Steem – justice for creators

Steem – justice for creators

The thing about digital currencies and associated ventures is that they either have a certain something that captures the public interest – or they fail completely. This ability to seize the zeitgeist is very difficult to predict. Despite the legions of haters, alive with Satoshi-envy, bitcoin has clearly captured the public imagination and continues to flourish as the number 1 cryptocurrency with a market cap of US$10bn. Ethereum – the number 2 cryptocurrency with a market cap of US$1.2bn - also rose to prominence suddenly and dramatically in early 2016, assisted by the Vitalik Buterin ‘genius’ narrative – though recently this has been somewhat tarnished by the very regrettable failure of The DAO.

A new cryptocurrency called STEEM has now jumped into the rankings at number 3 – the price having risen from approximately $0.25 a month ago to around $4 at the time of writing, giving STEEM a market cap of approximately US$360m. Why the excitement? Steem appears poised to capture the network value effect by coming up with a way to reward content creators, that makes it better than all other blogging and social media platforms to date.
To date the internet has forced creative bloggers, writers, artists and musicians to provide their intellectual talent for free in exchange for intangibles like ‘profile’ and the remote possibility of sharing in advertising revenues. All the value is captured by monopoly platforms like YouTube and Twitter that expect participants and publishers to give their time for free – they harvest the creative content of publishers and the responses of users, package it and present the collective product as their own.

Steem changes this – Steem is a blockchain based social media platform. In Steem content uploaded to the platform is rewarded with the cryptocurrency STEEM as a result of users upvoting a post or article. But users themselves do not directly pay for upvoting the post. Steem has astutely identified that “the only transactions that users can approve without thought are ones that cost them nothing” – this is why tipping platforms do not work. Steem seeks to reward every single participant in the platform who does anything positive with something (be it publish, like or comment a contribution, mine the token or provide liquidity).

To address the externalities and prevent the abuse and collusion that is prevalent in the traditional social media content creation model (e.g. buying 1000s of fake Twitter followers) STEEM as a cryptocurrency has a complex structure. It is actually three interlocking tokens in one – like the Holy Trinity – all three parts are interdependent and intertwine.

There is STEEM, the tradeable token, which is intended for short term use on the platform – a liquid currency that is subject to fairly hefty inflation (in the form of rewards for publishers and participants) of some 100% per annum. There is Steem Power (SP) – which can be understood as a form of untraded equity ownership in the Steem platform. SP is non-transferable and is redeemable only over a 2 year period in exchange for STEEM. For every 1 STEEM that is issued as a reward 9 STEEM are allocated to SP holders as an incentive for maintaining long term ‘equity’ ownership in the platform. And there are Steem backed dollars (SBD) – which can be best understood as ‘convertible debt’ in the platform – a token that will always buy you 1 US dollar of STEEM at the time of ‘conversion’. SBD are intended to provide stability so that participants can easily and immediately understand the value of the reward on an ongoing basis.

STEEM is a cryptocurrency so it is mined on a sort of ‘carousel’ basis by a succession of miners – to prevent the emergence of mining pools. Miners are also rewarded with STEEM. Liquidity providers between SBD and STEEM are rewarded for making a market. Publishers of content are rewarded with STEEM depending on the number of votes and comments their article receives – as the sum of the crowd’s wisdom is greater than the individual parts the Steem algorithm rewards successful content in a geometric progression rather than on a simple arithmetical basis. STEEM received by miners, liquidity providers and publishers vests over time – not immediately – in order to incentivise all participants to stay continuously engaged and maximise the value of the platform.

Steem is a fascinating, fantastic extension of the cryptocurrency world – seeking to solve the huge problem of unrewarded content and disintermediate the digital conglomerates that have a stranglehold on the collective value of humanity’s discourse. Unlike bitcoin STEEM is not designed to be a long term store of value but rather a continuous monetary reward system for human ingenuity.

The value of Steem tokens, in constant dollar terms, may not deliver returns as a financial investment, but this is not the purpose of this cryptocurrency – the aim is to provide a means for the collective creative brain-power of humanity to be appropriately rewarded, on a decentralised cooperative basis, rather than harvested by a small matrix of digital monopolies as is the case at present.