I've probably already told you about it, but when I arrived on Steem, I wanted to embark everyone in this crazy adventure (like probably all of you, you will tell me!). And strangely enough, most of the people I've talked to have told me Hey, it's a Ponzi, that's why you insist at this point (meaning, you're going to make a lot of money on our backs).
I was so disgusted that people might think that, so I immediately stopped shouting it from the rooftops. It's true, no, why would I want to share such an easy way to make money without moving off the couch, without making anything?
Sometimes the world lacks trust in people and people are afraid of seizing opportunities.
Too bad for them.
Nevertheless, I still wanted to dig deeper into the question and think about a solid, simple and clear answer to give if this situation should ever arise again.
But by the way, what is a Ponzi system?
According to Wikipedia,
A Ponzi system is a fraudulent financial arrangement which consists of rewarding clients' investments mainly with funds provided by new entrants. If the scam is not discovered, it appears in the open at the moment it collapses, i. e. when the sums provided by new entrants are no longer sufficient to cover the remuneration of customers1.
A little bit of history
In the 1920s, a certain Charles Ponzi invented a fraudulent financial system that allowed him to become a multimillionaire (billionaire?) in a few weeks. The business only lasted six months.
And no, he didn't build a pyramid with all his money, but he was at the top of the pyramid. Basically, his idea (dishonest but so genius) was to offer people to invest in his (false) company and to obtain an interest rate of 50% after only three months.
The idea behind this is to recruit as many people as possible. These people invest and the people at the top of the pyramid get richer.
Except that there is one thing: if everyone decides to collect their money or if there are no more new investors... Everything collapses!
For a little more info (so that you have even more knowledge to convince your friends), there is this video:
Personally, I know this technique as Ponzi Pyramid. I had vaguely been approached when I was twenty years old by a girl who asked me to invest 100 euros in exchange for much more (like x% interest) if I found x investors of my own (but as all my girlfriends were broke, I had refused!). Already, I felt that there was something going on that wasn't sound (she seemed quite stressed out when she told me that it would be so easy to find investors...).
And so people are suspicious of things that are too good to be true. And I understand them because I myself will never invest any money to earn more.
What is Steem?
The blockchain is totally open source, which means that everyone who uses it has the right to propose modifications, create an alternative version and above all, to create applications that use it.
When an account is created and users start posting content, these actions are not stored on servers owned by a company. The content is stored in different parts of the world, on a distributed network, maintained by users who make resources available (in exchange they are paid with the encrypted money of this network: STEEM).
The Steem crypto-cryptography is directly created by the Steem blockchain. It is called Steem (STEEM).
New STEEMs are generated every day, in a certain volume, according to a very specific algorithm. More concretely, blocks are created approximately every three seconds. Each block contains a bit of this currency (currently about 1.67 Steem per block).
It gains value by entering the crypto-currency exchange market. This value is measured on its usefulness, scarcity and the confidence placed in it in the markets. The more useful, sought-after and rare a product, service, etc. is, the more its value increases.
It is the same for the money we know (euros, dollars etc.). Moreover, when a block is created with 1.67 Steem in it, it is as if the bank were printing a new note.
A banknote, in reality, is a small piece of paper, insignificant to all but those who have given it value and this value has been recognized. It is the fact that it is exchangeable for goods or services that gives it its value.
It is the same for all crypto including STEEM. The more people join the Steem platform, the more STEEM is used, the more its value increases.
The blockchain Steem has the particularity of redistributing a large part of the value produced by the blockchain, more than 75%, to content creators.
What are the differences?
Ponzi
- The power is pyramid-like and held by a single person at the very top of the pyramid (and then, power is held by all the people above you);
- This person can decide to run away with all the money;
- You earn a defined percentage depending on the people you recruit;
- You are obliged to make an initial investment (in cash);
- The pyramid starts from scratch (there is no money at the start);
- There is no value creation (no goods or services). Money just goes from hand to hand.
Steem
- There is no initial investment required to be able to use Steem (and potentially earn STEEM);
- You can only invest time and still win rewards;
- You don't have to recruit people (but it would be a shame to make them miss such a social network) in order to win rewards;
- You don't know how likely you are to earn. It will depend on your articles, your involvement in the community and therefore your popularity;
- The platform lends (free of charge) Steem Power to new users;
- Steem being based on a blockchain, control is in the hands of x Witnesses (and not the founders); These Witness are voted by users; it is a kind of mini democratic system;
- If a Whale powers down its account, it doesn't change the accounts of others;
- Steem price fluctuates between supply and demand;
- You can earn much more than just money by participating in Steem: new friends/new acquaintances/knowledge...
- Steem users create value on a daily basis (mainly content creation).
- In short, there is no risk to register on Steem!
I hope this convinced you, and that now you will know what to say when Steem is called Ponzi!
And if you have other advice, share it!
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