my personal opinion.
According to the "Whitepaper" which is the plan for Steemit after which the platform has been built, SBDs were supposed to be a simple exchange tool for the US-Dollar. This might be a surprise to you but Steem Dollar is not the official currency of Steemit! I know, it doesn't look like that, but it is very important to understand that SBDs aren't the real thing. SBDs were planned as a mere tool for users to make it simpler for them to exchange Steem for US-Dollar and over time, things kind of got out of hand.
I know, this sounds very strange - at least to me - but that's the case as far as I understand the matter and the discussions about SBDs (see December 11th ff).
For the purpose as an exchange tool, it was deemed optimal to "peg" SBD to US-Dollar in a 1:1 ratio. Pegging is a term meaning that the exchange-rate between the two currencies is defined as constant. If the US-Dollar changes its value, SBD changes its value to the same degree and in the same direction. Recently I wrote an article about how this is done - or about how the process of keeping SBDs and the US-$ in check is supposed to work.
While the details of how this works are not very interesting for the very most users (exception: economists!), the construction, the treatment and the development of the SBD has major implications for everyone on Steemit and you really shouldn't ignore them, because they could cost you a lot of money.
Since SBDs are:
- not supposed to be the "real" currency of Steemit, but just an exchange tool
- not fixed in their amount to anything like a blockchain, but can be created more or less arbitrarily
- the price peg is out of control and right now (Jan 2018) one SBD is even more worth than one Steem
- nobody knows what is driving the price of SBD
- most witnesses do not understand SBD and its purpose (or monetary politics)
- dividing the witnesses into two fractions, one which wants to get rid of the SBD and one which wants to peg SBD in a 1:1 ratio to the US-Dollar again
- overall completely ill-understood, overvalued and a matter of controversy among the developers of Steemit
You should hold as few SBDs as just possible in your wallet!
This counts for your Steemit wallet, but also for other wallets like the Bitshares exchanges or offline wallets (if that is a thing). When you get a payout for an article, sell all the SBDs as soon as possible for Steem or transfer the SBDs to an exchange and buy another cryptocurrency for it.
Again: The Steem Dollar (SBD) is not Steemits currency, but a flawed tool that can easily get out of control and already got out of control. If you own SBD or see other users owing many SBDs, you should advise them to get rid of them.