As a new user and even after reading through both the official and a number of unofficial FAQs I felt I still didn’t fully understand what the three different crypto currencies that Steem uses are, or rather what they are used for, why have three of them?
By now I’ve gotten the hang of them, I’ve been here for half a year now, so I’ll explain the currencies here for other newcomers to Steemit who might have run into the same problem with understanding how it all works. There are bound to be other people who have written something like this before me, but there are always new users and they probably won’t find ancient posts. I didn’t when I looked for it.
I don’t guarantee that everything I write here is 100% correct, but it is my current understanding of how it all works after reading up on it quite a long time. If I misunderstood anything and you are a more experienced Steem user than me, please tell me in the comments (preferably with a link so I can verify the information), so that I don’t misinform people while trying to help them.
From here on I’ll refer to Steem only as the currency and Steemit as the social network, just to make it less confusing, even though in reality Steem is the name for both and Steemit is just one “client” for the social network (Busy.org and eSteem being two other examples).
Steem
This is the least interesting of the three currencies. You can think of it like Bitcoin. The most basic crypto currency you could imagine. It’s a lot faster than Bitcoin, transactions are almost instant and you have to pay no transaction fee (which is very relevant now since Bitcoin transaction fees have risen dramatically) but other than that there is nothing really of note here.
You can use this currency when you want to buy coins on exchanges when they are low and sell them when they are high. Not a good choice to use as a replacement for fiat money because the price is, like Bitcoin’s, highly volatile. This is really more for traders who want to make money by speculating on the price rising, it’s the “traditional” crypto currency.
Steem Dollars
Now this one is cool! It’s just like Steem in that you can buy and sell it on exchanges, you can send it to other people, you can use it to buy things directly, but the difference is that the value is artificially kept at $1. One Steem Dollar is supposed to be always worth as close to US$ 1 as possible. This means you can keep your money in Steem Dollars and you don’t have to be afraid that in a month, the price plummets and you lose half your money. On the other hand, you also won’t be making any money if Steem gets more popular, because again, the price is always supposed to be $1, it shouldn’t ever be a lot lower or higher and Steem witnesses will use the tools they were given to lower or raise the price accordingly.
This is perfect as a replacement for actual fiat money, as a replacement for the US Dollar for example and it means the number one critique of Bitcoin, it being too volatile to be usable on a day to day basis as real money, does not apply here. This is a crypto currency that actually works as a replacement for fiat.
As a bonus, you even gait paid interest on your Steem Dollars in your account. The interest is automatically added to your account daily and how much Steem Power you have influences how much interest you will receive.
Steem Power
This is basically Steem, but you can’t spend it, you can’t buy or sell it on exchanges, you can’t send it to other people. You can convert Steem into Steem Power instantly, but converting Steem Power back to Steem takes 13 weeks and every week you get 1/13 of the Steem back until you have the full amount back. So what good does it do to have Steem Power? It gives more weight to your votes on Steemit for one thing. The more Steem Power you have, the more money people get when you upvote their articles or comments.
It basically buys you influence on the platform. You have more power to curate and reward the things you like and you want to see more of. Just to be clear in case some people are confused by this, you don’t give away your Steem Power when you vote on posts. You keep your money. The rewards for posts, comments and votes are created by the Steem blockchain when new coins are created.
The other upside of having Steem Power is that you get higher interest rates and more money for voting on posts and comments.
How do you get the currencies?
You can buy Steem and Steem Dollars on exchanges like Bittrex or directly in your Steemit wallet by using a number of other crypto currencies. If you want to earn the money instead, by default you will receive both Steem Power and Steem Dollars (50/50 split) when you post an article on Steemit and it gets upvotes. You can then convert the Steem Dollars into Steem in a process that takes 3.5 days, exchange them on Steem’s internal exchange or any other like Bittrex, or just hold on to the Steem Dollars.