By Ian Allison
August 9, 2016 16:30 BST
It achieves community building and social interaction through rewards and a reputation system.
"Welcome to the Blockchain! Your voice is worth something," states a webpage of Steemit, the social network built on a blockchain that's now exploding with popularity.
For a while now, experts in the crypto space have talked about leveraging social media. Back in 2014 there was news circulating that Reddit was considering creating a cryptocurrency backed by shares of the company, to be redistributed back to the community in recognition of the role it has played in the site's success.
Enter Steemit, a blockchain database that supports community building and social interaction through cryptocurrency rewards and a reputation or influence-based system, known as Steem Dollars and Steem Power.
Ned Scott, CEO and co-founder of Steemit, told IBTimes: "If you think about the existing models - Facebook, Twitter, Instagram - these are platforms that invite people to come and do all this work so that their shareholders, who are not necessarily contributors make all this money.
"Our platform is a cooperative version of a social network which is more intuitive, and a more shared, community-driven approach, and that's why our early user base is growing.
"We are completely open source; the blockchain and even the website, and we are seeing entrepreneur after entrepreneur show up to build their own tools. Literally more than 15 entrepreneur-built, third party-built tools have popped up in the last few weeks."
Steemit grew out of a long process set in motion by gifted developer and co-founder, Daniel Larimer. It evolved from the idea of a decentralised exchange, in the form of the iconic Bitshares platform, to a later exploration of blockchain-based mutual aid and micro-insurance, with a forum added for users to interact and compare notes.
Scott said: "We realised that the forum has got to be on the blockchain so that it's really tied to people's accounts and it's totally verified. Then we had this idea that the blockchain could pay them to post, kind of like the way mining works for Bitcoin, and pay them to vote so that there's this wisdom of the crowd element. Before long we were saying, this is going to look a lot like Reddit, except people are going to get paid to post and vote."
"So it combines a lot of the technology that has appeared along the way. Underneath the hood, there is a piece of the decentralised exchange in there; there are ways for people to do mutual aid across this blockchain and tell their stories. All these concepts that we care deeply about are caked into this.
"But at the same time there is this great element of fun and networking that kind of makes the platform much more friendly and viral."
Scott said the team are currently looking at social media-type features that need to be built into the platform. "We're looking at successful things we have seen on social media sites like Twitter, including follows and perhaps categories; we will also add private messaging and open up real time communication for people in a peer to peer, totally encrypted manner."
From a blockchain perspective, one cool thing about Steemit is how it does away with traditional cryptocurrency barriers to entry, like having to go and buy coins at an exchange. "We have come up with some innovative solutions that make cryptocurrency much more user friendly, to the point where it kind of moves to the background.
"With Steemit you just show up and do things you are already doing; you are posting and voting and by participating you earn cryptocurrency."
Scott said users don't have to worry about managing their accounts, or understanding how private keys interoperate with the public keys and addresses; long strands of private numbers have been substituted with simple account names for a more intuitive UI.
In addition, a layered key security system hides in the background. "We have built certain measures into the protocol level itself to make sure that when disaster strikes it isn't actually disaster. For instance, we have come up with trustee-based account recovery and now people link their account to another account - essentially another person - who can then vouch for their rightful ownership or identity."
Scott said that basically the blockchain is able to return an account to a user if they have their former password. "So it negates a hacker's ability to make off with people's accounts. That's crucial. Before in crypto, you lose your private key, or your private key gets stolen, that's it, you'll never get it back."
He also said Steem Power is constituted with a time delay in respect to how it can be removed from accounts. This means that should accounts be compromised, they cannot be instantly drained.
In terms of genealogy, predecessor Bitshares employed the concept of delegated proof of stake, which is the idea that witnesses are voted into a queue to produce blocks and are voted in by their shareholders to have this job of producing blocks. They are accountable for being block producers and they can be quickly eliminated for bad actions, thus ensuring a pool of good actors.
Scott said: "We took that concept and said it's missing something; it's missing the element of proof of work. So for Steem we created a hybrid model that is both proof of work and delegated proof of stake.
"Because of that, the block production is completely decentralised across nodes around the world and it's also much easier to communicate between nodes.
"There are actually two types of proof of work here. There's the one that we have been talking about that we call subjective proof of work, which is when people are posting and voting. That's the work they are bringing to the network, and they get paid for it.
"There's also the traditional proof of work, where people are showing up with their computers to send hashes to the network. The way it works here is they get a place in the queue, they go through the queue and then they get to produce their proof of work."
Scott said everyone is rewarded one way or another. People who post content actually get rewarded 50% in Steem Power and 50% in Steem Dollars. He explained that at its root, it's all Steem: the token is split between tradability and reputation.
"You get maximum stability with Steem Dollars, which are pegged to the US dollar. Or you have maximum influence, which is Steem Power, that allows you to participate and earn more by voting, promoting your own content and promoting other people's content."
Steem launched on exchanges in mid-April and has risen from a market cap of $3m to $10m, then around $20m. Scott said: "Just in the last four weeks, it's just kind of taken off – it's had a ride into the hundreds of millions. It's incredible, but Steem is currently the third most valuable cryptocurrency in the world."