Know your investment : Steem Economy; two Smart Contracts and three currencies.

Steem, SteemPower, SBD, Steemit and SmartContracts

Picture

To begin there is Steemit the decentralized application hosted on the Steem blockchain Chain, Steem the cryptocurrency like Bitcoin, SteemPower the voluntary locked up form of Steem which earns interest and allows you to give and receive rewards on the application Steemit. And you have Steem backed dollars, also called SBD, a stable coin guaranteed to be worth $1.00 worth of Steem and the Smart Contract which defines the interaction between all three. That’s the short explanation, so onto the longer version....

Let’s start from the beginning.

Steemit.com is a Social Platform built on top Steem's Blockchain, which rewards it's users Digital Currency called Steem, that is not only Tradeable but also has real financial Value.

Steem is a Cryptocurrency just like Bitcoin/Ethereum when it comes to having it's very own Blockchain or Distributed Ledger, making this Virtual token Transferrable, Fungible & a Freely moveable Asset.

Steem can also be compared to Bitcoin, when comes to being a permission less blockchain ledger where no one has direct control over the Network meaning that tokens are Governed by Code and not some Individual, Corporation, Government or Bank. You have a Decentralized Network which is hosted by Steem Witnesses & supported by it's Users around the World, whose goal is to strengthen the security of its Digital Currency.

Steem is tradeable on popular Exchanges like Poloniex, Bittrex, Binance, Huonobi and until recently Polonex. Steem tokens are part of a permissionless ledger made accessible to the general public, making it a free tradeable Currency with little to no restriction where the end-user or parties decide on the final price and choose the preferred platform to facilitate this trade

The Steem blockchain is built using the relatively new Graphene Blockchain software construct, which is also used by projects like Bitshares & PeerPlays. All three use this cutting edge technology to power their infrastructure, while Bitcoin tends to be Slow when comes to being a Medium of Exchange and charges it's users transaction fees, Steem on the other hand is Free of charge and Executes Blockchain transaction almost Instantly. Steem has No Transaction Fees & almost Instant transactions.

Steem and Steem Power
One Cryptocurrency & Two Smart contracts
Ned Scott explained that the Steemit Developer wanted to create a mechanism by which individuals could take a long-term interest in the project, and traders could speculate short-term events within a free market with little to no restriction. The idea behind Steemit was it was meant to be a Decentralized Social Media that rewards users Steem for their Contribution. This is based on the idea that Financial Value can be found & derived from Social Interactions.

Steem Power
The most interesting Smart Contract is called Steem Power which is also the backbone of an account's voting-potential. In other words, the more Steem Power an Individual has, the stronger their vote is on Steemit. Essentially Steem Power is Steem locked up in a Smart Contract, this conversion ‘locks’ their STEEM – it’s not burned, just inaccessible while it’s being used as Steem Power for the purpose of providing Utility and Leveraging it's Token to actively partake in Steem's Network

Emphasing on the word Power, Steem Power is symbolizing how much influence you have inside the Steemit platform. If you have a lot of SP your upvotes will count more and you'll have greater say to how the Reward Pool is to allocate a large share of Steem Inflation.

So where are Steem Tokens locked up?
Steem Power will result in that Steem being transferred in what is also known as the VESTED STEEM or STEEM POWER and represents STEEM that is locked up in a Smart Contract which grants you certain a stake in Steemit, a Social Network build to distribute STEEM from it's Reward Pool.

Steem Power rewards it's user for their Contribution, as 15% of Steem Inflation was originally allocated to Steem's Vested Fund as annual Interests, earning from holding this Smart Contract over long period of time.

In the case of Steem Power should a User want to convert back to the base currency of Steem, it will be converted within 13 weekly conversions, this used to be 104 (2 years to 3 months). The purpose of this Smart Contract is to give you more influence over the Network, Steem will be locked up making the Tokens inaccessible until the User decides to Power Down. Then Weekly Payments begin to convert Steem Power to Steem.

Steem Dollar
The Second Smart Contract is called Steem Dollars. This is a debt instrument that promises to distribute $1 worth of Steem to the token holder in the Future. STEEM Dollar is essentially STEEM in the form of a pegged Currency. SBD pays interest and SBD should be convertible to $1.00 worth of STEEM, however it will take 3.5 Days to complete a Conversion.

Note that Steem Dollar is a Smart Contract which is freely tradeable, hence why 1 Steem Dollar may not actually be worth $1 Dollar because of Free Market Demand & Supply, whenever SDB is traded on popular exchanges the price is directly influenced by Buyers & Sellers who set prices between each other.
At any time, the value of the Steem Dollar is roughly equivalent to the value of the Dollar, the World's most popular fiat currency used as Benchmark & Standard, this Smart Contract is backed by Steemit's own built-in Market Exchange. This stability is remarkable in the Crypto Sphere where prices are never the same the next day, with unstable price fluctuation.

In fact, it eliminates some instability associated to Cryptocurrencies, which most agree is the largest barrier for adoption of Bitcoin or or other Altcoins.

So there it is, the Steem ecosystem: Steemit the decentralized application hosted on the Steem blockchain Chain, Steem the cryptocurrency like Bitcoin, SteemPower the voluntary locked up form of Steem which earns interest and allows you to give and receive rewards on the application Steemit. And you have Steem backed dollars, a stable coin guaranteed to be worth $1.00 worth of Steem and the Smart Contract which defines the interaction between all three.

It’s that complicated and it’s that straight forward.

✍🏼written by Shortsegments.

Shortsegments is a blogger or writer on the Steemit social media platform, which is an decentralized application hosted on the Steem blockchain.

Read other articles by @shortsegments on the Steemit Social Media Platform.

Read shortsegments investment blog on the Steemleo investment Blog

Please follow @shortsegments Twitter Feed Here

Shortsegments is a blogger or writer on the Steemit social media platform, which is an decentralized application hosted on the Steem blockchain.

**Other Applications on the Steem blockchain include Video Blogging site 3Speak, popular games like Splinterlands and Next Colony, fitness application Actifit and open world game SteemCity.

Steemit a decentralized platform, so there isn’t a central authority or owner to take your account away from you and your account can’t be deleted. You are the owner of your account. Examples of centralized platforms include Facebook or YouTube. there isn’t a central authority or owner to take your account away from you and your account can’t be deleted. You are the owner of your account

Curious? Want to learn more about Steemit??

Find out more at this Steem onboarding helps new members! Link

Plus there’s Steem Onboarding to help, and the information is available in Six Languages!

Steem Onboarding helps you apply for an account and is a series of videos which explains how Steemit works. You don’t need to understand everything about the blockchain to post content and our Onboarding help is available in six different languages.

Posted via Steemleo