The research done for writing this article, and the writing of the article itself was during the acquisition of Steemit by Tron. Although it does make the future less secure, meaning that Steemit can both enjoy accelerated growth due to extra funds made available, while there is also the possibility that Steemit goes into an entirely other direction, or could even implode. For now, we remain vigilant and will keep a close eye on the situation.
The underlying principle on which Steemit has been build, and how it functions at this moment however remains unchanged and In its current form we see the following article as being accurate.
Social media apps have rapidly become the number one go to for people that are passing some extra time, are bored or are uncomfortable in a certain situation. Often, people simply autopilot their phones searching for an interesting post placed on their timeline. We see people flipping from one app to the next, scrolling away for minutes to hours, bordering addictive behavior. Although more and more people are getting aware of this time-wasting trap, we don’t see Social Media disappearing anytime soon. Better yet, we expect social media to get an ever increasing share of our time. But for that to happen it is crucial that the way we currently share our lives, data and time will become safer, more rewarding and more private.
Blockchain technology is set up to help this process move along. Different companies are already harnessing the power of blockchain technology, encrypting all data stored on the blockchain, and changing ‘likes’ ‘upvotes’ and other ways of giving critiques into cold hard (crypto)cash.
One of the premium companies and brands in the blockchain space is Steem, an entire ecosystem build around a fair social media system, where content creators are rewarded for their efforts instead of the company owning the website, and where curators are rewarded for their likes and dislikes.
Getting used to the new era of blockchain-powered social media will take some time though, but we’ll follow up on that later in this article.
History of Steem
Steem is one of the oldest blockchains around, dating back to 2016. It started when 2 guys, who now have become 2 veterans in the blockchain space although still being very young, started discussing the possibility of how a cryptocurrency could be implemented to work in the same way that for example, the coinsystem on Reddit works. The idea grew to a social media place where individuals get rewarded by a community for posting and voting on content. As explained in our Blockchain & Social Media article, Steem is trying to solve the problem that we have now, where instead of the content creator the platform gets the lion share of the rewards for everything that is created and shared.
The 2 above-mentioned guys are Ned Scott and Dan Larimer.
Ned Scott stayed on as CEO of Steemit and helped nurture it in the last 4 years to what it is now, the leading decentralized social media blockchain application, with over 60 apps now running on its blockchain. As of February 2020, he resigned, selling Steemit to Justin Sun – more on this deal later.
Dan Larimer is one of the most well-known names in the blockchain space, creating not only Steem, but before that also Bitshares (2014), one of the first decentralized exchanges, and later on EOS (released in 2018), a decentralized operating system which can support industrial-scale decentralized applications. EOS netted 4,1 Billion dollars in its ICO (initial coin offering, which can be seen as an IPO), making Dan Larimer a very wealthy person in the process. Dan was the CTO of Steemit until 2017.
The Steem(it) Ecosystem
Both Steem and Steemit are 2 words that will be used in this article, and that generally causes confusion for people unfamiliar with the Steem ecosystem. So before we continue explaining what they do, we’ll elaborate on these terms.
Simplified, Steem is the blockchain on which applications such as Steemit are build. In essence, you can compare Steem to the Bitcoin blockchain. Even though they have a lot of differences both are a blockchain.
Steemit is one of the applications that are running on the Steem blockchain. All these apps have their information stored on the blockchain, however, every app also makes it able to interact with the information and data stored on the Steem blockchain in a wide variety of ways. Steemit is the social media/ blog website and is the most popular app running on the Steem blockchain. Other popular apps are Dtube Dlive, Dsound, Steem Monsters which we’ll discuss later on, and others.
In short – If we mention Steem we mean the blockchain and all of its components. If we mean Steemit we mean the most used app that interacts with the blockchain, which is similar to a lot of current-gen social media platforms that do not use blockchain technology!
What makes Steemit revolutionary?
Steemit differs from legacy social media platforms in a couple of ways. The most important one is the concept of earning and monetizing your own content on platforms, and it is one that takes time for the public to get used to. After people get educated about the new possibilities though, it will no doubt cause people to flock to these new blockchain and cryptocurrency powered platforms. Inevitably people will follow the money and value cryptocurrency, and in essence cash, over thumbs up, likes and other forms of digital recommendations. And that is exactly what Steemit has accomplished.
Content creators are able to earn cryptocurrency simply by posting their content on the Steemit platform. Other people then curate the content and the poster will be able to earn some cryptocurrency. It is up to the earner to decide what he or she wants to do with their newly earned coins. They can be used to value and curate someone else’s content, they can be traded for other cryptocurrencies such as Bitcoin, or even for Fiat money (Dollars, Euros, etc. ). Or, if they are confident in the platform and feel it has the potential to grow, it can be held hoping the price of $Steem increases in the future.
Furthermore, there is a system in place where curators are rewarded for curating content. This enables people to search for, and take the time to read, other people’s posts and content. The content that gets curated as the most valuable content will increase in visibility and in return gets more rewards. There is a lot going on behind the scenes to make this possible, and if you’re interested we recommend you take a look at this article that explains rewards, or this article.
Suffice to say, the ecosystem revolutionizes the way we create and consume content on social media platforms. But as with all social media platforms, Steemit is dependent on the network effect and it’s reach to become a real competitor to legacy social media platforms.
Besides the monetizing aspect of Steemit, being built on blockchain technology brings a number of other interesting aspects to the table. People can be sure that their data is safely encrypted and that it is private. Something that has shown to definitely not be the case looking at current social media platforms, especially Facebook. Another very important aspect is the decentralized nature of the Steemit platform, making sure that no single entity can decide whether or not you and your content are allowed. Shadowbanning is nonexistent and users can’t be banned from the platform. Currently, we are seeing more and more YouTubers getting banned, or their videos not being shown due to Youtube disliking their content. Free speech is one of the greatest assets we have in western society and Steemit ensures this to stay possible.
Decentralized Youtube, Soundcloud and other apps on the Steem blockchain.
Besides the Steemit platform, other applications are built on the Steem blockchain. As of the time of writing the article, there are 86 applications running on the Steem blockchain, and while they definitely aren’t all interesting or useful, a number of them are genuinely creating an interesting product and further increasing the value of the blockchain itself.
it enables a system where the system pays for the most valuable content.
Dtube (decentralized tube) is a decentralized video platform running on the Steem blockchain. It has, in essence, the same advantages and rules as Steemit but specifically for video content. Content creators are able to upload their videos, curators can reward them, and both can earn cryptocurrency. Furthermore, Dtube is fully decentralized and censorship-resistant. Dtube cannot reject any videos, only users can by massively downvoting content. It’s also ad-free although users can promote what they want in their own videos.
Dsound is a decentralized platform for music, essentially a Soundcloud clone. In the same manner as Dtube and Steemit users can upload their own music, which is stored on the blockchain, and other people can curate the content. As with the other applications, users can earn directly from the engagement of their fans rather than via intermediaries in the publishing chain. Again, the content creator wins and earns instead of the platform or other form of distribution.
Splinterlands is one of the most popular apps currently running on the Steem blockchain. It’s a mix between both physical and digital card games, wherein every card is a Non-fungible-Token (read more about NFT’s and how blockchain can enhance the gaming industry in our Blockchain & Gaming article). People can battle other players and every result is stored on the blockchain. The cards can be bought traded and sold for real money.
This is only a small segment of apps running on the Steem blockchain, and we hope that by now we mode the use cases and win-win situations clear by using blockchain technology and cryptocurrencies in combination with content creation and social media.
The Steem Blockchain
Proof of Brain: Smart and Social Tokens
While most people will be familiar with the ‘Proof of work’ concept that is being used by a lot of blockchains, Steem uses the ‘Proof of Brain’ concept. New tokens aren’t randomly distributed to machines solving difficult mathematical problems. Instead, new tokens are distributed to valuable content creators and curators. The blockchain rewards both these players based on their created value in the Steem ecosystem. The amount everyone receives is based on the collective wisdom of the crowd (more ‘likes’ equals more rewards!). The gravity of every vote is based on the Steem someone is holding. This means that if you have more Steem, and are more invested in the Steem network, your vote has more value. It’s a way of making sure that random 1-day accounts can’t spam the network. On top of that, you are only able to vote after you converted some Steem to Steem power which takes some time to complete, again making sure that only people that are serious about the ecosystem have a say in the matter. To make sure that block producers are incentivized to keep consensus on the blockchain 10% of the block rewards are divided by them.
Speed and Scale on the Steem Blockchain
Since Steem was developed with the idea of becoming the next big social media competitor, from the start it was obvious that the underlying blockchain had to be fast, reliable and scalable. The Steem blockchain uses the ‘Delegated Proof of Stake’ algorithm instead of Proof of work. (This is prior to the before-mentioned Proof of Brain concept. Delegated Proof of Stake is the way in which new blocks are created, Proof of Brain decides who then receives the rewards in those blocks).
Blocks are made faster, and more frequent while also being able to hold more information such as content (images, text, etc.) in them. In theory, the blockchain is able to scale to 10.000 transactions per second. To put that in perspective, the popular site Reddit doesn’t even come close to that many transactions. Steem is made future-proof.
Transactions are feeless
Due to the way that the Steem blockchain has been engineered all transactions on the blockchain are feeless. Block producers are paid entirely through the creation of new blocks. This means that all actions on the Steem blockchain are free. And this is the only way Steem can function since every post placed, every post liked, and every other interaction is seen as a transaction.
To deter bots and spamming users are given a specific amount of bandwidth which replenishes over time. And in a same manner as with voting gravity, users that have more Steem Power will have more bandwidth to spend.
3 different cryptocurrencies in one system
The Steem blockchain consists of 3 different cryptocurrencies that all have their own role in the ecosystem. Although it may seem a bit confusing if you are just starting out learning about the possibilities of Steem and Steemit, it is vital to understand their functionality. Otherwise, you may find a roadblock trying to post your content and not get rewarded in the process.
Steem is the base cryptocurrency used on the Steem blockchain, similar to Bitcoin. It can be bought and traded on exchanges and can be seen as an investment. However, more importantly perhaps for people actually using Steemit, it is used to transfer into Steem power and Steem Dollars, the other 2 currencies on the Steem blockchain. Steem itself has no other practical uses in the Steemit ecosystem.
How much influence your curations have is dependent on the amount of Steem Power you have. The reward you give to someone else’s post also increases with the amount of Steem Power that is in your account. Furthermore, newly generated Steem is allocated to users in proportion to the amount of Steem Power they hold, creating an incentive to increase their Steem Power holdings. To acquire Steem Power you will have to turn your Steem tokens into Steem Power, a process that is called ‘powering up’. To turn them back into Steem is called ‘powering down’ and it has a catch. It takes 13 weeks before you are allowed to transfer them back, guaranteeing that there are no flash crashes caused by people panic selling at the same time. This also means that you need to be sure you are willing to transfer your Steem into Steem power, which only functions on the Steem blockchain and can not be traded outside of the ecosystem.
Steem Dollars (SBD)
Steem Dollars, or SBD abbreviated, is the 3rd and last currency of the Steem blockchain and is designed to be more stable than the other ones. It is intended to be pegged to the US dollar, meaning that it trades to the Steem price with the intention to get the number of Steem tokens that represent 1 dollar at that time. 50% of the payment to creators and curators on Steemit is processed in SBD to protect them against the fluctuations of the Steem cryptocurrency.
You are able to trade your SBD internally on the blockchain for Steem (which takes 3,5 days) and Steem power, and you can trade SBD on exchanges.
We do have to mention that there are times that SBD is having a hard time to be pegged to the dollar. During the mania phase of 2017, for example, the tokens were bought up so rapidly that they peaked at a price of $13,00. Eventually, it corrected.
Smart Media Tokens
The Steem developers didn’t stop with conjuring up revolutionary concepts after creating the Steem blockchain. One of their most anticipated new inventions has finally been released on testnet and is expected to be live in 2020. Smart Media Tokens, or SMT’s
SMT’s are a token protocol related to the more familiar ERC-20 protocol that runs on Ethereum. It allows anyone to create their own token on the Steem blockchain. These tokens can be fully customized to the owner/creator’s own wishes. Inflation, the number of coins, voting system, etc. can all be decided when creating your own tokens.
One of the main focus points of the developers was to make creating your own tokens as easy as possible. This means that entrepreneurs, bloggers, application builders and anyone else can now make their own cryptocurrency without having any coding knowledge or experience.
After completing the initial process, the new cryptocurrency can be integrated with your own website or application, immediately creating an internal economy in the process. SMT’s are about delivering the value of cryptocurrencies to every website or application manager. In the same way that Steem tokens are rewarded towards the most valued content creators and curators on the Steemit website, your own following and readers can start getting rewards for interacting with your product or commenting on your blog posts.
This process can also be used to start raising capital. Rules can be made for selling the initially created coins, essentially an ICO. After the initial ICO, these tokens can be used to monetize their site and content. It creates a plethora of new possibilities for everyone to harness the power of blockchain and cryptocurrencies, something that is now mostly reserved for coders. If this takes off in the way we think it could, it may well be an even bigger revolution than the Steem blockchain is for social media.
And since these tokens are made on the Steem blockchain, they benefit from the same characteristics. Fast and free transactions, Delegated proof of stake, and the ‘Proof of brain’ concept. Furthermore, it only costs 1 dollar to create your own tokens and start implementing SMT’s yourself. For more information check out the Smart Media Token website.
Tron (hostile?) takeover
In late February, Steemit was purchased by Justin Sun, founder of Tron, a cryptocurrency that sits in the top 20 by market cap. We are unsure of the future implications that this brings to Steemit and the Steem blockchain. For now, it seems that it has caused a divide in the community, where some have gone as far as creating an entirely new platform (Hive.io, we intend to take a DeepDive into them in the near future). This caused us to reevaluate whether to continue our review or not. The decision was made to look at Steem for what it is, and the revolutionary technology it brings. Internal struggles could mean that the Steem blockchain and Steemit website will lose some of its most valuable assets – The community and its users. Some say that Tron’s purchase of Steemit has been met with questionable actions by its founder Justin Tron, and even consisted of foul play of some of the bigger exchanges. We have not investigated this further since, again, we are focusing on other aspects of the blockchain industry.
It remains to be seen if the new owner, who is very active in acquiring other companies, can further build on what is already there, or that the existing community shuns them.
Steem has laid the groundwork for ‘smart social media’. The entire concept of earning your fair share of the attention you create should cause the social media space to evolve. It is yet another industry that will benefit from all kinds of blockchain technology advantages. The fact alone that we may never see another Facebook Cambridge Analytica scandal will rest some people’s nerves.
It is hard to imagine that social media websites and apps rewarding their users with actual money won’t conquer the legacy markets. However, it all depends on the network effect. It has to become common knowledge that there are better alternatives out there that don’t see you as their ‘product’ but give you a safe and honest place to interact with likeminded people that share the same interests.
The icing on top will be Smart Media Tokens. Being able to create your own cryptocurrency and economy to increase engagement and potentially earn more revenue will really entice people to transfer from the old to the new.
It’s a shame that Tron’s acquisition of Steem has caused a great divide within the community since the growth of the community is one of the most important factors of gaining market share. As mentioned before we will take a DeepDive into Hive.io, and we will continue to follow Steem’s developments as well.