FOR NEWBIES: HOW TO POWER UP
Many new to STEEM are still learning.
This article may help you gain the first understanding of how it all works. Here are some of the basics for powering up:
https://steemit.com/steemit/@jassennessaj/steemit-lesson-1-the-best-way-to-power-up-your-sbds
People who create content are rewarded for their content. People who upvote content are rewarded for helping to curate the best content available on the site. Commenters who add to the discussions are paid too.
The Three Currency Units that Steemit Uses:
The first thing you need to understand is that there are three different kinds of Steemit currency units.
We have Steem, Steem Power, and Steem Dollars.
This can be confusing but let's look at this closer:
Steem:
Steem are the units that are bought and sold for actual money on the open markets. You can trade them as you would bitcoins or a company’s stock.
But you don’t want to hold on to these for too long because more Steem Units are created every single day. If you hold onto Steem Units for a long time, they tend to become diluted and lose value.
Steem Power:
Owning Steem Power Units is essentially like making a long term investment in the currency because you can’t sell Steem Power Units for 2 years. But there are a lot of good reasons to have Steem Power.
By keeping your currency as Steem Power Units, you will be able to make considerably more money in the long run because you essentially have ownership in the network. As the network grows, so will your piece of the pie.
And you’ll be heavily rewarded along the way. The way things are set up now, 90% of the new Steem Currency that is generated every single day is distributed to the people who already hold Steem Power Units in the form of additional Steem Units. (The other 10% goes to content creators and curators).
Half of the pay you receive for your content will be in Steem Power Units.
Also, the more Steem Power Units you have, the more your curation vote will count. You will have more influence on the site and you will also get paid more for upvoting other people’s work. (When you upvote someone’s work, they will get paid more as well.)
Steem Power Units also play one final and very important role. They prevent massive price swings and volatility on the open markets. Because everyone is locked in for 2 years, we can’t all sell our currency all at once if the market starts to dip, which would crash the price were it to happen.
Steem Dollars:
Steem Dollars are the third and final form of the currency and never get diluted or lose their value. They are designed to be a stable currency that you can sell at any time. When you create popular content, 50% of your pay will be in Steem Dollars.
And you’ll be rewarded for holding Steem dollars too. It’s not nearly as much as the rewards for holding Steem Power. But because it still keeps the currency in the network, holding Steem Dollars pays interest. There actually is no fixed interest rate. It can be changed by witnesses so it can adapt to market conditions if necessary.
When you earn Steem Dollars for creating content, you have three choices:
You can convert the Steem Dollars to Steem and sell it immediately on the open market for real money, essentially cashing out.
You can hold the Steem Dollars, which keeps the money in the network and pays you 10% interest. You can sell them at any time. If you think the value will go up and want to sell at some point in the near future, this is your best option.
You can exchange your Steem Dollars for Steem Power. If you want to invest in the future of the currency and reap the biggest rewards, this is the way to do it.
How are the newly created Steem distributed each day?
Every day 90% of the new Steem units are rewarded to the people who hold Steem Power Units.
10% of the new Steem units are paid to content creators, curators, and commenters.
When you create content that actually earns money, 50% is paid to you in Steem Dollar Units that can be exchanged for actual money right away (or converted into Steem Power). The other 50% is paid in Steem Power. The Steem Power Units are locked up for 2 years.
How to cash out your earnings:
Once you start earning Steem and you want to actually cash out, what do you do?
Other Steemers have created fantastic guides for doing just that. Here is how it is explained:
**** Now you’ve been paid in steem dollars an What should you do? ****
Now that you have Steem Dollars and Steem Power you have a few choices:
FIRST: Cash out (many do NOT recommend this option)
Not recommend this because the markets are down at the moment, meaning you would not get very good rates. And if you decide to convert or take some of the profit follow these steps.
You need to convert your Steem Dollars to Steem, Steem to Bitcoin, then Bitcoin to cash
The quickest way is to go through Steemit's internal market. Then place an order to buy steem with your Steem Dollars. You can either take a current price, or place an order.
For the next part you will need a bitcoin wallet if you have one. (Or to skip this step, read on)
The next step is to exchange Steem into Bitcoin.
There are a few places you can do this, but the quickest is probably through BLOCKTRADES. Send the steem to the address is says, and enter your Bitcoin wallet's receive address.
Then you can exchange your bitcoin into cash, or bank deposit (or other means) with something like LocalBitcoins.com.
LocalBitcoins has a wallet function which means you can send it Bitcoins from your Blocktrades exchange.
It's a bit hassley and difficult as the market is so illiquid now. But it is possible.
SECOND: Convert your Steem Dollars into Steem now -> Then power up
Alternatively you can use your Steem to power up. This is probably the better option, as you're reinvesting in the site.
The choice to make from here is to convert your steem dollars into steem now on the market, or you can wait for it to be converted through Steemit's conversion mechanism which takes about a week.
Most people on the platform choose to power up.
THIRD: Hold your Steem Dollars as they are
Alternatively you can keep Steem Dollars just as they are. They should keep family close value to the USD and also pay 10% interest. You can also always hold onto them until the market is up even further. From here cashout or still power-up.
Hope that this helps clarify things. And of course, please let me know in the comments if your have anything more to contribute or if I've made any errors. It is a new developing community and things are bound to be updated.
BlockTrades adds support for directly buying/selling Steem
Where does the money come from?
Steemit user @Steemrollin has written a fantastic explanation on this:
MORE DETAIL HERE
Steem: Where DOES the money coming from? If we dive deeper we can compare the Steem System to the model of currency. Let's look closer at this explanation.
Sea shells, beads, cows, real estate, tobacco, gold and silver all have been used as money at some time or another. The definition of money is subjective, but various commodities or assets have been used as money at different times in history, and in different situations and geographies. We have 180 government or bank issued currencies being used today. Some commodities or assets have better characteristics as a medium of exchange, store of value or unit of account, but any community or ecosystem can ultimately choose what they want to use as money.
Some of these new digital assets like Bitcoin can be seen as monetary commodity assets. Other digital assets are required to access or use a system's resources. For example, Ether is required to execute smart contracts on the Ethereum network and Safecoins are used to access storage on the Maidesafe network. Some digital assets are similar to company shares such as the DAO or Bitshares.
Digital Assets & Money in the Steem Ecosystem
The Steem system is built on secure blockchain software that run on computers. There are three types of assets in the Steem ecosystem. Both Steem and Steem Power are analogous to company shares. A third asset, Steem dollars, are created as a loan on Steem collateral and issued to contributers to the ecosystem as currency.
Steem
Steem is similar to publicly traded company shares. The amount of Steem doubles each year so there is signficant dilution for those that hold Steem, however like many fast growing startups a rapid increase in value may outpace the dilution. Just like company shares (ie. stocks) these digital assets have value as more people use and contribute to the ecosystem. The estimated value of the total outstanding Steem assets is currently about $20 million on Coinmarketcap.com.
Steem Power
Steem Power is similar to private restricted company shares and have disadvantages and advantages. One disadvantage is that holders can't sell Steem Power immediately; hence they are illiquid. The advantages of Steem Power is that holders:
May earn more Steem and Steem dollars as dividends to offset any dilution
Have voting power to determine the value of each post.
Steem Dollars
Steem dollars are assets that are created from loans using Steem/Steem power as collateral. If the Steem ecosystem is worth $20 million, the Steem software can create one million in dollars as a loan on the network and issue it as currency for circulation. It's the same as if you owned Apple stock shares worth $500,000 and created a $25,000 loan on your shares and used that as money. You can use similar mechanics with real estate. In fact commercial banks create money this way. Just think about home equity loans and then think about regular home loans and how banks use real estate as collateral to create fiat money.
The blockchain software network executes the entire loan process & interest provisions for Steem dollars and the issuance & allocation of new Steem/Steem power.
Conclusion:
A blockchain-based software network creates Steem Dollars, to be used as a currency, from loans on Steem digital assets. Steem digital assets have value because they're useful to a growing Steemit community and are scarce.
Remember we're still in the early stages of this digital economic evolution and much of this is experimental so it's good to keep your expectations measured. That said, might as well jump in and write about your interests, have fun and enjoy the ride!
Thank you fellow Steemers for the tips! Your feedback, questions and clarification help us all to succeed.