Steemit– a new blockchain-powered social media site– works in an entirely different way compared to today’s most popular social media sites. Rather than expecting its users to contribute content and interact for free, Steemit shares the wealth created by the platform.
Though Steemit’s decentralized structure shows promise, Steemit does have a significant downside: quality content isn’t necessarily king. Steemit’s biggest spenders can use their influence to promote low-quality content and get it featured on the home page.
Keep reading for an in-depth look at Steemit and find out whether or not it’s for you.
- Money-making potential.
- Large, growing user base.
- Minimal censorship.
- No corporate ownership.
- Reposting previously published content is allowed.
- Building an audience takes time and money.
- Few businesses currently accept SBD / STEEM payments.
- The future of the platform is uncertain.
- It’s difficult to convert Steem into cash.
- Steep learning curve if you’re new to cryptocurrency.
- Big money Steem investors have more power than newbies.
- Quality content doesn’t always rise to the top.
- 2FA is the only way to recover your account if your password is lost or stolen.
Ned Scott and Dan Larimer launched Steemit in March of 2016 with the goal of creating a new type of social media network.
Scott first found out about Larimer after becoming interested in BitShares– Larimer’s first major cryptocurrency project. Scott and Larimer started communicating via the internet in 2015. The following year, they met in person. After several brainstorming sessions, Scott and Larimer decided to focus on developing a new type of cryptocurrency community.
Scott shared some details about how he and Larimer developed the Steemit concept with CoinReport:
“Steem was born out of ideas about insurance and mutual aid: it was the idea that people would be able to help each other peer-to-peer if they were struggling to solve problems or needed assistance. It quickly grew into a much larger vision and Steemit was born as a place where individuals get rewarded by a community for posting and voting on content.”
The cryptocurrency community’s initial response to Steemit was mixed. CoinDesk reported that Magnr co-founder Joe Lee had positive things to say about Steemit:
“The concept itself is interesting, it is a Reddit and Quora mashup with a strong monetary incentive to produce good quality content.”
Others, however, expressed skepticism. Petar Zivkovski, director of operations for full-service bitcoin trading platform Whaleclub, told CoinDesk that he viewed Steemit as a potential scam.
“My first impression is that it is a ‘pump and dump’ crypto where accumulators (founders, early adopters) will be looking to cash out on a major pump in price (distribution). Whether it survives longer term remains to be proven.”
Steemit generates some buzz
Though Steemit attracted a few initial miners and content creators, it mostly fell off the radar until July of 2016. That month turned out to be a pivotal one for the fledgling project.
On the 4th of July, Steemit released its first batch of rewards to its initial contributors. When those initial users reeled in their first Steem Dollars and STEEM tokens, interest in the platform began to surge.
Scott provided the following comment to CoinDesk about the renewed interest in Steemit:
“What happened on 4th July, it was like a three-month long day that finally ended. Today, the rewards pool distributes in a continuous matter. On that first day, it was sort of this moment that had been building up.”
Problems begin to emerge
The following year, it became obvious that there was major problem with Steemit: its front page was filled with sub-par quality content. Much of that content was related to Steemit itself.
Michael Casey, a senior advisor of blockchain research at MIT, pointed out the problem with Steemit’s rating system in a CoinDesk thought piece:
“One limitation can be seen with the upvoting model in Steemit, which rewards top voted stories with steem tokens and which invariably results in posts about Steemit itself rising to the top of the trending ranks.”
Dan Larimer Resigns
In March of 2017, Steemit co-founder Dan Larimer parted ways with Steemit. Larimer notified the Steemit community of his resignation with a three-sentence Steemit post:
“Today I submitted my Resignation to Steemit, inc. I will not be posting or voting any more. I wish you all the best.”
The next day, the official Steemit blog posted the following farewell message:
“Steemit, Inc. and Dan each look forward to continuing to make valuable contributions to the blockchain and cryptocurrency communities. Steemit, Inc. wishes to thank Dan for his service, and Dan wishes the Steemit officers, employees, and community members continued success in the development of the STEEM blockchain and the Steemit social media platform.”
Larimer’s departure seemed to worry the Steemit community. Even blockchain consultant Steemit Tone Vays said negative things about Steemit following the co-founder’s resignation. Vays had worked with Larimer on both BitShares and Steemit.
In a CoinDesk article about Larimer’s newest blockchain project EOS, Vays described BitShares and Steemit as “shady in nature.”
“Both Bitshares and Steemit allowed insiders to create lots of tokens for themselves, and after that, the proof-of-stake nature of the project allowed those insiders to print tokens of value for themselves in perpetuity.”
Despite the criticism, work on Steemit keeps moving forward and the platform continues to grow. In early 2018, Steemit briefly ranked among the internet’s top 1000 websites, according to Alexa.
Scott has stuck with Steemit and continues to promote it. In an interview with Bloomberg, Scott spoke about Steemit’s continued growth.
“I attribute almost all of Steemit’s growth to the reality it’s distributed money to members of the community. There’s been very little marketing. It’s been all organic conversations that have led to the growth of the platform. A majority of the people who continue to stick around are being compensated for their time.”
This year, Steemit will unveil SMTs– Smart Media Tokens. Essentially, SMTs build on what Steem already does– provide an ad-free way for content creators to generate revenue.
According to the SMT white paper, the token’s core features will include better token sale programmability, automated liquidity providers, decentralized token markets, dynamic token distribution parameters and a large ecosystem of tools for facilitating website integration.
How Does Steemit Work?
The technical details of how Steemit works are complex. But on the surface, Steemit looks just like a typical social media site.
The Steemit dashboard page borrows from Reddit and Tumblr. Trending posts are spotlighted in the center of the page. Categories on the left side of the page and four tabs on the top of the screen– Trending, New, Hot and Promoted– let you filter the most popular content in a variety of ways.
The pen icon brings up a simple form that lets you create a new Steemit post. The Editor link opens a menu that lets you add bold or strike-through text, italics, links, images and large, medium or small headers.
The most interesting thing about Steemit is not its appearance, but rather what goes on under the hood. Steemit’s decentralized structure and rewards system provide a glimpse of what the social media networks of tomorrow might look like.
The decentralized network
As is the case with bitcoin and other cryptocurrencies, Steemit is supported by not just a few hundred powerful computers, but by hundreds of thousands of ordinary computers across the globe. Every Steemit post gets written to the distributed Steem blockchain.
In contrast, typical social media sites run on centralized computer servers. Those servers are costly to maintain. Steemit has much less overhead because it is totally decentralized. The money saved gets passed along to Steemit users through Steemit’s reward system.
Even though Steemit doesn’t run on high-powered computers, its capacity is impressive. According to the Steem white paper, Steemit decentralized network can accomodate a larger user base than Reddit:
“Steem is capable of handling a larger user base than Reddit.”
The downside of Steemit’s decentralized structure is that Steemit has limited support. If you lose access to your account because of a lost or stolen password, you can only regain access if you set up 2FA (Two-factor Authentication). There are no administrators that can generate a new password for you.
The rewards system
Steemit’s reward system was intended to give content creators a way to receive funding that doesn’t involve ads.
“Creators posting to social media outlets that are connected to Steem may monetize merely by having their work recognized (or “liked”) by the Steem community. Blockchain-based payouts are completely digital and have no middle-man. Therefore monetization by blockchain-based content rewards should be faster and have a much lower barrier to use than monetization through advertising.“ – The Steem white paper
There are two types of Steemit rewards: Steem Dollars and STEEM tokens. Ether reward can be used to power up your Steem account with SP (Steem Power).
- Steem Dollars. Steem Dollars are “liquid stable-value currency tokens” that are designed to be pegged to $1 US. Unlike STEEM tokens, Steem Dollars can only be used to buy things on the Steemit site.
- STEEM tokens. STEEM tokens are more flexible compared to Steem Dollars because they can be traded on cryptocurrency exchanges. Steem Dollars can be converted into STEEM tokens, but that process takes 3.5 days.
According to the official Steemit FAQ, the formula that Steemit uses when it issues payouts can fluctuate:
“Payouts occur as a combination of Steem Power and Steem Dollars. Sometimes the blockchain may substitute STEEM in place of the Steem Dollars based on market conditions.”
There are four main ways to earn Steemit rewards:
- Creating new posts. You can get get STEEM token rewards when other Steemit users upvote your posts.
- Upvoting posts. Another way to earn STEEM tokens is by upvoting posts.
- Curating posts. If you upvote a post that happens to go viral, you can earn bonus rewards for being an early upvoter.
- Purchasing SP (Steem Power). Owners of SP automatically receive 15% of all new STEEM tokens.*
*Steem began creating new tokens at a yearly inflation rate of 9.5% in 2016. That rate will decrease at a rate of about 0.5% per year. 15% of new STEEM tokens get sent to SP owners. The rest gets deposited into a rewards pool.
Once you get some STEEM token rewards, you can either cash them out through a cryptocurrency exchange that supports Steem tokens, or you can use your Steem tokens to “power up” your account by purchasing Steem Power.
If you have a large amount of SP, your upvotes will result in a large payout for whoever wrote the post. Likewise, if you only have a small amount of SP, your upvotes will result in a small payout. In addition, SP holders automatically receive 15% of all newly generated STEEM tokens.
Steemit users are allowed to upvote their own content. This means that Steemit users can upvote themselves all the way to the front page of Steemit if they purchase enough SP.
“Powering down”– or in other words, trading your SP for STEEM tokens– takes 13 weeks. During the power down, Steemit converts 1/13th of your SP into STEEM tokens every week and deposits your funds into your wallet.
Any STEEM tokens you earn can be traded in for other currencies through any cryptocurrency exchange that supports STEEM. The most convenient way to cash in STEEM tokens is likely Changelly. Changelly is very easy to use and it supports government issued currencies, but its fees are somewhat high.
Other exchanges that support STEEM include Binance, Bittrex, Bitwala, Blocktrades, Gopax, HitBTC, Korbit, LocalBitcoinCash, Living Room of Satoshi, Openledger, Poloniex, ShapeShift and UpBit.
How to Join
There are two ways to sign up for Steemit:
- Send in your application and wait for approval.
- Pay to have your account created instantly.
According to the Steemit FAQ:
“Some accounts are approved faster than others. Most accounts are approved within 24 hours. Some may take a week or two to review.”
If you’re not willing to wait, you can join Steemit through Blockchains, AnonSteem or SteemConnect.
The fee for signing up through Blockchains is 0.018154155080725382 ETH, or roughly $7.50 USD. If you go through AnonStream, you can opt to pay either 5 STEEM (approximately $1.20 USD), 0.0025 BTC (approximately $18.50) or 0.1 LTC (approximately $7.50). SteemConnect charges a variable signup fee that fluctuates depending on market conditions.
You have to have a cellphone to complete the signup process. Once you verify your email, you have to set up 2FA (2-factor Authentication) to gain access to your account.
The developers behind Steemit have a tricky problem to address: they need to find a way to reward quality content without penalizing the people who have already invested large amounts of money into the platform. If they don’t find a way to thread that needle, Steemit users will abandon the platform if a similar one does.