As more people are joining Steemit, I can’t stop observing their satisfaction when they cash out their first payment. “Oh, my God, this thing really works”, or “Wow, I can’t believe it! I just paid rent with Steemit money”.
And a buzzing theme of all these messages is the “free” word. This is free money. I just blogged and got some free money. Open an account, post some articles, comment a bit and you get free money.
Well, is it really free?
It think not. And it’s not free from a variety of angles and because of a multitude of causes.
What follows is a moderately long post, geared towards not only the newbies on Steemit (although they are the primary target), but also towards people using it for a while and considering they are entitled to their rewards.
The Economics Behind Steemit
First and foremost, we have to understand that there is an underlying economic layer of the entire mechanism. Things are not just happening, out of the blue. You don't post out of the blue, and you don't get comments and upsteems out of the blue. There is a very solid network of processes, which, combined, are producing this ongoing result.
Let's take them one a time.
Hardware Infrastructure:
You can access the entire database of accounts and blogs on Steemit because there is a very consistent, albeit unusual, network of hardware. This is not a website. Or, to be precise, this is also a website, but it's so much more than that.
The first level of hardware is made of witness nodes. These servers, running a special type of the Steemit blockchain daemon, are validating all the transactions on the Steemit ecosystem. All of them. A user signing up, there you go, you have a transaction. An upsteem, another transaction. Following someone, you guessed it, a transaction.
There are around 70 witness nodes at the moment.
And there you have seed nodes. These are like "relaying" post offices for all the transactions and they serve a very specific role in the community. Suppose you want to write your own app on top of the Steem blockchain. You will need a specific node to query in order to pull your data. In the beginning, you may choose some of the public nodes, like node.steem.ws, or thisp.piston.rocks. But as your app grows, you will need your own seed and app node.
All relevant apps on the Steemit ecosystem (busy.org, chainbb.com, etc) have their own seed node. I estimate there are between 20 and 30 solid seed nodes.
If you do the math, you already have more than 100 people involved in this mechanism at a very deep level. All these people are doing a lot of work so you can post, comment, upsteem and transact.
Underlying Software
The software ran by witness and seed nodes is free on Github, under an MIT license, everybody can see it and audit it. But there is an entire core team of people maintaining it and making sure there are no bugs and no security holes. Some of these people are on the payroll of Steemit INC, but many people contributing to the codebase are not. They are just developers contributing their time and skills to build something for the greater good (or for some personal agenda, like, you know, getting rich).
I estimate there are a number of 50-100 developers moderately active at this point on the Steemit ecosystem.
The Interaction Level (inter-personal processes)
Here we are getting to what most of the people are considering the flesh and blood of Steemit:
- witness voting
- witnesses are maintaining the health of the network by generating various props: block size, price and many others
- authoring posts
- commenting
- upsteeming (drawing from the reward pool)
These activities are consistently made by around 35,000 people, over a period of 30 days (according to steemd.com.
There IS A LOT OF WORK!
So as you can see, this thing is not even remotely free, there is a lot of work involved. And all work deserves compensation.
What makes it difficult to recognize and accept is the fact that it’s distributed among many people in relatively small tasks. Combined, they are creating a similar result with a standard website (or service), here all the processes are centralized.
But so are the benefits. They are centralized in the hands of the very few who are creating, launching and maintaining the website.
Facebook versus Steemit
Let's make an exercise. Let's put together Facebook and Steemit and see how decentralization tilts the balance when it comes to ownership of what is created.
| Metric | Steemit | |
|---|---|---|
| Market Cap | 452 billions USD | 380 millions USD |
| Active Users | 1.9 billions | 35,000 |
| Ownership | private held | open (owning STEEM) |
| Average stake | ? USD | 10,857 USD |
Statistics are pulled from financial websites (coinmarketcap and zephoria.com).
Now, what's with that last number? What "average stake" means? Well, it's the actual amount owned, on average, by an user of the network.
In Facebook this is zero, because the owners are just a few. A few investment funds and a few brokers and probably a couple of dozens of thousands of regular traders. If you happened to buy Facebook shares on the IPO, you may think you own a share in the company, but you only own what other people are willing to pay you for that.
In Steemit, if you own STEEM or STEEM Power you actually have a say with your vote (on how witnesses are elected, how much you draw from the reward pool and so on).
But what's fundamentally different is that all those 1,9 billions users have NO STAKE in Facebook, although they are contributing each and every second to its growth. I'm not saying this is good or bad, I'm just noting the difference. Both Facebook and Steemit are doing pretty much the same thing, only in Steemit the decentralized model empowers people to a whole new level.
In Facebook, you are not producing anything, you are the product being sold to advertisers.
The Wealth Distribution In Steemit
The last number in the table above says 10,857 USD. This is obviously an average. The wealth is not equally distributed in Steemit, but it’s fair. And by fair I mean a conglomerate of factors:
- knowledge
- risk tolerance
- initial capital
- persistence
- ability to create and maintain relationships
These are skills or assets which can be used to generate value. If you use them carefully, you can create a sustainable and predictable income.
As you can see, there's a lot of work going on. It may be unusual money, all those paychecks you get from Steemit, but for sure they are not free money.
I'm a serial entrepreneur, blogger and ultrarunner. You can find me mainly on my blog at Dragos Roua where I write about productivity, business, relationships and running. Here on Steemit you may stay updated by following me 
https://steemit.com/~witnesses
If you're new to Steemit, you may find these articles relevant (that's also part of my witness activity to support new members of the platform):