As more people are joining Steemit, I can’t stop observing their satisfaction when they cash out their first payment. “Oh, my God, this thing really works”, or “Wow, I can’t believe it! I just paid rent with Steemit money”.
And a buzzing theme of all these messages is the “free” word. This is free money. I just blogged and got some free money. Open an account, post some articles, comment a bit and you get free money.
Well, is it really free?
It think not. And it’s not free from a variety of angles and because of a multitude of causes.
What follows is a moderately long post, geared towards not only the newbies on Steemit (although they are the primary target), but also towards people using it for a while and considering they are entitled to their rewards.
The Economics Behind Steemit
First and foremost, we have to understand that there is an underlying economic layer of the entire mechanism. Things are not just happening, out of the blue. You don't post out of the blue, and you don't get comments and upsteems out of the blue. There is a very solid network of processes, which, combined, are producing this ongoing result.
Let's take them one a time.
Hardware Infrastructure:
You can access the entire database of accounts and blogs on Steemit because there is a very consistent, albeit unusual, network of hardware. This is not a website. Or, to be precise, this is also a website, but it's so much more than that.
The first level of hardware is made of witness nodes. These servers, running a special type of the Steemit blockchain daemon, are validating all the transactions on the Steemit ecosystem. All of them. A user signing up, there you go, you have a transaction. An upsteem, another transaction. Following someone, you guessed it, a transaction.
There are around 70 witness nodes at the moment.
And there you have seed nodes. These are like "relaying" post offices for all the transactions and they serve a very specific role in the community. Suppose you want to write your own app on top of the Steem blockchain. You will need a specific node to query in order to pull your data. In the beginning, you may choose some of the public nodes, like node.steem.ws, or thisp.piston.rocks. But as your app grows, you will need your own seed and app node.
All relevant apps on the Steemit ecosystem (busy.org, chainbb.com, etc) have their own seed node. I estimate there are between 20 and 30 solid seed nodes.
If you do the math, you already have more than 100 people involved in this mechanism at a very deep level. All these people are doing a lot of work so you can post, comment, upsteem and transact.
Underlying Software
The software ran by witness and seed nodes is free on Github, under an MIT license, everybody can see it and audit it. But there is an entire core team of people maintaining it and making sure there are no bugs and no security holes. Some of these people are on the payroll of Steemit INC, but many people contributing to the codebase are not. They are just developers contributing their time and skills to build something for the greater good (or for some personal agenda, like, you know, getting rich).
I estimate there are a number of 50-100 developers moderately active at this point on the Steemit ecosystem.
The Interaction Level (inter-personal processes)
Here we are getting to what most of the people are considering the flesh and blood of Steemit:
- witness voting
- witnesses are maintaining the health of the network by generating various props: block size, price and many others
- authoring posts
- commenting
- upsteeming (drawing from the reward pool)
These activities are consistently made by around 35,000 people, over a period of 30 days (according to steemd.com.
There IS A LOT OF WORK!
So as you can see, this thing is not even remotely free, there is a lot of work involved. And all work deserves compensation.
What makes it difficult to recognize and accept is the fact that it’s distributed among many people in relatively small tasks. Combined, they are creating a similar result with a standard website (or service), here all the processes are centralized.
But so are the benefits. They are centralized in the hands of the very few who are creating, launching and maintaining the website.
Facebook versus Steemit
Let's make an exercise. Let's put together Facebook and Steemit and see how decentralization tilts the balance when it comes to ownership of what is created.
| Metric | Steemit | |
|---|---|---|
| Market Cap | 452 billions USD | 380 millions USD |
| Active Users | 1.9 billions | 35,000 |
| Ownership | private held | open (owning STEEM) |
| Average stake | ? USD | 10,857 USD |
Statistics are pulled from financial websites (coinmarketcap and zephoria.com).
Now, what's with that last number? What "average stake" means? Well, it's the actual amount owned, on average, by an user of the network.
In Facebook this is zero, because the owners are just a few. A few investment funds and a few brokers and probably a couple of dozens of thousands of regular traders. If you happened to buy Facebook shares on the IPO, you may think you own a share in the company, but you only own what other people are willing to pay you for that.
In Steemit, if you own STEEM or STEEM Power you actually have a say with your vote (on how witnesses are elected, how much you draw from the reward pool and so on).
But what's fundamentally different is that all those 1,9 billions users have NO STAKE in Facebook, although they are contributing each and every second to its growth. I'm not saying this is good or bad, I'm just noting the difference. Both Facebook and Steemit are doing pretty much the same thing, only in Steemit the decentralized model empowers people to a whole new level.
In Facebook, you are not producing anything, you are the product being sold to advertisers.
The Wealth Distribution In Steemit
The last number in the table above says 10,857 USD. This is obviously an average. The wealth is not equally distributed in Steemit, but it’s fair. And by fair I mean a conglomerate of factors:
- knowledge
- risk tolerance
- initial capital
- persistence
- ability to create and maintain relationships
These are skills or assets which can be used to generate value. If you use them carefully, you can create a sustainable and predictable income.
As you can see, there's a lot of work going on. It may be unusual money, all those paychecks you get from Steemit, but for sure they are not free money.
I'm a serial entrepreneur, blogger and ultrarunner. You can find me mainly on my blog at Dragos Roua where I write about productivity, business, relationships and running. Here on Steemit you may stay updated by following me @dragosroua.
https://steemit.com/~witnesses
If you're new to Steemit, you may find these articles relevant (that's also part of my witness activity to support new members of the platform):
I would amend this to "but it's getting fairer over time (and if it doesn't, it will be displaced)".
Yeap, very good observation, thanks.
I definitely agree that new users should not anticipate getting rich quickly from a few posts on Steemit, but in a way it can be seen as free money. Are you writing posts that you would write regardless of if you were getting paid or not? If yes, then I would argue that this is "free" money for the user making the post.
I think a lot of times, people try to over complicate things to show that they have value when in reality, 90% of new users don't really care about witnesses and nodes and all that infrastructure. Hell, I don't really care about understanding how the whole thing works and I've been here since the beginning. This is not meant as a criticism to you by any means because I truly do value your post and think it is very helpful to new users, I just think we should all remember that there are many different types of users that are attracted to Steemit and we shouldn't knock those who are here for different reasons than ourselves.
I do think in the case of Steem right now most new people care about the underlaying infrastructure. The whole process at Steem is still very time consuming and not completely ready for the masses yet.
In the future this probably will be different, how this will result we have to see.
Woww!! Just imagine if we can take 1% of facebooks 1,900,000,000 users :)
That would be 19 million active users on top of the 35,000 active users already.
Exactly :)
This is an excellent post and I agee with you. Nothing is free and if you earn something here (especially new minnows) you must work very hard to post, comment , upvote , build and maintaing relationships...and dont forget the costs of electricity and time...
With regard to steemit and faceboo, I indicated why Steemit will disrupt social media and make socializing profitable again : https://steemit.com/steem/@charles1/why-steemit-will-disrupt-social-media-and-make-socializing-profitable-again
We will do great, thanks for sharing.
the problem also lies in the fact that the people that see it as FREE money will never read this post. everything costs. death and taxes man, death and taxes :)
well said :)
I also thought that the money here is free. But I've read this post :)
Yes, in principle, nothing is free ...
Also the DEATH have a cast - THE LIVE or the gravemant but it´s not a funny thema
I understand the immense amount of effort that goes on behind the scenes. What I don't understand is where the money (or value) comes from?
If there are no ads, then all the revenue comes from the Angel Investors who believed in the project initially and got it off the ground. Do we intend to continue to get money from these investors?
I recommend you to have a read of this article: https://steemit.com/steemit/@dragosroua/steemit-newbie-faq-rewards-were-does-the-money-come-from. It will take a while to wrap your head against the concept, but once you do, you'll realize that all money is just what we agree to call money. There's not "set in stone" value for what we call money. It's all agreement. And it's all in our minds.
Thanks.
Hi. I have another article talking about the "where the money come from" article.
https://steemit.com/steem/@ygern/where-is-the-money-on-the-stemmit-platform-actually-from-let-me-try-to-answer-this-question
It might answer part of your question. But I am still new here, please correct me if I get the concept wrong. :)
Keep in mind also that many individuals have invested into buying steem from their personal funds.
Nicely put together @dragosroua. This makes a lot of sense!
thanks, glad it's useful :)
Ain't nothing free, just glad we're all willing to work together and pay the price.
This is SUCH a rad platform and I'm stoked to share it with you. However you do it; witness, seed, developer, content creation, curating, commenting...
I'm STOKED you're all on board!
Glad to be of service and thank you for your support!
Nobody thinks that much about the technical details of it... they only trust a platform if they receive cash in hand, and consider it to be free money...but nothing comes free in this world.
Precisely.
Very well structured article for people like me who wants to know the details of the structure in simple words. Thanks for the time that you devoted to write this article.
Glad it's useful :)
nice comparison you should talk about how money is created and mention inflation as well ;)
There are links at the end of the article about that.
Plain and simple? No its not,you still got to work your ass off to the top. But it is profitable. Great post btw.
Yep, it is profitable if you do it right, like any other work yo do right and you get the benefits. No work, no benefits.
Yup
A great article and well said on all counts. Happy to resteem :)
This post was very informative and intriguing. Only having been on this site for less than ten minutes, this is by far my favorite article so far. It's good to know there's a legitimate purpose behind this site besides profit and greed. I don't see this place becoming toxic anytime soon.
This is a really well-written article. I was once given advice as a young boy by my father who said, "There is no such thing as free money. If someone offers you free money, walk away. The only way to make money is to work hard." The added statistics and information breakdown is very helpful and makes it easy to understand!
Your father is a very wise man :)
This has got to be one of my favorite articles so far and as someone new, I have been reading a lot of posts! That word free is misleading in so many areas of life on earth. People aren't free, things aren't free, emotions.. everything has an undercurrent of cost. Most people just choose not to see it!
The more you see the "cost", the more value you're inclined to put on that thing.
I agree. Both sides of that coin... pun intended. If you value your time above all things, you are much more likely to spend it wisely. My time is worth $500 an hour. No binge watching or pixel play is going to equal that as a rule. Only when I need a reset and have to back away from all things in "the plan" do I resort to what I think are categorical wastes of precious time.
Free money would entail getting something in return for little to no labor. I've had to work harder on here than I've ever had to work at any other job. Just to get noticed I have to spend hours responding the post and writing my own blog just to make a few cents. So I guess the question you're asking is all based on how great of a steemer you are. For me I can make more money picking cans.
Well, it's also about persistence. As in everything. There's a learning curve and a certain time until you form meaningful relationships. But then it flies.
I thought the same thing about the guitar. But after 20 years of playing, I still suck at it. Sadly I don't have 20 years to make it on here. It's a small window and if you don't hurry, it'll close. Thank you for the words of inspiration though.
You're welcome. Steem on!
Nice to read, it increased my knowledge about steemit.
great primer, not only on the economics but also the technical aspects here.
I love how nonchalantly you're using "upsteem" as a fixed term now ;)
butofcors ;)
Thanks for giving a detailed and in depth "behind-the-scenes"!
Glad it's useful!
Thanks for this relevant article... It's very useful for steemit and Facebook members...
Thanks for explaining this all so clearly and concisely. I've been struggling to explain Steemit to non-Steem friends, but this will make it a lot easier.
Glad it's helpful. Please have a look at the links in my signature, they also contain relevant information about rewards, witnesses and netiquette.
Steem on!
@dragosroua thank you for this informative post. I follow you because you have a talent for explaining tech to the rest of us who are tech-challenged. Thank you!
I understand the concept of the witness nodes, but still a bit foggy on the seed nodes and their role. How do I, as a steemit.com account holder interface with the seed nodes?
Also, theoretically I see Steem / Steemit.com as a network of people who are seeking win/win transactions with each other. We follow who we want, we develop content for an audience and our audiences grows (or fails to grow) based upon our ability to meet the audience expectations. It's one of the best expressions of a truly free market. I'm excited for the future.
And thanks again for all your contributions.
A seed node is a server always in sync with the network (containing all the blocks, that is) that you can interact with programatically, using some of the libraries available (javascript, python, or, in my case, PHP). It's like having your own database server, only it synchronizes itself with the blockchain.
On top of that, they're also helping the network sustain big loads.
Many thanks!
We really are in the midst of another Gutenberg type moment in history. Thanks @dragosroua for keeping things in perspective. I think the active users here on @steemit understand that our time is worth something!
Well said :)
Thank you for this fine explanation. It reaffirms my belief in Steemit...
Voted Best Post of the Day... as far as I can tell. 😎
PS:// Got my witness vote.
Thanks a lot, appreciated :)
My respect drago!
Well I also don't think it's free. Today I spend about 8 hours researching and writing my article about Lyme disease, turns out it earned only about 0,13$... i think that Steemit costs us all a lot of our time.
When I first started, in October last year, I gave it 30 day and I posted an article every day. There were days when I was making nothing, or at most 5 cents.
I'm aware that the begginings are difficult so I'm just gonna focus on doing my job and the rewards will come!
It will also help a lot if you invest into some Steem Power, the people who have skin in the game reap the most rewards from the content they create.
I'm still putting together my own formula of what works. It's tough right out of the gates, but will be beneficial long term. Keep grinding till you get it, is what I keep telling myself.
Sadly it is free money for some of the (IMO) appalling posts I've seen. I saw one the other day that had around 15+ images on it and minimal text. All of the images were ill thought out, supposedly humorous, in some cases poor quality with three of them animated gifs that looked my dog threw them together and yet the damned post was pulling $200 at the time I read it.
I had two thoughts.
"who the hell is upvoting this trash?"
"There's just no justice in the world!"
Oh, and now the Youtubers have jumped on the bandwagon as well. I'm so chuffed people are banging out posts left, right and centre with a youtube video plonked on it with that phrase that makes me want to kick a baby otter:
"Must See!"
Annoyingly, for those people it is free money because they're making no effort and yet reaping the rewards. :-(
Just stay with it. It pays off, eventually.
So everyone keeps saying. :-D
Well, technically, the post did require some sort of effort. And even clicking on the upvote, does require some sort of action.
It is folks like yourself and the other witnesses who have my vote that make steemit amazing thank you @dragosroua for http://steem.supply, which is a very valuable reward estimation tool. My interviews with @aggroed, @theprophet0, and @ausbitbank truly left me in awe of the work witnesses do.
Glad it's helpful and thanks for the witness vote, appreciate it!
I really enjoy talking to witnesses about the work they do..maybe I will continue my quest and interview all of the hard working witnesses who support our community..you are on the list if you are interested :) u can check my last post and see if it interests you
I will have a look, thank you!
Thank u..u can either respond to the post or here and we can talk more https://steemit.com/minnowsupport/@necrophagist/witnesses-the-unsung-heroes-of-steemit-and-why-you-should-vote-interviews-with-aggroed-theprophet0-and-ausbitbank-included
Hit me in the steemit.chat with a PM, I have the same handle.
Liked the way you compared Facebook which doesn't give you monetary reward for your custom and Steemit which does. In addition, votes give you some power who in effect runs the company depending on how much you own etc.
Sorry for the witness thing before, i did click on your username but i was trying to see your ranking not downvote you.
Also made a mistake sending SBD to Bittrex
Do you know anyway to see the transaction in Steem.
I sent SBD using the wrong memo
Where to find the transaction reference?
I sent SBD using the steem memo instead of steem back dollar memo
I know if someone else has this its gone but if its not in use i may get it back if i can find the transaction ID.
Try to write to the bittrex account the same way we communicate via the wallet. That's how you can see your transactions too. Or in steemd.com/@gary-wood
Really a superbly informative article, as a newcomer I have learned so much from your breakdown of the system, and how it all fits together into this wonderful ecosystem.
Thanks so much for posting this info!
Glad it's useful :)
If it was really free everybody will come take the free money.
Yeap, good point :)
Is it correct that "promoting" is a form of buring your SBD/Steem?
If that is the case, it makes a lot of sense as the value burnt by promoting indirectly goes back to the community with the token issuance.
With more traffic there are for sure going to be entities that wanna promote their content, thus creating value for steemit and its users :)
Yes, you are correct about promoting, it helps burn some coins, therefore creating demand.
Thanks for clearing that up for me.
Thats a really strong model going forward, as it actually makes a lot of economic sense for the platform. Especially considering inflation. With lots of good organic content publishers, contentcreators and advertisers will want to drive traffic and clicks.
Gave you a follow, solid stuff :)
I really like the way you broke down the way this works! "The cloud" may just generally be someone else's computer, but the decentralized infrastructure built around a blockchain like Steemit seems a better fit to the concept. While the currency earning aspect itself is definitely a draw, the ability to resist censure is also one of the things I think most fascinating about the platform.
Hopefully Steemit will someday grow to something approaching Facebook's userbase (and market cap)!
Great info you got there...quite a read. Learning everyday here in steemit community and yours is quite an eye opening on the going ons in steemit...thanks for the info...
Resteemit! upvote!
The most comprehensive post I have read so far on this subject. Resteem!
Yes you are right! Most people don't value their own time, so why would they value yours. Thats why think its free money!
What they don't understand is there is no Free ride today. When people start vakuing their time, then they will understand what you are talking about.
You're the man! Thanks for sharing!
Thank you for a excellent and informative article. May Steemit become the next norm for social media <3
Thanks for the information @dragosroua! It's definitely hard to wrap your mind around. But, hopefully I'll get there. Much appreciated!
Cool post! Upvoted!
Very informative post. Nnothing is free, but why steem is not free? Your article explains it well @dragosroua.
Yes. It ain't free, you earn every steem dollar here but it is true our time and attention alone has value and social media sites make billions selling us to advertisers and data miners
Thank you, great post! This will hopefully convince more people to come over from Facebook and grow the community :D Steemit is still so far under the radar its crazy
Loved the post. Its pretty informative< I'll follow you to read some more
So, the steemdb is saying that 35k people out of the 200k accounts are actually active? I swear I saw that there were 200k accounts.
Something is going to have to happen to increase numbers. I don't know what.
Technically, there are more than 200k accounts, but only 35 active on a consistent basis. User acquisition is good IMHO, I think the site barely copes with the influx of new users.
Can't say that all 1+ billion FaceBook accounts are active either.
I have noticed lag issues with the site.
Which makes me wonder if the site would be able to handle it if a large influx of new accounts were added and then began posting more.
That's one of the issues devs have to solve, one way or another.
And hopefully before it breaks the entire site.
Great Post!!!
There is no such thing a free money. Easy money perhaps... Either way I like it! 8D