Explaining Steemit to a non-crypto person - a dialogue

So tell me more about this website Steemit - how does it work?

Well, it's built on this cryptocurrency, STEEM.

Cryptowhat?

Like a digital currency. A computer network is running a computer algorithm that continuously generates virtual coins and distributes them to members of the website, according to votes. And it has value because other people want to trade for it.

So it's generated out of thin air? More and more every day? Why would people value it?

Think of company shares in the stock market - why do people value it?

It represents the value of the company. And some pay dividends.

Right. So imagine that old hoax is true. Facebook is paying for each like on posts. But instead of using its own money, it issues ten thousand new shares a day and distributes them between the top liked posts that day, and to the users that liked those posts. Each share today is worth almost $130 so that over a million dollars to go around.

Wouldn't it devalue the shares a lot if you issue a bunch of new ones every day?

Yes, but not that much. There are almost 3 billion shares out there, so 10000 is about 0.00003% of the existing ones. Still, instead of awarding the shares directly, imagine Facebook creates an investment fund backed by its stock shares and issues participation shares on it. Then uses it for most of the payouts. You can cash it out over a period of two years. So you are both decreasing the dilution and ensuring there's long-term investment in the company when people choose it invest on it.

Hmm. Here's what I would do: I would create a bunch of accounts and like each other's posts to get a large part of that million bucks.

That's why votes are weighted by the amount of investment shares one owns. The more invested you are, the more influence you have. Your like has a bigger impact on the payout of the post and you get a bigger share back.

Makes sense. But wouldn't people feel two years is too long by only rewarding them in investment shares?

Well, there's another kind of reward that could be given, more liquid than investment shares, and more stable than the stock shares: bonds. Imagine that Facebook would form part of the reward as a debt note, a token that could be used to claim $1 worth of stock shares at any time. Unlike the investment shares, those tokens can be transferred and traded between users.

Sound like as long there's enough stock to cover those tokens, their value is guaranteed. And if there's enough money invested long term in the platform, and enough user engagement to keep the company profitable, the stock value should hold even with the small amount of shares continuously issued per day.

Exactly. So Steemit is kind like that. Just instead of stock shares, the platform is powered by the digital currency called STEEM I mentioned before. The shares in investment funds are called Steem Power and the bonds Steem Dollars. And the whole thing is decentralized, running on this blockchain powered by Graphene.

Blockwhat?

OK, that's a subject for another day.