(in reply to the #bitcoinpizza conversation)
Where does Steem value come from?
How best to explain where and how Steem gets it's value... I my words :)
It's a challenge trying to explain the concept of Steem for the laymen out there, especially if they're not used to, or even heard of Crypto Currency.
Luckily for us Steemians, we have a much simpler task in explaining this concept, unlike Bitcoin, Eth, etc., because we can compare our project against Social Media. People get and understand Social Media, not super technical stuff.
In today's world, any who's breathing knows one thing or another about Social Media.
So how could a typical conversation go when engaged in a conversation explaining Steem?
Your audience starts getting captivated and enthused while you're walking them through the ideas of this new Social Meadia platform called Steem. You explain how it was built, how easy it is to join and how everything is recorded and protected by the block chain and you can go on, and on, and on!!
During the conversation your enthusiasm starts to glow, which in turn makes them more excited because they sense your energy. Now you're get amp'ed up a bit more with excitement, which in turn makes them even more super excited!
Then all the sudden... BOOM, out from left field they drop on you the dreaded, MASSIVE F-bomb!!!
From where does the Value come from??? I mean, like, where does Steem get the money to pay you for your post?
Now you're standing there like a deer in head lights, twitching ear to ear, getting ready to go into cardiac arrest!
LOL, but you quickly remember Steem money is more or less a "Knowledge Based" asset, regaining your composure and remember a post this jackass 
Knowledge
You- "Ok, so let me ask you this. Remember the car wreck last year you where in?"
Them- "LOL. Yea, that friggin' idiot who ran the red light and T-boned me?"
You- "Yes, and did you win the case?"
Them- "Yea my attorney did an awesome job getting me the money to pay the bills, plus some!"
You- "Well, let me ask you this then. What exactly was he paid for? Did he grab his baseball bat to go even the score? Did he fix your car? Stitch you up at the Hospital? Give you Message Therapy? NO. he didn't. He got paid for the Knowledge he had to win your case in the courts. Which in turn, won you more money in the compensation that you originally expected. Right?"
Them- "Well...yea...I guess so! Never really thought of it in that context!"
You- "Ok, so now that you see where I'm going... What about other profession that have to "think" or use "knowledge" for their professions? What about Pharmacists? What about Accountants? What about Engineers? What about Software Engineers? You see, ALL these people get paid for their knowledge.
The better quality their knowledge is, the greater potential they have to make good money. That's what their bosses and to some extent, the public are paying them for. Their knowledge! So thus, their knowledge has a monetary Value and the more demand there is for that persons knowledge, the higher their rewards are!"
Them- "Ok, so nowww I'm starting to understanding what your saying"
You- "Ok cool. So now you agree that knowledge can be worth money and that Steem pays money for knowledge. Let me explain HOW the system pays you!"
Them- "Yea, ok, cool. But first let me piss and order us another beer!"
You- "Shit yea, Let's roll!"
***fyi-that isn't me in the gif :) ***
Steem Payouts
You- Ok, now that I've killed that pitcher of beer and posted it on Steem let's move on.
Them- "LOL, dude...WTF? I'll order you another one!"
You- "Alright, so we've talked about how knowledge is value.
So how does Steem pay it's users for it's content?
*Well... It's all built into the algorithms of the block chain. I can't exactly get into the details of this but, for the moment I'll explain it's payout structure. *
So Steem has it's currency called Steem Tokens. Theses tokens are stored, created and distributed by the block chain. When someone writes a post on Steem, they've essentially broadcast their knowledge on a certain subject. That knowledge is then recorded and monitored by the block chain and can be read by other Steem members.
If members like the content of the post, then they can Up Vote it. Once a person votes, the block chain will then start taking tallies of the votes over the 24 hour period that the post was created and will periodically broadcast back to the Steemit web site, of what the "theoretical" value of that post has accumulated."
Now, this is something to remember. A person who has a lot of their Steem Tokens locked up into Steem Power and decides to vote on a post, they're able to increase the value of that post quit dramatically. This is how the system weighs vote power for each individual."
Them- "Steem power? LOL. WTF is that? sounds like something you'd hear in a damn game!"
You- "LOL, yea I know right. But it's quit brilliant! Here is how it works.
Kinda like playing a game, the objective is to power up or level up your character. The higher the level you get, the more influence you'll have to beat certain levels of that game. Steem Power is kind of the same way. If I were to Up Vote your post and I have high level of Steem Power, then I'll be able influence that an increase it's money payout. If other members who have high Steem Power vote with me, then that will increase the earnings of that post even higher! So the more votes you get towards your post, the better money you'll be able to make."
Them- "So what would I then do with the money I've earned and how much?"
You- "Well, it all depends on WHO and HOW MANY votes you get. But I've seen post pay out as much as $20k USD. LOL"
Them- "Wait, What??? $20k Dollars? For a single post!!! That's craziness!"
You- "Yea.. well, those posts are special circumstances and realistically they didn't get the FULL $20k.
They got half of that, which is still awesome but, this is how that 20k actually gets broken down.
Half of it get's paid to the Poster and the other half goes towards Voters, the people who Up Voted that post. So there is incentive for people to Up Vote good and quality posts which they think will benefit the system and earn them some money. The half that get's paid to the poster is then broken down into two parts. 50% goes towards their Steem Power, a.k.a. "level up", and locked up into their Steem vesting account. The other 50% gets paid out in Steem Tokens and Dollars. Steem Dollars and Steem Tokens can be taken out immediately and sold for Bitcoin, which as you know from past discussions, Bitcoin can then get cashed out into US Dollars and transferred to your bank account. Either through Coinbase, Circle or whoever you're set up with."
Them- "Damn, you have to take all those steps just to cash out?" That sucks!"
You- "Yea I know but, remember Steem is only 4 months old. If Coinbase or the others don't get their act together and support Steem to USD conversions and someone else does! Then they've missed the whole boat."
Them- "Yea right! I mean, if Steem is as easy as using a Social Media site, the every day person are now using something easy and familiar, AND learning about crypto! Then yea! This could easily trump Bitcoin! Especially if Bitcoin isn't needed anymore as a gateway to cash out from crypto. LOL, now I can see why you said Coinbase needs to get their ass in gear!"
You- "Yup!"
Them- "So essentially I'd get half of what I earned if I made a post on Steem."
You- "Correct. And the cool thing is... let's say you made a post and it earned $200. The Hundred Dollars you got paid out, which would was approximately 50 Steem Power and 50 Steem Tokens... and you didn't need the money to cash out right away... you can then transfer that 50 Steem Tokens into your Steem Power account and increasing your future earning potentials with every vote you make. And though those tokens get locked up for a 2 year period, it doesn't mean they're gone! You can always Power those back down and the block chain will repay those 50 Steem tokens back to but, it will take 104 payments, or two years for the system to pay it back. You have to have some strategy in how you'd like to invest your self and your tokens within the Steem system."
Them- "I can kind of see why they'd created Steem Power. So money isn't getting liquidated and crashing the price."
You- "Yup, exactly! Now you can see why I'm so excited about Steem and it's potential. I mean let's face it. All that time you've spent on Facebook, MySpace and whatever else... has ANY of them paid you a dime for your time and knowledge while using their site???"
Them- "LOL, Hell no!"
You- "LOL That's right! Zuckerburg has turned you and everyone else into his Bitch. It's only him, stock holders and advertisers making the big bucks! On top of that, think of all the info they've gotten from you! Your habits. Your thoughts. Your family, address, phone number, date of birth!!! They've got all that shit and basically selling off to other entity's! WTF! Where's the privacy in that?"
As both shake their head in realization and disbelief.
You- "Dude! I almost forgot. Today I just got money transfered into my account from my post I did last week! Let's go hit the strip clubs!! My treat!"
Them- "Fuck yea!!! Let's roll!"
You- *"LOL, alright let's roll. While we're there, lets get you to sign up onto Steem and then we'll compete to see who can get the most girls to sign onto Steem! We can explain how to make extra cash while we're getting some lap dances!" *
Them- "Dude, You're On!"
Ok, so the last bit was a stretch :) Plausible though!
But anyways... I hope this post, while trying to make it somewhat entertaining; also served up some thoughts, ideas and approaches to help explain Steem and its value plus how it pays out!
I also kind of rushed this post... so please don't hurt me to bad LOL.
Spoiler Alert!
If you like this post and look forward reading more from me... I'm working on a post regarding Advertising on Steem and how we can make money through that avenue also.
So it kinda ties directly into this same subject we're just talking.
I hope to post it within a few days!
Thanks everyone!
Happy Steeming!