Beginner’s Guide. Part 2. Steemit: How the hell does it work?

in #steemhelp8 years ago

In this article, we used layman’s terms to explain how Steemit works. We’ve explained in a very understandable way what Steem, Steem Power and Steem Dollar are all about. The article also tells about who votes, how to vote, the reward, and why some votes attract $100-500 to a post, while others don’t.

This part is devoted to the topic.

Steem

Let’s use analogies. Steem can be compared with gold. In the real world, gold has value. Its price can change with time and it is determined by supply and demand. In the digital world, Steem is the same as gold but only digital in nature. The Steem team opened its source of gold (Steem) and miners are working painstakingly to supply more and more new Steem in the system every day.

Steem doesn’t have its own servers and data center. The system makes use of a distributed database – Blockchain. Miners are people using their computers and software to process data and ensure that the system works perfectly.

Some features of Steem:

  1. 100% issue per year from the total amount of Steem;
  2. There are no fees for any transactions (transfers from person to person);
  3. Steem can be sold at the exchange or converted to Steem Power;
  4. Steem can be exchanged for Steem Dollar at the internal exchange.

Steem Dollar (SD or SBD)

Now let’s talk about Steem Dollar. What do you understand by the usual US dollar? In essence, it is a paper secured by certain obligations. Before the gold standard was abandoned, the US dollar was rigidly pegged to gold, and you could always exchange the dollar for gold at a rate of $35 per troy ounce.

Steem Dollar is the same obligation that is always exchanged for Steem at the rate of 1 US dollar (1 SD = 1 USD within the system). It is smartly called convertible loan. It greatly eases the lives of users because you don’t need to always keep the exchange rate of Steem in mind in order to weigh your earned money against ‘reality’. Everyone in his or her country knows what he or she can buy with a dollar, and thus can assess his or her labor. 

Steem Dollar represents the same obligation. You can at any time exchange your Steem Dollar for Steem (the equivalent of gold). And for your Steem Dollar, you’ll always get the same amount of Steem that is worth $1.

So what happens when you receive for example 100 SD from the system for your post? The system is saying “Well done! Take this receipt, you can at any time get from us as much gold (Steem) as you can buy with $100 at this moment on the exchange”.

Let’s present an example. Let’s assume that 1 Steem = 1 US dollar. By converting SD to Steem, you’ll get 100 Steem. So what if the exchange rate of Steem increases to $10 (1 Steem = 10 US dollars)? Converting your SD to Steem, you get 10 Steem.

By selling your Steem at the current rate, you’ll in both cases receive $100. Such mechanism gives the system stability and enables ordinary users not to depend on fluctuations in the exchange rates of Steem at the exchange.

SD has additional features aimed at checking abuse and enhancing user interest:

  1. SD can be exchanged for Steem in the internal exchange;
  2. SD can be traded for other cryptocurrencies at the exchange;
  3. It takes one week to convert SD to Steem;
  4. The average price for the week (rather than the instant value) is used for exchange transactions;
  5. You can’t exchange back from Steem to SD;
  6. If you keep SD in your account, you get 10% interest per annum;
  7. SD that is already at the exchange does not generate interests.

Steem Power (SP)

If Steem is gold, and Steem Dollar is paper money, then what is Steem Power? Steem Power is a kind of rating/karma in the system. The power of your voice depends on your Steem Power. Besides, Steem Power is a kind of an equivalent to shares.

Let’s take it one step at a time. Let’s assume you’re Alice in Wonderland. You have 2 cool things: the potion Pishsolver and the cake Upelkuchen. When you drink the potion, you decrease in size, and when you eat Upelkuchen, you grow up.

A daily fair is organized in our Wonderland. The fair attracts sculptors, painters and artists (authors of posts and comments in Steemit) from around the country, who hope to enthral the discerning audience with their talents.

There are sponsors in this party – mysterious miners but known by everyone! Each day, the miners bring 10% of gold (Steem) produced from the mines to the fair. This gold is daily distributed among all the participants at the fair. Why? – Because that’s the agreement between everyone.

Residents of the Wonderland (Steemit users, including you the Alice) visiting the fair on that very day go around and vote for their authors. The more you overeat Upelkuchen, your voice becomes more reputable and powerful. The voice of young novice residents of the Wonderland is almost inaudible, but yours, the strong voice, already has weight. All the votes gathered by each author are written down on a piece of indelible paper. Every evening, money is distributed based on this paper. How?

75% of gold brought at the fair is divided proportionally among all the authors who exhibited their works today; the other 25% goes to the Wonderland residents who came to the fair and voted.

You may ask what happens to the remaining 90% gold that didn’t make it to the fair? This gold (Steem) is transformed into Upelkuchen (Steem Power) and is fed to all the Wonderland residents.

 

Let’s recall that Steem Power is a kind of an equivalent to shares in the system. Therefore, 90% of the mined Steem is shared among all members of the network as a ‘dividend’ proportionally to their ‘equity stakes’ (number of Steem Power).

Of course, you can convert your SP to Steem. To do this, you need to drink Pishsolver (press the Power Down button in your account). Each week, your SP will reduce in equal amounts for 2 years (104 weeks). So every week, you’ll receive your respective Steem equivalent. 

This is done to bring stability in the notoriously unstable world of cryptocurrencies. Speculators exchange one cryptocurrency to another based on short-term growth expectations. Steemit wants to build a community that is owned and controlled by the people. A community that is guided by long-term outlook.

Features of Steem Power

  1. SP can not be moved to other participants;
  2. SP is not traded on exchanges;
  3. Users can at any time convert Steem to SP at the rate of 1-to-1.
  4. Steem issuance does not create significant inflation thanks to SP share distribution among all participants.

In the next section, we’ll explain the structure of the voting system and distribution of rewards between authors and curators.

Previous part of guide is available here: https://steemit.com/steemhelp/@lehard/beginner-s-guide-steemian-s-adventures-in-wonderland-part-1

 Crossposted by #steemhelp #help #steem #steemit #basic 

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Excellent article! May I translate your series article into Chinese?

Yes, I'll be happy! Send me a link and I'll vote for your translation of my articles

Here is the translation of the first part. I will translate all the beginner's guide and share 50% of the earnings with you. : )

https://steemit.com/cn/@somebody/4ginna-steem

Thanks! Upvote it!

I need time. All nights after meeting Steem is sleepless. Too many projects on hand.

ok I decide to find a translation company to do that. Could you please send me the markdown file of the beginners guide Part 1 and Part 2? my email is [email protected]. Thanks.

Sorry, but I do not have the markdown files.

More sharing on the go! Thank you so very much for this precious work and namaste :)

I ask again, if you take SP out in 104 rates but you also gain continuously, wouldn;'t you end up with more sp than you started with in 104 weeks?

If you good author and continuously get rewards for your posts, when yes - you end up with more SP. When you order power down, you order power down for current amount of SP, if you continuously get rewards - for you will be better if you will cancel power down every week after weekly payout and start it again for new amount of SP.

I love the way you presented these posts, and you were right to "sign" your graphics because they will surely be used.

On a post I wrote today, I have someone convinced that having more steem power isn't really important. Can you please come over and take a look?

Excellent work on this guide @lehard . Thank you :)

Thanks!

👍great article, very interesting @lehard

The main thing about Steemit is that it could not work without all three steem tokens ( SBD , STEEMPOWER , STEEM) thanks to them, we see steemit working.
How is it possible to gain from making posts?

You can get money from the advertiser, but that is not how steemit works, what is the source of income then?

It is these three tokens.
People trust in them- they are willing to buy them because it may yield a return, but the thing is that as long as we see people trusting (buying) steem, we will have steemit rolling.
Because every upvote generates some tokens , which we can sell later on market.

This is great thanks a lot man. Very helpful for newbies.

high five

Thanks! I have long been working on this post

Hey lehard,

I don't consider myself as new but this had some nice information for me as well. Thank you for doing great work for the community.
This is why Steemit is so precious. The community give the value

Thank you so much) I also believe in the power of the community!

I just love those images!

Well, while I read this post, STEEM went up 5%. You pumped Steem Karma, thanks!
question: How rate SD to Steem is calculated? In internal Steem wallet all calculated via BTC, at adds to mess (BTC - one more variable).

SD to STEEM rate calculated using data from internal exchange: https://steemit.com/market

Keep up the good work :)

I wish iad this when i was a noob it would of helped alot. Thanks

Thanks! Hopefully this will help new beginners)

awesome post!

Great work! Looking forward for part 3 ;-)

Thank you! Already working on it)

Great guide! Thanks!

Now this is quality content.

Excellent. How do you write easily. What's the last article that new. I hope your quality will still be on top.
Thank you. And wait for translations.

Thank you! It is nice to hear such words)

Thank you for information :)

Thank you very much for your excellent explanation, I loved the analogy between Alicia and our reality ... after today you can count on me as a follower , esperare forward to your next post and continue learning too much, Greetings from Colombia

Thanks! Greetings from Russia)

@lehard
Thanks for the explanation
I was curious for awhile
Still new to this place 🍻🍻🍻 cheers

I'm glad the post was helpful to you

Great Explanation!!! Thank you:)

This is the best guide I've seen to date. Thanks for the hard work.

Good description of how STEEMIT works with STEEM, STEEM POWER and STEEM DOLLAR, one thing isn't quite clear to many users, once you power down, does the remaining STEEM POWER still collect interest? Or is it frozen to the amount at POWER DOWN Time?

The answer to your question has already been mentioned by @testz:
If you good author and continuously get rewards for your posts, when yes - you end up with more SP. When you order power down, you order power down for current amount of SP, if you continuously get rewards - for you will be better if you will cancel power down every week after weekly payout and start it again for new amount of SP.

Thanks for your insightful post! I learned something :)
But I have still troubles understanding how the Steem Dollar can keep its 1$ price. While it is traded on exchanges?

At the moment SD is converted on a "7" day average, by using the "Convert to STEEM" command, it takes the average price of STEEM based on the last 7 day market feeds, and gives you the equivalent of $1.00 worth of steem for that week. This can happen without using the internal market. If you do use the internal market, then you should be prepared to research if you're buying at the bottom, or the top prior to deciding on what price you are selling it for to ensure you are getting either "more" or "less" than the average $1.00 worth of steem.

Love your explanation! Makes it easy to picture and understand. Great job!

Thank you so much!

Nice artwork! Upvote!

good explanation and infographics, upvoted dude @lehard 8]

This is a very helpful article I can understand

When you say they SD at exchanges does not generate interest, what do you mean? Poloniex?
If so, then I have two questions:

  1. How does the system differentiate exchange accounts from any other account on the blockchain?
  2. What happens to the interest that would have been generated had the SDs been held in a steemit account?

This is why every woman should wear a supportive bra, you just never know when you will caught on camera with a terrible Prank

I'm just curious. Was this a candid camera like thing, or part of a bigger study to see people's reactions? Is a longer version with an explanation available anywhere?

very informative. thanks for this

Excellent post. The idea of a kind. There are significant advantages and disadvantages.
Some features include if will be fun!

Thanks!

You are making some good points, thank you for sharing this :)
Maybe you can learn something from my mistakes:
https://steemit.com/steemit/@lorddominik007/trading-done-wrong-see-my-mistakes-so-you-don-t-have-to-see-yours

Great information, thanks. I would like to hear more about when it is useless to vote once the post has passed certain amount of money.

In the next article I will talk about it

oh this English :))

This is such a great write up. The information available is plentiful, but it's hard to get it down to very simple ideas that anyone can understand. Thanks for that, but I'd love to know if you plan to make one of these for mining ;) Lord knows we could use a simplified guide to setting up a witness and mining some Steem

I do not mining, but maybe my friend @testz decided to write about it

Hi! Thank you so much for your interesting information. It's a really important post, especially for the beginners (as me).Good luck in Steemit.
Please, read my post too: https://steemit.com/introduceyourself/@knyaz/hi-steemers-my-name-is-igor-knyaz-and-i-ll-be-35-in-two-weeks

Great information. It took a while to wrap my head around how the profits work. Basically profits get split between Steem Power and Steem Dollars. Steem power gives you more reputation in the system as well as collecting interest on it. Steem Dollars can be converted to Steem which can be sold on a cryptocurrency exchange for Bitcoin or Dollars. Steem Dollars also collect interest but a lower amount than Steem Power. It is a really well thought out system.

excellently written,
only one small thing though...
"and you could always exchange the dollar for gold at a rate of $35 per troy ounce. is true onlly after the revaluation from $20.20 in the early 1930s.
the older price was in effect from the beginning of the nation.
We had gold coinage along side our silver change, most have no idea.
The $10 coin was called the Eagle, $20 coin (85% of one troy ounce of 22K gold) was the Double Eagle.

The half eagle and quarter eagle were $5 and $2.50 coins

-Features of steam power
Powering down steem power to steem is missing...

Thanks for link. Flaged this post

Thanks for sharing this post with us @lehard!

I was having a little trouble explaining how Steemit works to a few friends that I'm encouraging to sign up, and your post just saved me a heck of a lot of time.

By the way, the add-on graphics are spot on!

Thanks again!

Excellent work!

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