Steem represents blockchain cryptocurrency mechanics in a different and novel form.

A lot of people couldn't understand it at first either which is why even those in crypto can be seen calling it a scam/ponzi until they apparently got used to it sometime this year. Although that's not saying much in crypto as accusations of "scam" is thrown at just about everything and as soon as someone so much as sneezes or a websites page takes slightly longer to load. Ethereum and Dash are similar to Steem in that they also imagined blockchain mechanics in a different way to Bitcoin... and also they got called scams at first as well. ^_^

For example I saw Dash called an obvious scam on forum posts about a year ago accusing it of being some kind of criminal plot to create a free money printing machine on the account of it's masternodes where if you have enough coins to qualify can allow you to generate many many more and without all the expense involved with Bitcoin POW mining. These Dash masternodes will have become incredibly profitable had someone started a masernode last year when Dash was as cheap as peanuts

The simplest way to think of it is to remind yourself of how Bitcoin works. New Bitcoins come into existence through Bitcoin mining. MIning is necessary because they are validating transactions. From the miners point of view they aren't trying to validate transactions they just care about getting those Bitcoin mining rewards and the Bitcoin from peoples transaction fees.

Where is the money coming from to pay Bitcoin miners? The system itself.

Bitcoin miners earn Bitcoin, the value of that Bitcoin is completely up to us. In the early days you wouldn't be asking where the money comes from to pay the miners because Bitcoin mining didn't really pay anything valuable at the time even if you'd mined thousands of coins.

The point is you're not really being paid in USD on Steemit, you're being paid in Steem and Steem Backed Dollars. No new money is needed to find it's way into the system to pay people like we're used to thinking it needs.

The difficulty in understanding is that cryptocurrency is less like money as we know it and more like an asset that can also be used like a currency. We find Steemit valuable, therefore it's assets (the coins) become more valuable. In an indirect way it's us that bring in the money to pay people but not in the same way as we're used to thinking. Regular fiat money is only worth something because the government/banks say it is. Something like Steem or Bitcoin is worth something because WE say we think it's valuable.

Steem is allocated as a reward for using the system, which (at least as I understand it) is something created by the genius idea to represent blockchain mechanics with a blogger/reddit type front end. Using the system is what allows it to work, the reward in tokens are like the nearest equivalent of coins which use POS mining to validate transactions earning staking rewards.

These coins don't need to be worth anything for the system to run, it works independently of what we decide to value the system in terms of price. Like the Bitcoin blockchain doesn't know or care how much we value Bitcoin, whether it's $0.05 per Bitcoin or $20,000 per Bitcoin it doesn't matter. The system is it's own economy and would function regardless. WE give value to the coins it pays. The SYSTEM is what pays people, it does this as part of it's block reward for keeping the system functioning. From our perspective the payout reflects a reward for creating valuable content.