What is Steem?
STEEM is a cryptocurrency created by Ned Scott and Dan Larimer for the purpose of powering Steemit, a highly incentivized blockchain-based social media platform. Steemit is quite similar to Reddit in that users can make posts, comment on the posts, and upvote or downvote posts and comments from other users. However, Steemit is different from Reddit in that it rewards users monetarily for their actions. The Steemit platform utilizes a blockchain technology that enables users to receive cryptocurrency in exchange for participating in the network. This cryptocurrency can be exchanged for other conventional cryptos like Bitcoin and Ethereum or fiat currency like the US dollar.
History of Steem
Ned Scott, who is currently Chief Executive Chairman of the Steemit company, along with blockchain developer and crypto entrepreneur Dan Larimer, developed and released the Steem Blockchain.
They met in January 2016, and by the end of March 2016, the blockchain went live. Some weeks later, the decentralized and censorship-resistant blogging and social networking platform Steemit was released as the first of several applications that will run on the Steem blockchain protocol.
Dan Larimer, however, quit as CTO of the company just a year after the blockchain launched and later on stopped participating in the development of the Steem Blockchain to focus on his new project called EOS.
How Does Steem Work?
The Steem blockchain is quite complex. It has several components that come together to ensure the platform runs optimally. These components are the consensus algorithm, an economic system of spam prevention and payouts, a content curation system and a user interface.
Consensus Algorithm
A consensus algorithm is necessary for the best user experience. It enables a 3 second block time with a 65kb maximum block size. Users can get finality on actions quickly due to the fast block time and large block size, even when the blockchain is under heavy load. Steem uses a DPoS — Delegated Proof of Stake — consensus algorithm to achieve the response time and scalability. Steem holders vote on accounts to be witnesses/block producers. With each round, block production occurs and 21 witnesses are selected to create blocks. 20 witnesses are decided by approval rating and the rest of the witnesses that didn’t make the top 20 time share the 21st witness. The NTP protocol is used to synchronize block production by witnesses.
Economic System
- Spam Prevention
Steem’s economic system allows free writes to the blockchain. Users with enough power can post, comment, upvote, and downvote for free. This is quite different from other blockchains that requests a fee for every write to prevent spam. Free writes are important as a user writes to the blockchain for even minor actions such as voting and commenting. If fees are paid every time for these actions, the social media platform would be rendered useless as there’ll be little activity.
Although spam happens with free writes, Steem prevents this by using bandwidth. Users are allocated bandwidth equal to the Steem Power they hold. Low bandwidth results in stretched bandwidth allocation per active user and high bandwidth results in shrinking bandwidth allocation per active user.
- Payouts
Steemit pay authors in Steem and Steem Backed Dollars (SBD) when their posts and comments are upvoted. A portion of the payout is also paid to the user who upvotes the post or comment. Payouts are made a week after posts or comments have been made. How much Steem Power an author is paid is determined by how much Steem Power is committed to upvotes on their posts.
Curation System
For Steem to be successful, the platform needs quality content and that is why the curation system is highly effective. The curation system works through upvotes/downvotes based on Steem Power. The theory is that, the more Steem Power being held in the account, the more interest the account has in the platform’s success. Thus, the account is more willing to upvote quality content.
Users also get rewarded for curation in Steem. If a user votes on a post early and that post goes on to receive a large number of votes in the future, the user will receive more curation rewards. This is an incentive for users to seek out and upvote more quality posts with a lower number of upvotes. Downvotes, on the other hand, does the very opposite of an upvote. Downvote reduces a post’s visibility and payout due to the amount of Steem Power behind the vote.
User Interface
Steem is just a blockchain that has a user interface that lets users execute actions such as reading, upvoting, downvoting, and commenting on posts. Steem’s most popular interface at the moment is Steemit.com, operated by the Steemit company.
The Steem Team
Dan Larimer is the brain behind Steem. He is a serial blockchain entrepreneur and had created BitShare before going on to create Steem. He has, however, since moved on to another project, EOS. Dan was joined by Ned Scott to co-found Steemit, Inc. which operates Steemit.com and the development of Steem. After Dan left Steemit to found EOS, Ned remained as CEO of Steemit and currently leads the operational and development staff.
How to Buy and Store Steem?
STEEM is not like Bitcoin and other cryptocurrencies where mining is used to produce tokens. It is instead given as a reward to individuals contributing content to Steemit and other Steem blockchain-powered platforms. Nevertheless, you can purchase STEEM using fiat currencies on major exchanges like Binance, Huobi, Bittrex and more. It is also interchangeable with other crypto tokens like Bitcoin and Ethereum.
Storing STEEM
STEEM tokens can be stored in the Steemit native wallet. This wallet is accessible when you sign up for it by registering on Steemit.com. It was recently launched, so some of the wallet options are limited. But if you want to try other wallets, you can use some like ESteem Wallet, CLI Wallet, and Vessel among others.