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I recently came across Steemit, a Reddit-esque platform which seems to be running on the Steem blockchain. It looks like it is paying its users to post and curate content. However, it looks rather leery that essentially a lengthy blog post could have a pending payout of over $3900. Even taking into account the exchange rate of about 0.25 USD/Steem, that is a good pay for writing articles.

So I wonder - what's the catch? What is Steem and Steemit all about? Is the platform really paying people hundreds of dollars to post articles, or is there something fishy going on?

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Steem content is rewarded based on a voting system, described well here:

https://steemit.com/steem/@smooth/voting-is-a-popularity-contest

Not that payment is made in Steem not fiat and Steem value will fluctuate over time.

The developers were able to mine a huge portion of the total Steem supply due to the relative complexity if the mining process at launch. The fairness of the process has been a matter of debate:

"First, they did a typical instamine/flashmine/freemine scam (yes scam) where they released

(1) no compiled wallets (2) no instructions to build (3) incomplete and inaccurate instructions to mine

This wasn't bad enough. After the first 12 or so hours of mining, all their miners crashed, exposing that they were mining to 100 different witnesses to hide the fact that they (he) was one entity. The devs wouldn't have been caught except that their mining instructions were wrong, and no one else was mining because, even if they couldn't get the client to build, they entered mining commands that caused them to get no blocks. The devs will claim this isn't on purpose, but check the original thread. You'll see that no one mined a block when the dev's miners were down.

Then, as I have stated many times, when their miners crashed again, I mined a significant amount of steem that night in their absence. To prevent my vesting that and driving the price of vests up on them, they relaunched to ensure COMPLETE CONTROL AND CENTRALIZATION.

After the relaunch, no one would challenge them on mining because if they did, the devs would just relaunch this scamcoin again. So, no one who pays attention (and the people who have the means to procure whatever hashes they want are also the people who are paying attention), would challenge them on the hashes. As they hoped, no one did and they completely dominated the hashes for 1 week."

https://bitcointalk.org/index.php?topic=1427230.0

The "stealth" mining by developers raised a lot of Steem which are now being deployed in part to attract new users.

"At the conclusion of the pure-PoW mining phase, all of the coins from the developer mining accounts were merged into the transparent 'steemit' account, with a stated plan to sell them off to pay for development and distribute them for free to new users (each new account requires 10 STEEM funding). These actions have occurred and are transparent on the blockchain."

https://bitcointalk.org/index.php?topic=1513252.msg15232327#msg15232327

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About the reward model

One of the core principles of Steem is the idea that micropayments are inefficient. Even for a small tips of, say, $0.05, there is a conscious calculation that occurs as you weigh the option. This is a detriment to engagement.

Instead, Steem uses a steady stream of new tokens to reward content producers. Users do not have to think about how much to tip -- just what to tip. In addition, transactions are free on the Steem blockchain. This makes it very easy to participate by removing any cognitive load.

Why are the payouts so high?

Since Steem is a very young platform, there is less competition for rewards. Basically, this means early adopters are getting a bonus. As more users come onboard (view charts), there will be more competition for this same reward stream.

Consider the first Bitcoin miners. It was fun and easy for anyone to jump on and get a good chunk of coins as long as you had the know-how.

Steem applies the exact same idea through subjective Proof of Work: Instead of allocating stake to miners, Steem allocates stake to those who post captivating content, as measured by upvotes.


For a full explanation, see the whitepaper. It explains the motivations behind the platform as well as the economic model in depth. Disclaimer: I contribute to this project, and run a chain explorer.

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What is Steemit?

Steemit is a social media platform where everyone gets paid for creating and curating content. It leverages a robust digital points system, called Steem, that supports real value for digital rewards through market price discovery and liquidity.

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Steemit.com is the main website "wrapper" for a social network platform that allows access to STEEM blockchain.

There are some more wrappers and tools that allows you to access this social network. You can find a huge list of STEEM tools that allows you to access many features of this network.

STEEM blockchain is supported by a network of servers that are backed up by people so called Witnesses that allows it to stay alive. They receive a portion of generated STEEM. The amount of STEEM they receive is based on a votes they receive from users who vote for them.

The main currency that this blockchain generates is STEEM and it is base for everything. You can trade it in exchanges. And I suggest to invest only in STEEM if you decide to.

This social network is like a Bank that generates this currency and uses it inside of it. But the tricky part is that inside this social network it uses a "frozen" STEEM variants.

STEEM is converted into 2 other currencies:

  • STEEM POWER - it is like a deposit that you keep inside this network and is kind of frozen while you use it there
  • SBD or STEEM Dollars is equivalent of USD or at least was meant to be

STEEM social network users get rewards for writing posts and comments, as well as upvoting other posts or comments. It is very complicated formula that takes into account many aspects of a user rating and network. It is far from perfect.

Those rewards are paid in those 2 currencies - STEEM POWER (SP) or STEEM dollars or (SBD).

For newbies it is seems not fair. Because as a new user you get something like:

0.001 SBD and 0.001 STEEM POWER

At the same time, if you have invested time and got some network of other users that have reputation then you can earn 10 or 100 times more. And yes, you can get a $1000 per post.

Current implementation of reward system is crippled. Like it is in other networks. You get rewards not for writing good content but for being a leader of a strong follower network. You can get $100 for a post that shows a silly image of your cat. At the same time other user will be paid $0.001 for posting an article that was posted on Wired.com.

Steemit user base is growing fast and is more than 400,000+ users. Bounce rate is 40%+. So, around 10% are alive and probably human that make all the activities on network. And only 41 of users are called Whales that has the power of giving away those magical $100+ per vote that everybody whishes to get.

This network is full of bots and scammers that use the reward system to earn some cash. Average post receives 2 comments. Most probably one of them is a bot.

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