A simple, easy to understand guide to Steem for anyone new explaining how it works and why, with no assumed prior knowledge.
Steem for Noobs
I've been spending some time trying to get to grips with Steem and I suspect many others will go through a similar process of liking the concept, but finding the complexities difficult to grasp.
I thought (hopefully contributing in the spirit of Steem) I'd try out a first post by making what I hope will be an easy to understand guide for anyone new to Steem.
I've written this as I thought about it, going through a logical progression of starting at the beginning then trying to answer the obvious questions that arise as hopefully the progression will make sense to other people that are completely new to it.
I am not an expert on Steem, so if I get something wrong here then let me know in the comments and I'll fix it.
So, we have Steem, Steem Power and Steem Dollars. Why?
First off we'll run through the basics of what each is. It won't make much sense now but don't worry, it will later.
Steem
This is what you can buy on an exchange like Bittrex.com.
Its not meant to be a way to store value in the way that Bitcoin is, it's just a means to buy into Steem (the organisation / website). The total number of Steem doubles each year.
Steem Power
Steem (above) can be converted to Steem Power and are then locked. To convert them back to Steem takes two years.
(clarification required: how does this process of conversion back to Steem work exactly?)
Why would you do this? Because by holding Steem Power you are given some of the Steem that are created each second as more Steem Power.
- 90% of the new Steem goes to anyone holding Steem Power.
- 10% of the new Steem goes to anyone voting on a post or contributing.
When you vote for a post, the more Steem Power you have, the more you are rewarded by the creation of new steem.
For example, if you see a post with an estimate of $1000:
- $500 is being paid to the curators
- $250 is being paid to the author
- $250 is being paid to the parent/grandparent post if there is one, otherwise it goes to the author
Steem Dollars
A stable store of value (relative to most of the real world) where each Steem dollar is worth about $1 USD
Ok, so what is the point in these three things?
Steem is just a way to facilitate the site working, and to move real dollars into Steem Power or Steem Dollars. Nobody would want to hold Steem for any length of time because it will lose value, instead they would make a decision to either:
- Convert it back to USD and spend it on groceries or whatever
- Convert it to Steem Power, thereby making a commitment of value to the Steem network for 2 years (because once you convert your Steem to Steem Power, you can’t just get it back right away)
- Convert it to Steem Dollars, keeping the value committed to the Steem network (rather than selling it on an exchange), but also keeping it liquid so you can take it out if you like. Because you did commit value to Steem though, you get some reward, but not nearly as much as if you converted to Steem Power.
This may sound complicated but you can think of it as these mindsets:
- I’ve had enough of Steem, I just want to get my USD back and not be a part of it any more
- Wow Steem is cool! I really think this is a great system of rewarding content creators and curators, and I want to commit my cash for the next 2 years with the expectation that it will grow and I will be rewarded by that growth
- I like Steem, but I’m not sure if I can commit this money yet for 2 years. I’ll hold it here ready and when I make decision between mindset (1) and (2) I can take it out as USD if I want (mindset 1) or I can easily commit it as Steem Power if I choose to (mindset 2).
But the number of Steem doubles each year, so will it just lose value over time?
The doubling will cause Steem to lose value, but not Steem Power and Steem Dollars.
But thats OK, because (see above) nobody would want to hold Steem, its just a way to switch between options 1,2 and 3.
The number of Steem will double every year which would imply that it should be worth half as much every year (unless a lot more new people buy in).
However, every 3.32 years a 10:1 reverse split will occur (each 10 Steem become 1 Steem, effectively resetting the clock on the amount of Steem in circulation).
This sounds complicated but its not. For example:
- Year 0: 500 Steem
- Year 1: 1000 Steem
- Year 2: 2000 Steem
- Year 3: 4000 Steem
- Year 3.32: 5000 Steam (reverse split now occurs, and the number of Steem goes back to 500 and the process starts all over again)
(note that the numbers here aren't accurate, there are more like 500 million to 5000 million steam, not 500)
Wow that is weird, what is the point of all that if it resets every 3.32 years?
The point is that:
- The value within Steem (i.e. Steem Power) isn’t diluted and forced to drop in the long term because it will ultimately just cycle around 500-5000
- but the value within Steem can be redistributed to different Steem users, and is distributed more to those that are more committed, and more active.
The value in Steem is redistributed to:
- those who have committed to Steem Power long term
- those who are contributing posts and curating them by voting
Complicated. What does all this achieve?
All the above stuff is this way for good reason. What you end up with here is something where:
- You can buy into and trade it easily as a cryptocurrency
- You can commit to it long term, giving it stability (i.e. you, and most other people involved, can’t just panic one day and pull everything out making it crash)
- If you do commit to it long term you are rewarded
- If you contribute you are rewarded
So everyone is heavily incentivised to make the site very active, to keep it stable in terms of value and trading, and to make it a huge success however they can, including telling others about it and encouraging them to participate too.
It sounds cool, but Reddit and other sites are big already. Why would anyone switch?
If you spend your time on Reddit and other social media sites contributing content and upvoting posts (curating for everyone else) then at the end of the month you get a warm feeling knowing that you spent that time building value for the shareholders and employees of Reddit or Facebook and that they can buy carbon fibre toilets for their yachts and fuel their Bugattis for another month thanks to you.
If you spend your time on Steem you are rewarded with real value - something that is effectively a slice of the organisation.
The more you commit and contribute, the more valuable you are to the organisation and the more you are rewarded with a larger share of it. As it grows you don’t just get a warm feeling, you get genuine rewards.
If I want to get started do I have to buy Steem or something?
No, you can just sign up and start contributing and curating by upvoting.
If you think Steem is a great idea you could buy Steem and then convert it to Steem Power, effectively buying into the Steem organisation and network, but it's not necessary to do any of that. You can get rewards just by signing up and contributing to it like any other social media site.
Power down in your wallet. Starting 7 days later, you'll get 1/104 of your SteemPower paid out in Steem. If you get more Steem Power in the meantime you need to power down again to include that in the payouts (which will reset the next payout to 7 days)
Your post is the parent of mine, answers to mine are your posts grandchildren.
Thanks for these clarifications, I've updated the parent/grandparent post reference. The Steem Power -> Steem conversion process I am still trying to get my head around though. Is the 'Power Down' like a state switch on the wallet rather than an instantaneous action? So I basically leave the wallet in 'powered down' state for as long as I like, which then means that each week I get 1/104th of the Steem Power converted back to Steem (so I can move it into Steem dollars or sell it on an exchange), which then conveniently works out that the whole thing will be drained in 2 years (52 weeks * 2 = 104 weeks)? So if you wanted to take out 25% of your holdings of Steem Power it doesn't take 2 years, it takes half a year?
Correct
another question about Steem Power.
If you are in power down mode but keep earning SP through posts. Do you effectively have two balances of SP; one in power down mode and another in powerup mode?
Or do you reset powerdown or lose powerup?
Thanks!
Only the VESTS you had when starting the power down are included in payouts. If you want to withdraw what you earned in between, you have to restart the power down.
It was very useful for me during my first days in Steem. Added to Awesome Steem
That is not right!
Every minute are created 800 STEEMS... That means (800x60x24x365) about
420 millions STEEMS the first year...
840 millions years the second year...
1.26 billion the third year...
1.68 billion the fourth year...
2.10 billion the fifth year...
EXACTLY ! :)
It is right long term. The first year is an anomaly as the supply is issued.
I just want to understand this better too and clarify - you mean the first year ever is an anomaly as the supply of Steem is issued, rather than the first year of issuance after a reset? So presumably some time in 2017 it does start to go through the doubling/reset process and the supply of Steem is maintained at around 500m-5b thereafter?
Yes. Steem is created at a fixed STEEM per second until the STEEM per second falls to 100% annual growth. Each day the "inflation rate" is falling because the supply is growing relative to the rate, just like in Bitcoin. This "rate" stops falling once it hits 100% annual growth (doubling every year and then resetting).
Soo.... There is or is not a reverse split at all? I get everything else, but I'm still having trouble with that part.
@are-you-mad There is a reverse split every three years.
I don't understand it yet but I can tell this post is awesome. I'll read it a few more times and it will sink in soon. Lots to take in. I'm a super noob at this. Thanks for posting! Saving this for later. Following you.
The very same for me. I don't have a clue about what he is talking, but the post is great!
Same here. I have a slight idea what all this means, but I'll have to go over it all again :-)
Maybe this is a stupid question, but how do you 'save for later'?
Good guide here. My concern is why does this need to be so insanely complicated? And what appeal does this have to people outside cryptocurrency enthusiasts?
I can see content creators/curators being interested in owning the social network, and being paid for their work. I can sense this gaining some momentum. But I'm also concerned that there's something wrong or scammy about it. For example this post has been noted to gain $4,906 so far. Has it really generated that much value to the community and the general public?
I would like to see this succeed but I am concerned about where the money is actually coming from. The VCs who are initially bankrolling this might not be too happy that Steemit it giving out thousands of dollars to contributors who are just writing about the platform itself.
I'm just a little confused and confuddled - that's all.
Good point about the actual value of a post. As to Steemit "giving out thousands of dollars", think about this. Steemit is just awarding Steem and Steem Power. Those tokens only become dollars when you go on the market and trade them to some other person. So, Steemit gives you something it created. Then someone else gives you money for it. Voila! Steemit never gave you dollars.
"Carbon fibre toilets" LOL :D
wow, that was an awesome post! I wish I could bookmark it and link to it whenever a new noob come in. :-) But one thing for sure, I'll share it on twitter! (Suggestion: add a nice image at the top so that your post has a thumbnail)
Great to see it was well received! And thanks for the suggestion, image updated :)
Steem for nubes in pictures (1000 words right)
https://steemit.com/steem/@dennygalindo/introduction-what-old-travel-pics-can-teach-you-about-steem
I don't quite get how you get steem power for voting and posting. I have a post with over $4000, but my steem power is still at 10.335 STEEM, up from 10 when I joined. It seems to tick up slowly every few minutes, but I don't see any clear gains from any actions.
First payout will be at 4th of July, after that day payouts will be at a daily basis
Awesome. Thanks!
You get SP for just having SP. The value of the post contains the value of SP influence voters have. Someone with a lot of SP that votes for your post will increase the value of the post.
"Because by holding Steem Power you are given some of the Steem that are created each second as more Steem Power" - does that mean that if i have a lot of SP -> each second i will get Steem that will be automatically converted into more SP?
Do you know what is the SP to upvote influence ratio?
Awesome post, thanks found it very useful to get my head round it all.
Enjoyed the post. I'm new to the site and this was a very good summary of how the processes work and function.
Why I can't earn anything? I wrote a big big post, it took me 1 hour, but nobody likes it(((
my post: https://steemit.com/mining/@bitlord/testing-gtx-1070-in-games-and-mining#@bitlord/re-bitlord-testing-gtx-1070-in-games-and-mining-20160714t124655105z
you have to see what's trending and write your posts around that. Currently any hype around the platform itself is viewed as good content, since there are a lot of new users.
Very well explained, will share on my Facebook and Twitter, thanks a lot for the post :)
pd: I will translate it in Spanish and posted linked to this post if it is not a problem, I think is a very good way to understand how works Steemit.
Great post! I've been around a while, but you communicated the what & why better than I could. Welcome aboard the Steem train!
BTW @aem feel free to introduce yourself in the Welcome Thread here.. always curious to see how people find Steemit. Thx!
thank you i needed this!
You might want to change this to something else, as it is shown as a summary on the main page.
Thanks for the suggestion, updated :)
"The more you commit and contribute, the more valuable you are to the organisation and the more you are rewarded with a larger share of it. As it grows you don’t just get a warm feeling, you get genuine rewards."
Nice future proof wording, given the latest changes. Now you don't have to edit ;-)
Having just started to get involved with Steem only hours ago, I've found this post to be immeasurably helpful in explaining some of the basic concepts and technicalities of the system without reading through the entire 44-page Steem Whitepaper. Thank you, thank you!
thanks, but i dont understand something, you make money making post and "blogs"? please answer me
Noob question here...Why can't I upvote? Do you have to wait a period of time after signing up a new account? For example: I see this post has 385 votes, but there is no option (button) for me to vote.
I just figured it out =)
I still haven't figured out how to upvote. Any help would be appreciated.
Help! Any help on how to upvote please? !!!!
Same question here...
I've just arrived and appreciate happening to find this - thanks! So, how do I make the conversion from Steem to Steem Power? Is there an article, or tutorial on that hidden somewhere?
More like how do I convert power to steem and cash out of this overvalued heap of junk.
Go to https://steemit.com/@bushwacker/transfers and click your steem amount, then choose "Power Up".
This is very interesting, and I look forward to learning more. I'm still puzzled as to how I'll make any money through use of this site, but I'll sit down and read your explanation closely this weekend. As someone who came to that Bubblews thing pretty late in their game, I never made any money, but a friend claimed he did for a while. I'm a skeptic, but look forward to watching how Steem evolves.
Hi! We're brand new to Steemit, so hi! :-)
We need help because we can't seem to add more than 1 tag per post. Is there a support page where we can get some help / report bugs?
Separate tags with spaces. It works, I just tested it.
you can separate tags by using space. you can also use 1 hyphen to connect words. i noticed if you try to do more than one it doesn't work which is frustrating. so you can't do mixed-martial-arts cuz it has 2. however you can connect names like kris-tharp so the two words are associated and not viewed as separate tags like kris & tharp. hopefully they allow multiple hyphen connection.
Thanks for the info, curious to see where this network goes in the future.
that good, steemit power
Thanks, that really helped me figure these little things out. Think it will be a spectacular network, and it's great to be on board in the initial stages where we all grow the project together.
"It sounds cool, but Reddit and other sites are big already. Why would anyone switch?
If you spend your time on Reddit and other social media sites contributing content and upvoting posts (curating for everyone else) then at the end of the month you get a warm feeling knowing that you spent that time building value for the shareholders and employees of Reddit or Facebook and that they can buy carbon fibre toilets for their yachts and fuel their Bugattis for another month thanks to you." hahaha
So the way I understand this is as follows:
Am I missing a trick?
I think you are missing a trick.
Everyone who participates gets given a share of the value of the platform. The more valuable the platform gets, the more valuable your individual holding gets. Steem will drop in value, but as the platform grows that should be offset by the increase in value the newcomers bring in (by adding content, curating etc).
As @dantheman stated, the founders are more than happy to take a tiny slice of a huge pie, rather than take a larger slice of a smaller pie. Which seems to make sense. Their focus right now is to increase value by building user numbers (no surprise there, eh?). :)
Thanks for sharing this info with us. Keep Steemin' on!
Thanks for this post! Very helpful :)
great article thank you
Nice post. It cleared up a number of things for me. There's just one bit of the puzzle that is still eluding me.
In BTC, correct me if i'm wrong, the people that successfully crack a hash are awarded a Bitcoin. The cracking itself takes computational power. If the same applies to the steemit blockchain, where steem are produced instead of bitcoin, are the steem produced just given away within the ecosystem? To authors, curators etc? In other words, who's paying the miner's bill?
Thanks in advance.
Ive been a member for 2 weeks now and I own a good bit of steem on bittrex, thanks to your post I know that having it sit in bittrex is the dumbest thing to do haha. Thank you @aem!
Still 'getting it', but I know it will all fall in place after a while. Thanks for the summary, was good 'n helpful.
This is very useful for us newbies just wish i could save it for future reference. thank you
Great post, I think I finally understand steem a bit. I just don't get why you came up third on google search. The first two articles where way worse lol.
So i can just upvote unlimited? And if it's a good story. I earn money out of the upvote? is it that it?
I know i'm late to this party but where can I view the cycle and see when it begins/ends?
Is it safe to say, the reset happens on the "capital" not on the income, or interest produced by exchange of the capital? In other words, only the placemarkers reset, they are not coming after anyone's gold.
Steem for noobs:
Welp, that pretty much sums it up.
Hi! Thank you for the concise post. It would be great if you can explain if there is a right time to post my first post on steemit? Also, what is the ideal time period for which I can hold my steems?
I still find it all confusing but this article definitely helped somewhat. I'll keep looking into it I guess:)
Excellent post! Very informative. I am glad this was my starting point for figuring everything out. The comments are super helpful too!!
More confused than ever..but thanks! Re-reading..
(sigh)
"If you spend your time on Reddit and other social media sites contributing content and upvoting posts (curating for everyone else) then at the end of the month you get a warm feeling knowing that you spent that time building value for the shareholders and employees of Reddit or Facebook and that they can buy carbon fibre toilets for their yachts and fuel their Bugattis for another month thanks to you."
LOL xD You're right.
Good article explaining the difference between STEEM, STEEM PowerAND STEEM Dollars.
Thank you for the great posting. However, I am not still clear in some part. The following is what described in the white paper.
"Because Steem wants to encourage long-term growth, it is hardwired to allocate 9 STEEM to Steem Power (SP) stakeholders for every 1 STEEM it creates to fund growth through contribution incentives. Over time this drives the ratio of the total STEEM value of Steem Power balances to the total of STEEM balances toward 9:1 ."
I do not understand this paragraph (especially, "... every 1 STEEM it creates to fund growth through contribution incentives...") .
Does it mean that 90% of Steem inflation will be distributed to Steem Power holders? Then, Steem power holders will have a 90% increase of their Steem every year (until the year 3.32).
If it is true, how they can manager 9:1 ratio of the total Steem balance to the total Steem Power balance (in Steem)? Because they do not know the portion of received Steem (as a form interest coming from the 90% distribution) that Steem Power holders want to power up.
Thanks for the useful info. I have a question. Ive noticed I can't re-steem some posts. Any reason for that?
Thanks and great article, you have helped me get my head around what Steemit is all about. thanks
Great post, thank you!