What Is STEEM?
Created by Ned Scott and Dan Larimer, STEEM is a cryptocurrency that is used to power Steemit, an incentivized blockchain based social media platform. Steemit is very similar to Reddit, in that it allows users to make posts, write comments, and also upvote posts and comments made by other users. The difference however, is that users can be rewarded monetarily for these actions. Blockchain technology enable users on the Steemit platform to receive the cryptocurrency in exchange for participating on the platform, which can then be exchanged for other cryptocurrencies such as Bitcoin, and then eventually fiat currency.
Steemit also has a reputation system, where new users start with a reputation point of 25. The more upvotes a user receives on their content or comments, the higher their reputation point will increase. Conversely, a user’s reputation point can also decrease if their content or comments are flagged by other users on Steemit. The reputation system is designed to incentivize good online behavior and etiquette, which is hoped will foster a positive community on the platform.
STEEM, STEEM Dollars (SD) & STEEM Power (SP)
The Steemit platform is based on and driven by three units of measure: STEEM, SD, and SP (also known as VESTS).
STEEM is the unit that users receive for participating in Steemit; it is traded on open markets, and can be bought and sold off the Steemit platform. More importantly, it is an inflationary cryptocurrency, which means that the supply of the unit is not fixed. New units are constantly being created and distributed to reward Steemit platform participants, from content creators, to users that upvote and make post comments.
SD are units that are also used to reward users that participate on Steemit. However unlike STEEM, they are pegged to the US dollar, this makes them a more stable unit to receive and sell, as users are not affected by the market fluctuations.
The final unit of measure on the Steemit platform is SP. This essentially represents how much power a user has on the platform. By holding SP, a user has more influence on Steemit. He or she will get paid more for upvoting content/comments made by other people. Holding SP also represents a ‘long term investment’ as it is relatively illiquid. This is because converting SP back into STEEM takes 3 months, which are paid out as 13 weekly payments. SP is illiquid because it prevents large price swings and market crashes in STEEM, as users cannot quickly convert their SP, and then sell once the market starts to dip.
STEEM Witness & Delegated Proof of Stake (DPoS)
A witness is an individual that facilitates the operation of the Steemit platform by their work done on the blockchain itself. A witness operates a witness server, which allows them to make blocks, and then add them to the blockchain. These blocks contain Steemit related information on posts, comments, votes, and currency transfers. Witnesses are rewarded in the form of SP in exchange for their work.
Witnesses are selected using a consensus mechanism known as DPoS. The community chooses witnesses to act as the network’s block producers and governance body. Using DPoS, network parameters such as fees, block intervals, and transaction sizes can be altered through these elected witnesses.