Where Does The Money Come From? How STEEM Works!

in #basictraining7 years ago (edited)

Hello, guys today we're going to talk about where does the money in Steemit come from. There's been a lot of concerns from new users coming into the platform. They're suspicious about how this platform works and they're wondering how is the platform able to pay out so much money to the new content providers so there are basically three ways that you can think about how new money is created in Steemit .



#1. Think of it like Bitcoin where they issue new bitcoins.



#2. Think of it like like a company issuing new stock.



#3. Think of it as a fee for the users who use the Steem currency.


The first way you think of money creation in Steemit is to think of it like the way Bitcoin creates new money to for the miners who secure the Bitcoin network. The way Bitcoin pays its miners is to issue new currencies. Issues new Bitcoins every 10 minutes and it pays this to the people who operate the network.

So the money is created basically out of thin air according to a certain algorithm and the people who participate in the network and secure the network gets this rewards. Bitcoin has been in existence since 2008 and many people were skeptical that this system of creating a new currency and paying the people who sustain the network would actually work as an economic system but in the last eight years, Bitcoin has proven that this system works. Bitcoin is now a ten billion dollar industry.



Steemit aims to take this economic model of issuing new currencies to the users who participate in the system and apply it to a social media. The way Steemit does this is instead of paying the miners who secure the network like in Bitcoin, Steemit pays the who post comments and upvote comments.



Another way to think about the money creation in Steemit is to think of it as a new company that can issue new stock basically created out of thin air to pay for workers, investors, and stuff that the company needs.



Steemit has its own currency called STEEM and you can think of Steem as a sort of stock in the Steem platform. When you hold this stock you are exposed to the appreciation of the value of the whole social platform and the platform as a whole can issue new shares to pay for the people who post upvote and comments.



Another way to think of money creation in Steam is to think of it as a fee for the users who used the Steem currency. Steem currency is basically diluted a little bit each year for the new content and the money taken from the people who used the Steem currency or speculate in the Steem currency. So these are some of the ways to help understand how Steem platform pays its users for content and comments.

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I'm still a little confused. I'm looking at coin market cap https://coinmarketcap.com/currencies/steem/ and it shows that there is circulating supply and a total supply. Does this mean that there is a fixed supply of steem. I don't quite understand how steem dilutes.
Can someone explain this please?
Thanks.

I appreciate the attempt here, because I am very new, and still trying to wrap my head around this. I've had no previous experience with Bitcoin or any other cryptocurrency. So I'd be just as lost dealing with them. :)

I guess this is my main question/perplexity: if Steem is just a token that people agree to put their faith in, that's one explanation. But then, there would technically be an infinite amount of Steem to go around. But the way this seems to be set up (and all of these cryptocurrencies), is that there is mining or creation of each token (whatever the name), and therefore there is a finite amount to go around. That "finite-ness" presumably makes the token's value more "real".

Now, you say above that Steem is created out of thin air. But what does that mean? Is it created/mined, and if so, how?

This is probably a very complicated​ answer, and may not be suitable in a comments section. But if anyone has a link to some further explanation, I would appreciate it. Thanks!

Just like Bitcoins, Steem is a digital currency. And just 2 days ago it went up to 8 dollars. So you need 8 dollars usd to buy 1 Steem. Steem circulating supply right now is 246,000 and total supply is 263,000,000. Steem value can fluctuate in the market. So it could go up or down, we never know.

I understand that part. What I don't understand is why/how there are 246,000 Steem circulating. How/why were they created? Why/how does that process keep things limited? Either Steem is an arbitrary token created by whim (or fiat, as the jargon goes), or it is a specific thing found in the world. If it's the latter, what the hell is it?! Ha, I really just don't get it.

I guess a different way to put it is. Anything has value as long as people believe it has value. Our economy could change to bottlecaps tomorrow (Sorry Fallout reference) Just like that the dollar bill becomes nothing. Then the economists and financiers figure out comparing the different currencies to come to a 'value' Was cryptocurrencies created out of thin air? (a very basic breakdown)...essentially yes, but when people started putting real monies in to change it to a cryptocurrency it gave it 'value.'

This is where cryptocurrency is like buying stock. You purchased the cryptocurrency at one price. Due to other people doing the same thing you're doing makes the price go up and therefore your currency that you bought has more value. If you were to sell it back to get your money back you wouldn't get back your orginal investment you would get back whatever the 'value' price is at that time. That is why prices go down. People worry it will not have value anymore so the either cashout or purchase a new type of currency.
I hope this helps.

So it's basically from thin air but designed logically to reach us as money that nice one helpful post keep it on

Yes, instead of paying the miners who secure the network like in Bitcoin, Steemit pays us to post comments and upvote.

I thought they earn from traffic at first but this explains better

I’m glad you get it now :)

It's human psychology and incentives. It sounds "wrong" that we're getting paid for comments and upvotes. If I make a sale at work and create value, I get paid commission. Same concept. Steemit gets better content, more views, more people in the ecosystem, we all get a cut.

Steemit sure as hell won't have a commission check bouncing, that much I can say.

Cause you’re helping the plaform to find whats good and whats bad. You get rewards for that.

good article, this article basically help me solve the explanation to my friends. Already upvote and resteem.

Thank you, I hope your friend will sign up and start making awesome content!

I tried to explain this to my friend.. I will just show him this as it explains it perfectly 🤣

I’m glad you did. Hope he will join you and start making great content and some money too

I do also, I actually have contrnt I want to share and I am finding my feet slowly. It wont take long for him to join the family.

At least he would be another that actually has genuine content and not just spam.

great post but little bit confuse

Basically it a currency like Bitcoin and it will go up over time.

Nice Post @vaansteam ! I start really do understand that whole Thing because of your Postings how this Steem-Ecosystem works... THX + UPVOTE

Thank you @dalexx I"m glad you found my post helpful!

Well explained.
Thank you

Your welcome!

Great information thanks

Your welcome

Great, explaining it simple and brief..👍

I’m glad it was helpful to you :)

thank you so much i was always wondering and always lookiing fot the answer thank you for this post

Glad it answer your questions :)

thank you brother you do

Great intro post! Thanks!

Your welcome my friend

Good job at presenting it simply and understandably

I’m glad it make sense to you

Great article. Super informative and puts things in perspective and makes them clear. Well done.

Thank you, I hope to get better everytime.

Nice Post... :)

Thank you!

Thanks for the post. Now I know.

Your welcome, glad you understand. It took me awhile.

Good article, explains everything perfectly.

Thank you steemitaddict

Thank you for this great info 😊👍

Your welcome 🙂

Follow me @ligarayk keep steeming 😊

I appreciate how the baby steps may be frustrating, but they add up to walking, moving, and giant steps. Thank You.

It could be a little frustrating at first but one you get it. I hope you ade able to take that giant steps soon!

Thank you for sharing, im new here so i have some questions and you cleared one of them, im still confused by a lot of things that i don't understand but this post helped me a little more, so thank you again this post was very helpful. Greetings

Please check my other posts maybe it could help you understand it a little better

Great explaining really appreciate helpfully post

Your welcome! Wish you luck!

My pleasure

Another great article man. Thank you so much for writing these. They are a ton of help to us new joiners.

I hope we all can help each other grow :)

This was an extremely informative read. Thanks for giving the time to make this.

Your welcome! Thank for taking your time to read this. Come back for more soon!

I've been searching for 3 days to find a simple, easy-to-understand answer to this question. Thank you, @vaansteam for such a simple explanation. I'll be emailing and tweeting this post.

Thanks for the info!! 😃

Your welcome :)

Hi! I think that I'm not understanding it at all yet, but your post really helped me. Thank you :)

Your welcome, hope you understand all soon.

Thanks for this post! This is a great help for all newbies like me. Though I am still confused... But I learned froms here...☺️🤗

Thanks, now my curiosity is solved