What is Steemit?
Steemit is a social media network established in mid-2016 by Ned Scott and Daniel Larimer that functions a lot and looks like Reddit, but with one HUGE difference:
Steemit pays both the content creators when their work gets upvoted, as well as those who curate the very best content on the site by upvoting quality work done by others.
This is possible because the Steemit platform runs on a type of digital currency (like bitcoin) called Steem.
On a daily basis, new units of the currency are created on the network and distributed to its users, who can exchange these digital currency units for real money. And it’s completely free to sign up and get started.
How does Steemit work?
Steem (the cryptocurrency on which steemit is run) has some similarities to other digital currencies. For instance, Steem currency units can be traded, bought, and sold on the open market just like all of the other digital currencies.
With other cryptocurrencies such as Bitcoin, the currency units created daily are distributed to individuals who run a special bitcoin software on their computers that perform a process called Mining. The amount of computing power you have determines the amount of money you earn. However, on steemit, although currency mining is also allowed, it’s not the primary way to generate income. New Steem currency units generated daily on the network are distributed to people who engage within the site. The more your engagement, the more you earn.
People who create content are rewarded for their content. People who upvote content are rewarded for their help in curating the best quality content available on the site. Commenters who contribute to the discussions are paid too.
The 3 Steemit Currency Units:
One big difference between Steem and other digital currencies is that there are three different forms of Steemit currency units.
Here’s a short video by Andrew Levine that really does a great job with explaining the difference between Steem, Steem Dollars, and Steem Power:
Now here’s a quick breakdown of what’s explained in the video:
Steem Is the basic currency that powers the steemit system. It’s like the building blocks utilized to construct Steem Dollars and also Steem power (will certainly be clarified in a moment). You can buy and sell Steem, or convert it to Steem dollars and also Steem power. Yet if you’re not planning to cash out your Steemit profits in the near future, you don’t have to manage Steem straight.
Steem are the units that are exchanged for actual money on the common markets. You can trade them as you would bitcoins or a company’s stock.
The Steem dollar, also known as SMD is the money of the Steemit system. This is exactly what people send out to each other when they upvote blog posts on Steemit. The reason it’s called Steem Dollar is due to the fact that 1 Steem buck stands for the quantity of Steem that equals 1 USD relying on the currency exchange rate at the time.
However, unlike Steem, you can’t use Steem dollars outside of the Steemit system. You will certainly have to convert your Steem dollars into Steem first before you can exchange the Steem for Bitcoin or USD.
Steem dollars were created because the owners intended to equate the worth of Steem somehow to the US dollar, so that individuals will be able to trade inside Steemit withour having to worry about currency exchange rate changes. This way if you trade, for instance, 100 Steem dollars you understand you’re exchanging 100 USD worth of Steem.
Whenever you choose to cash out of your Steem dollars, you will certainly get whatever amount of Steem it takes to reach that value in USD. 50% of your pay will be in Steem Dollars when you create popular content. You also get rewarded for holding Steem dollars in your account for a long period of time, though not nearly as high as the rewards for holding Steem Power. Because it still keeps the currency in the network, holding Steem Dollars pays an interest of 10% a year.
When you earn Steem Dollars for creating content, you have three choices:
1) You can convert the Steem Dollars to Steem and sell it immediately on a cryptocurrency exchange for real money, thereby cashing out.
2) You can hold the Steem Dollars, which keeps money in the network and pays you 10% interest yearly. This is your best option if you think the value will go up and want to sell at some point in the near future.
3) You can exchange your Steem Dollars for Steem Power. This is done if you want to invest in the future of the currency and reap the biggest rewards.
Steem power, also called SP, is generally a token representing how much influence you have inside the Steemit platform. The more Steem Power Units you have, the more your curation vote will count. This means you earn more SP for upvoting other people’s work and people also earn more SMD and SP when you upvote their posts.
Powering up: This is the process of getting more SP either by upvotes or by purchasing it with Steem.
Powering down: This is the process of liquidating your SP to Steem.
SP could be powered down for Steem in a lengthy process that takes 2 whole years, which is why SP is taken into consideration as a “long term financial investment” in the Steemit system. By keeping your currency as Steem Power Units, you will have the ability to make considerably more money over time because you essentially have ownership in the network. As the network grows, so will your piece of the pie, and will be heavily compensated along the way. The way things work presently, 90% of the new Steem Currency that is generated each day is distributed as additional Steem Power Units to people who already hold Steem Power Units. The other 10% is distrubuted to content creators and curators.
Half of the pay you receive for your content will be in form of Steem Power Units.
Steem Power Units also play one final and essential role. They prevent massive price swings and volatility on the open markets. Because everyone is locked in for at least 2 years, we can’t all sell our currency at the same time if the market begins to dip, which would crash the price were it to happen.
How are the newly created Steem distributed daily?
Every day, 90% of the new Steem units are rewarded to people who hold Steem Power Units.
10% of the new Steem units are paid to content creators, curators, and commenters.
When you create quality content that earns income, 50% is paid to you in Steem Dollar Units that you can exchange for actual money immediately (or converted to Steem Power). The other 50% is paid in Steem Power. The Steem Power Units are locked for 2 years.
Steemit Website: https://steemit.com