The Steemit content platform emerged with a novel blockchain use case when it first appeared in 2016. However, time and the bear market have not been kind to the project, as a range of issues have seen user activity dwindle.
Steem is a blockchain network that supports community building and social interactions with cryptocurrency based rewards. Steem hosts social communities where users are rewarded for their participation and contributions to the platform via a blockchain based accounting system that allocates rewards based on reputation.
Steem is best known as the blockchain that supports the Steemit social content/blogging platform and Steem Dapp. The premise for Steemit is simple. Content creators write blogs, post videos, or upload pictures. Steemit users react by sharing, upvoting, and commenting. This participation is rewarded with the native Steem token. Any participation in the form of content, comments or actions that create greater interaction within the platform is rewarded with more digital currency. The model is similar to Reddit (Karma) or Medium (claps) but creators and participants receive actual payments instead of imaginary internet points.
Steemit was an immediate success, even outside of the crypto community. It quickly gained a reputation as a fun, less toxic environment when compared to centralized social platforms such as Twitter and Reddit. The platform launched in March 2016 and at its peak, had a user base of 1 million users. By July 2016, STEEM, the native membership token of the Steem blockchain and the Steemit platform, was the third largest token in the ecosystem by market cap .
This position has been difficult to maintain. During the 2018 crypto bear market, Steem’s flagship Dapp, Steemit announced that it had fired 70% of its workforce. As a result, Steemit has been in self-described ‘survival mode’, with a focus on infrastructure reduction and driving advertising sales on steemit.com.
STEEM currently ranks as the 62nd largest token by market cap on the Brave New Coin market cap table and trades at ~USD 0.41 (global spot price). Despite recent concerns around the long term viability of the project, the price of the token has risen ~57% since the start of 2019 and is up ~1% in the last week.
The STEEM economy: The 3 token options
Participants in the STEEM ecosystem can utilize three different tokens, each of which has its own separate utility. These are; STEEM, STEEM POWER and STEEM DOLLAR.
STEEM (sometimes referred to as ‘liquid STEEM’) can be thought of as an equity share in the Steemit platform, designed to be traded on exchanges on the crypto open market.
With STEEM, users can trade Steemit for other digital assets/fiat pairs, or power it up and receive STEEM POWER to interact within the Steemit ecosystem. Users holding more STEEM POWER have more say in network decision making such as changing the blockchain’s reward distribution model.
The supply of STEEM doubles each year. 90% of this new supply goes to holders of STEEM POWER tokens, while 10% is allocated for users that create and curate content on Steemit.
For users concerned about crypto volatility, Steemit offers the STEEM DOLLARS (SBD) option, which is a ‘within the ecosystem’ currency that pegs a user’s Steemit holdings one-for-one with the US dollar. Users also receive a 10% yearly reward for holding. Users can choose to receive SBD for curating and creating content, or they can exchange it for STEEM.
STEEM POWER gives a user the right to vote on Steemit content and receive dividends as the network expands. STEEM POWER is generated when new STEEM is issued, when STEEM tokens are ‘powered up’, and when content is created or curated. The greater a users’ accumulated STEEM POWER, the more power their votes have.
Steem Power can also be ‘powered down’, and converted into STEEM tokens, so a user can on-ramp into other assets and exit the STEEM ecosystem. However, accumulated STEEM POWER can only be converted back into STEEM gradually, in 104 equal parts across 24 months. The power down process can be canceled at any point in the 24 months. This mechanism is designed to create a committed ecosystem of content, where users are incentivized to stay and participate.
STEEM is allocated to Steem blockchain transaction validators at a rate of 1 STEEM per block or 0.750% per year, whichever is greater. STEEM uses the Delegated-Proof-of-Stake consensus algorithm, which was conceived and developed by the Steem blockchain’s creator, Dan Larimer. Steem functions with block-creating accounts called witnesses, that are collectively approved by Steem stakeholders.
Instead of relying on Proof-Of-Work to find blocks, the Steem network actively schedules these accounts to blocks, making the time between blocks just three seconds. Like other DPOS networks such as EOS, Steem functions without transactions, and instead sets users a weekly bandwidth limit that is consumed for operations like posting, commenting, voting and token transfers.
Steem has created another in-ecosystem token model in the form of Smart Media Tokens (SMTs). Smart media tokens are the STEEM version of Ethereum ERC-20s. A Smart Media Token (SMT) is a native digital asset on the Steem blockchain that can be quickly launched by anyone to help monetize online content and create incentives to encourage desired user behavior. They are built with a ‘Proof-of-Brain’ reward algorithm that encourages people to create and curate content and rewards them with new tokens based on user operations like posting and curating content.
These new tokens are designed to enable publishers to create mutually beneficial community and economic incentives to drive platform growth.
Beyond Steemit, Steem hosts a number of other Dapps that have chosen to interact with the Steem blockchain economic model. NextColony, for example, is a space colony simulator where users interact with tradeable collectibles built on the STEEM blockchain. Normal Steem upvoting and curation activities occur as blockchain operations within the Dapp’s Steem address giving it an element of novelty.
NextColony Dapp activity, last 30 days. Source:
StateoftheDapps
STEEM is used to make in-Dapp purchases but users are also rewarded for upvoting and curating development updates. This model may incentivize greater community interaction both for developers to publish more frequent content, and for users to interact with and endorse high-quality developer content.
Dapp developers, however, have found flaws within the Steem blockchain model. The DLive streaming platform and Dapp, noted for being the live streaming platform of choice for mega-YouTuber Pewdiepie, decided to shift away from the Steem blockchain to a native chain in September 2018. In a blog post following the migration decision the DLive team said;
_ “the current economic model of Steem incentivizes large Steem holders to continuously upvote their own content and other creators who specifically support their content. This creates an ecosystem where a content’s true value can't be recognized or be fairly rewarded. Community members who are not ‘privileged’ enough to be a part of these groups with large voting power are therefore penalized financially.”_
Steem has systems in place to prevent automated curation and upvoting to disincentivize users trying to game the platforms curation and upvoting model. However, the fact remains that small users can be squeezed out of the Steem economic model because it heavily favors more active and token rich users.