Steem is one of the most important blockchains out there. Developed by Dan Larimer, it has been live for more than 2 years and is the busiest blockchain bar none. But Steem is almost unheard of outside it's user base.
Rising Steem
A few months ago, when we heard that the Steem blockchain was handling more than 1 million transactions per day, the news surprised many who previously believed that Ethereum was the only blockchain with any significant adoption. In fact in the last 24 hours Steem processed 1.8 million operations. That is significantly more than all other blockchains combined, so there is little doubt that Steem is currently the most utilised blockchain on the planet and that's accomplished with merely 0.15% of the total capacity of the blockchain.
That's impressive given that only a tiny proportion of the worlds population have even heard of it. Earlier this week it was announced that the 1 millionth Steem blockchain account was registered. While that's significant relative to other blockchains, when we compare it to the 2.2 billion Facebook accounts, it shows that despite fast growth, adoption of blockchain applications is still very much in the fringes.
But that hasn't stopped even the Crypto-averse Chinese government from giving Steem the nod. The CCID Research, China's Ministry of Industry & Information Technology ranked it the second 'best' blockchain globally. They scored blockchains on 3 metrics - technology, application and innovation and created a top 30 list in which Steem was 2nd to Ethereum.
But what is Steem?
Steem is a community run social blockchain that allows distributed apps (DAPPs) based on social networking, blogging, video sharing and messaging to run over it. It is a content management system and cryptocurrency merged into a single blockchain and that provides some unique characteristics. The two unique selling point over other platforms like Twitter, Facebook, Reddit and Medium are:
- All user data is uploaded to and stored on a decentralised repository (the blockchain) and is thus immune to censorship and manipulation, forever.
- Content authors, content curators and platform administrators (witnesses) are all paid for their efforts
The value of immutability on social networks is subjective to the user but in times where political correctness, partisanship and censorship are on the rise, it appears that more and more users place a higher value on this fundamental attribute. The idea of an ideas repository that is accessible to all, offers incentives and that cannot be controlled, is gaining support. Also, unlike most cryptocurrencies which are difficult to access for the majority of the world without any money to invest, Steem removes the friction for the average person to join in the cryptocurrency world by allowing earnings via posting without needing to buy in first.
Tech-onomics
The Steem blockchain is built upon Graphene and implements a Delegated Proof-of-Stake (DPOS) concensus mechanism that is also used on Bitshares and EOS blockchain. This technology has been demonstrated sustaining over 1,000 transactions per second on a distributed test network.
On Steem, block production is done in rounds. Each round 21 witnesses are selected to create and sign blocks of transactions. Because the active witnesses are known in advance, Steem is able to schedule witnesses to produce blocks every 3 seconds, making transaction confirmation times very fast.
Authors are incentivised to produce quality content through receiving upvotes from other users. Upvotes carry monetary value proportional to the 'power' of the upvoter. This power is essentially dependent on the amount of STEEM held. Curators (upvoters) are also incentivised to recognise that content. They receive rewards if they upvote a post that subsequently becomes popular - a kind of finders fee.
All rewards for witnesses, authors and curators are derived from newly minted STEEM tokens. This makes the currency inflationary. The Steem inflation rate was set to 9.5% per year in 2016, reducing by 0.5% per year.
There are various service layers that have been built on top of Steem that enable users to do things like lease out their voting power (earning interest), buy votes for their post (to get it seen and get rewards) and sell votes (in effect earning interest on their Steem balance). Minnowbooster is one such service that aims at newer users looking to get established.
DAPPs running on Steem
Currently Steemit, the social network blogging platform, is the most used DAPP on Steem, accounting for nearly 60% of users and transactions.
The next most widely used DAPPs are 1) Esteem - a mobile user interface to the social blockchain, 2) Busy - a more user-friendly interface with different features and 3) Zappl - a micro-blogging app aiming to be a twitter killer.
D.tube, a decentralized video platform based on the InterPlanetary File System (IPFS) protocol is another growing DAPP on Steem. D.tube is similar to YouTube, but without advertisements, instead uses the built-in Steem currency which gets awarded by users upvoting videos
Coming Developments
An upcoming release of Smart Media Tokens (SMTs) protocol will allow entrepreneurs the ability to create their own STEEM-like token that launches their application - and their business . The SMT protocol will launch with logic for performing Initial Coin Offerings (ICOs) and also enable the monetization of web property through reward sharing.
Markets Unrepresentative
The huge positives surrounding Steem's technology, community, adoption levels and future development are not well reflected in the markets. The native STEEM token currency is ranked 30th in terms of market cap at the time of writing , with a value of US$ 780 million. This is just a fraction of the mcap of other blockchains that are not even released on main net yet, such as EOS (US$ 11.4 billion) and Cardano (US$ 6.3 billion).
One of the reasons cited for this lack of representation in currency value is that Steem is an application-specific blockchain and therefore does not have as wide potential for use-cases - it is perceived that this will be a limitation on adoption and ultimately limit demand for the currency relative to general-purpose public blockchains.
From a relative standpoint this could become true, but from an absolute currency demand standpoint, if Steem is organically valued at $780 m with only 1 million users, it could be quite an interesting investment if the applications running on Steem start to take market share away from the Twitters and Facebooks of this world.
Summary
Steem is a first mover blockchain with first mover applications gaining fast adoption. Its fundamental characteristics supporting censorship-resistant freedom of speech, and incentives based on quality of content, are increasingly attractive to more and more users globally. Big names in social media are already present on applications like Steemit and D.tube and it seems that organic growth will only accelerate from here. It's development plans shout innovation and if it's community continues along the right path, Steem has a bright future.