Ninja Newbies: Where does the money come from? No Advertisements?!?!? How does steemit make money?

in #steem7 years ago (edited)

The most common question I get when telling people about steemit.com is:

Where does the money come from? 


As I pointed out in a previous post, new steemians need to be able to explain some of the basics of this revolutionary, experimental new social media platform, so that they can spread the love while not sounding sketchy (If you want to skip to the best part, scroll down to "The Good Stuff").

This question includes the implied follow-up question - “And how can I get that value into my hands so I can use it at Starbucks”? There are much more detailed answers out there for people with higher IQs than mine. The best way that I can explain it so that hopefully ANYONE can understand it is this: 

First, let’s rephrase the question and I’ll explain why - 

Where does the value of steem come from?
And how do I turn it into U.S. dollars?


Most people are confused by the term “money” when talking about cryptocurrency. Money is usually equated with the local currency, U.S. Dollars in my case. Let’s try to avoid confusing people by saying “money”. When people talk about Amazon stock, they don’t call it money. We should also stick to the correct terminology: Steem. Steem is just like any other commodity. It’s value is based on perception and trust. Similar to every other commodity, Gold, Stocks, Stamps, bartered goods, marijuana, digital assets like Bitcoin or WoW characters, or even baseball cards, the value is based on what you can buy, sell, or trade the commodity for at a given time. Once there is an established perceived value for a commodity and there is confidence(trust) in the security and genuine-ness of the commodity, it can be purchased and sold with local currency because they all have a measurable value. 

Let’s break it down some more:


Steem is the digital equivalent to a postage stamp in many ways. They both have limited supply(scarcity). They both have usability. Stamps can be used to send mail but they can’t buy milk at the supermarket. Their use is limited to the postal service and preserving(collecting). Likewise, steem can be used to reward bloggers for good content. It can be used to pay contest rewards, incentivize development, allocate curation rewards, and many other uses just within the steemit.com interface. But it can’t buy milk at the supermarket. 

Okay, can we possibly break it down even further? Let’s try!!

The Good Stuff


When a user “likes”(upvotes) a post, steem dollars are allocated to that post. How much steem depends on the steem power of the voter. "Allocated from where?" you are wondering. There are currently 235 million portions of steem in digital circulation. The software(blockchain) allows the voters to control how steem is spread among all the bloggers in the whole network, rewarding the good content. That's it in a nutshell. The awesome thing is that the voters aren’t using their own steem. The only cost to vote is a temporary decrease in allocation power(Steem Power). Voting too much means less steem you allocate with each vote and the longer it will take for your steem power to charge back up to full. Pure genius.

For more seasoned users that have around 500 Steem Power or higher, there is the ability to adjust how much power you use with each vote so that you can fine tune your voting frequency without draining too much steem power! I’m not there yet but I can’t wait!! Currently my full power(100%) vote is worth $0.03 steem dollars. I’ve seen others votes that are worth $26 each and I’m sure many are much higher. 

The two ways to get steem:
You can work at your day job, register with an online exchange like Poloniex and use your credit or debit card to buy steem shares.
Or you can work here, blogging decent content and receive steem for your work.
Let's go.


Alright! That about covers it. Now go out and tell your friends and family how this crazy thing works! Tell them they will all be rich in a year! And then when they aren’t, tell them they are just too boring!

I’m just kidding about being rich in a year. Don’t tell them that. It does happen though. My very first post on my first day on steemit.com earned over $50 steem dollars! If I did that every day… I still wouldn’t be rich. But many people make over $150 on almost every post they make! @papa-pepper and @gringalicious come to mind!

I hope some veterans will weigh in on any mistakes that I’m surely making in my explanations. I will edit this post as I am corrected. Please help all of us to understand further!

Stay tuned for my upcoming posts where I will deal with the following questions:

What is the difference between Steem Dollars, SBD, Steem, and Steem Power? 
How do I buy more Steem to use on steemit.com using my personal money? 
How do I turn value in my steem account into US dollars(or whatever currency I use at the local supermarket)?

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Ok that is a great explanation of how this all works. I am new to steemit. I have been here about three weeks. Just got a payout of $11 yesterday after getting tiny payouts before. I looked to see where it came from. Was it one of my posts? No it was just making a few comments with someone who is a "whale". And I was not spamming. Just commenting back and forth naturally about something she said that was interesting. Getting rewarded for real content and interaction! Much better than FB any day.

Yeah, I agree! That is the best way to interact. And make sure you fight the compulsion to only have meaningful dialogue with those ranked higher than yourself. We should be supporting the new users even more than trying to befriend the whales. Do both but don't forget the minnows.

I also got a boost of steem power which makes my interactions with minnows more rewarding for them. By interacting with whales you are mining where the gold is and you can share with others.

Great post again! Thanks for sharing

This is definately the best explanation! I will use it to share with newbies! Thanks & Upvoted!

Oh wow! Thanks!!!

Great post! I learned much and looking forward for your next posts! Btw: very well written and concise - keep up the good work - upvoted!

I was trying so so hard to be concise and it ended up being so freaking long!!!! Arrgh!!!

Upvoted & Resteemed - Keep up the good work!

Thank you!! And thanks for the fortune!!!

Looks like I'm down to $0.05... Hope to increase soon!

very informative post i learnt many things about steemit from your post

I'm so glad!!!

Really well written, especially for us blindfolded newbies. Cheers mate - followed :)

Yeah, it took me several days of digging to learn what I put in this post! Thank you! I will follow you back!!

What a fantastic article.

Something a lot of people should know!

Upvoted!

Thank you so much Sid!! What are you doing up at this hour? lol

I like reading your articles. :D

Just crossed 1 PM here in India. :)

Your Reputation is 42!!

I know has nothing to do with the topic ... but cool anyway
😄

Thank you! I will research the reputation score. Thanks for the idea!

That was not quite serious. At the Moment your reputation Score is at 42. (42 = answer to all questions).
You can see the reputation score next to your name.

Was quite fitting. Tutorial + 42

Very nice! lol

LOL - yet another fan of The Hitchhiker's Guide to the Galaxy! We're everywhere.

😄 😄 ... that's a must. My girlfriend has even marked the towel day in the calendar !!

I haven't seen it!!! I guess that's what I'm gonna do tomorrow.

Nice articel @pippininja:)

Thank you! I'm glad you liked it!!

This post answer many questions that I had about Steem it works and where the money comes from. Excellent post.

One question, would you mind if I translate this post and publish it in Spanish. I know this will be of good use for us (Spanish speakers) and of course, and will state that this your article, for people to follow you.

@joseph03, yes! you can translate it into Spanish and post it making sure to link to my post. I would like to talk to you about my future post also being translated. Maybe we can work together on some future projects. I also speak some Spanish.

Definitely, I'm gonna get to work as soon as I get to my laptop. I'll let you know once it's finished. Looking forward to work with you. Gracias. And of course your link is going to be on the post.

Thank you!! Let me know when you post it!!

Congratulations! This post has been upvoted from the communal account, @minnowsupport, by pippininja from the Minnow Support Project. It's a witness project run by aggroed, ausbitbank, teamsteem, theprophet0, and someguy123. The goal is to help Steemit grow by supporting Minnows and creating a social network. Please find us in the Peace, Abundance, and Liberty Network (PALnet) Discord Channel. It's a completely public and open space to all members of the Steemit community who voluntarily choose to be there.

If you like what we're doing please upvote this comment so we can continue to build the community account that's supporting all members.

This post is awesome. I had small details here and there and the post put them all together.

Thank you so much!! I'm glad it helped!!

I don't know the ins and outs of how it all works but I can tell you the first day I read the whitepapers I knew there was sustainability built in and I was here to stay.

I love your example with the postage stamps. There is definitely scarcity and limited usability. It took a dream, a developer, and a few investors to put this together and launch a platform that onboards traditional bloggers/creators into a crypto atmosphere.

As a good friend of mine says, "Value is based on what people are willing to pay." It wasn't that long ago when STEEM was down to 8 cents and it was doom and gloom for a lot of people. Many left. The diehards stayed and powered through it with blind faith that things would get better.

I think of STEEM and SBD as energy more than money. I don't need to know HOW electricity runs from the pole to my house but I'd like to know that the lights come on when I flip the switch.

It's nearly 3 AM and I'm rambling now. LOL I have no idea if anything I just said makes sense. :P

Lol! You made sense! Thank you for reading my post!!!

Were you here through the 8 cents days?

I was wondering if the white paper was very readable. And if it gets updated with each hard fork?

Thank you for the Free SBD giveaway #1 :)

You are very welcome!!!

When the World have more helpful people like you , than we have a grate World :)