Understanding the concept of steem trade.

[alexy007]

When I signed up for Steem and logged in, it was difficult for me to grasp the concept at first, I was completely clueless and didn't know what to do. But thanks to a friend of mine I was able to understand the basics. Therefore, I hsve taken the liberty to put together some of the things that I have come to understand about the platform. I hope this will assist newbies who are in the same position and don't know what to do.

What is Steemit?

Steemit is a social media platform in which contents created and curated by its users are compensated. The reward are given as steem, steem power and steem dollars. These rewards can be traded on the platform in exchange for cash, king of like bitcoin and other cryptocurrency. To understand the fundamental concepts Steemit economy, we need to understand the function of three values.

Steem.

So Steem is the basic form of currency that is rewarded and can be bought. The major exchanges on which it can be traded are Bittrex and Openledger.

When you own Steem you can then convert it into Steem Power. Those funds cannot be taken out for quite some time. So this way is more of a long term hedge on the success of the platform as a whole. For your conversations back from Steem Power to Steem takes 2 years, slowly starting to as much as 104 times the payment. However this comes with some T&Cs where Steemit rewards its holders by distributing Steem Power as new Steem is created thereby providing some kind of an interest rate to its holders.The Steem Power is also important when receiving rewards because the more power you have, the more influence your votes and posts have.

Steem Dollars are a stable store of value that is equivalent to about a US dollar. This doesn’t reap the rewards of those holding in Steem Power but has far more liquidity. Stability is very important in the economic success of any company. To that end, Steemit has a unit value that we refer to as Steem Dollars, which has a fixed value (equivalent) to 1 US Dollar.

What to do with these?
So Steem is constantly being created and every year the amount of Steem is doubled. So you neednot hold on to steem for too long because with the supply doubling each year there will inevitably be a decrease in value barring a major spike in use. So when you have Steem you pretty much want to put it into Steem Power, or if you don’t want to make that two-year commitment you put it in Steem Dollars in order hold its value. So to sum that up the only reason to have Steem is to convert it to USD or to buy either Steem Power or Steem Dollars. The Steem Power gives you a return on your holding but can not be taken out for two years. Meanwhile, Steem Dollars are more stable and for people that don’t want to commit to the two year hold.

What makes this work?
With other cryptocurrencies like Bitcoin, the actual currency units that are created each day are distributed to the people who run a special bitcoin software program on their computers that perform a process called Bitcoin Mining. The amount of computing power you have dictates how much money you get.
Steemit allows for currency mining as well, but it’s not the primary way to earn money. Every day, new Steemit currency units that are created by the network and distributed to the people who engage with the site. The more you engage, the more you get.

People who create content are rewarded for their content. People who upvote content are rewarded for helping to curate the best content available on the site. Commenters who add to the discussions are paid too.

Steem can easily be bought and traded as a cryptocurrency for ease of use. Meanwhile holding on to the currency is mutually beneficial due to rewards in the form Steem Power being distributed to holders while also keeping the value of Steem at a sufficient price level for a guaranteed period of time. The community is also constantly active because of the incentives for people to chime in and share ideas.

I struggled with the idea of Steem when I first started and had to research it for myself. I hope this would reduce the stress of research about steemit.