steem for newbies

This is a simple, easy to understand guide to Steem for anyone with no assumed prior knowledge, explaining how it works.

Steem for Newbies
I have actually spent a lot of time as a newbie, trying to find my way around steemit, and I assume a lot of other newbies are experiencing the same. But its very easy to get the concept.

This is just my own way of contributing to steem, by making this post that helps to demystify the complexities involved in steemit for everyone that is new to steemit.

while writing this post, I will try to present the challenges from the stages of being a beginner and progressing to the more difficult challenges.

even though i have been on steemit for a while, i am still learning just like you, so if I get something wrong here then let me know in the comments and I'll fix it.

So, we have Steem, Steem Power and Steem Dollars. Why?
First of all, we will run through the basics of what each of them is. You may still find these terms relatively strange, but as time goes on, you will understand.

Steem
This is what you can buy on an exchange like Bittrex.com.

Its not meant to be a way to store value in the way that Bitcoin is, it's just a means to buy into Steem (the organisation / website). The total number of Steem doubles each year.

Steem Power
Steem (above) can be converted to Steem Power and are then locked. To convert them back to Steem takes two years.

(clarification required: how does this process of conversion back to Steem work exactly?)

Why would you do this? Because by holding Steem Power you are given some of the Steem that are created each second as more Steem Power.

90% of the new Steem goes to anyone holding Steem Power.
10% of the new Steem goes to anyone voting on a post or contributing.
When you vote for a post, the more Steem Power you have, the more you are rewarded by the creation of new steem.

For example, if you see a post with an estimate of $1000:

$500 is being paid to the curators
$250 is being paid to the author
$250 is being paid to the parent/grandparent post if there is one, otherwise it goes to the author

Steem Dollars : This is a stable store of value (relative to most of the real world) where each Steem dollar is worth about $1 USD

Ok, so what is the point in these three things?
Steem is just a way to facilitate the site working, and to move real dollars into Steem Power or Steem Dollars. Nobody would want to hold Steem for any length of time because it will lose value, instead they would make a decision to either:

Convert it back to USD and spend it on groceries or whatever
Convert it to Steem Power, thereby making a commitment of value to the Steem network for 2 years (because once you convert your Steem to Steem Power, you can’t just get it back right away)
Convert it to Steem Dollars, keeping the value committed to the Steem network (rather than selling it on an exchange), but also keeping it liquid so you can take it out if you like. Because you did commit value to Steem though, you get some reward, but not nearly as much as if you converted to Steem Power.
This may sound complicated but you can think of it as these mindsets:

I’ve had enough of Steem, I just want to get my USD back and not be a part of it any more
Wow Steem is cool! I really think this is a great system of rewarding content creators and curators, and I want to commit my cash for the next 2 years with the expectation that it will grow and I will be rewarded by that growth
I like Steem, but I’m not sure if I can commit this money yet for 2 years. I’ll hold it here ready and when I make decision between mindset (1) and (2) I can take it out as USD if I want (mindset 1) or I can easily commit it as Steem Power if I choose to (mindset 2).
But the number of Steem doubles each year, so will it just lose value over time?
The doubling will cause Steem to lose value, but not Steem Power and Steem Dollars.

But thats OK, because (see above) nobody would want to hold Steem, its just a way to switch between options 1,2 and 3.

The number of Steem will double every year which would imply that it should be worth half as much every year (unless a lot more new people buy in).

However, every 3.32 years a 10:1 reverse split will occur (each 10 Steem become 1 Steem, effectively resetting the clock on the amount of Steem in circulation).

This sounds complicated but its not. For example:

Year 0: 500 Steem
Year 1: 1000 Steem
Year 2: 2000 Steem
Year 3: 4000 Steem
Year 3.32: 5000 Steam (reverse split now occurs, and the number of Steem goes back to 500 and the process starts all over again)
(note that the numbers here aren't accurate, there are more like 500 million to 5000 million steam, not 500)

Wow that is weird, what is the point of all that if it resets every 3.32 years?
The point is that:

The value within Steem (i.e. Steem Power) isn’t diluted and forced to drop in the long term because it will ultimately just cycle around 500-5000
but the value within Steem can be redistributed to different Steem users, and is distributed more to those that are more committed, and more active.
The value in Steem is redistributed to:

those who have committed to Steem Power long term
those who are contributing posts and curating them by voting
Complicated. What does all this achieve?
All the above stuff is this way for good reason. What you end up with here is something where:

You can buy into and trade it easily as a cryptocurrency.
You can commit to it long term, giving it stability (i.e. you, and most other people involved, can’t just panic one day and pull everything out making it crash)
If you do commit to it long term you are rewarded
If you contribute you are rewarded
So everyone is heavily incentivised to make the site very active, to keep it stable in terms of value and trading, and to make it a huge success however they can, including telling others about it and encouraging them to participate too.

It sounds cool, but Reddit and other sites are big already. Why would anyone switch?
If you spend your time on Reddit and other social media sites contributing content and upvoting posts (curating for everyone else) then at the end of the month you get a warm feeling knowing that you spent that time building value for the shareholders and employees of Reddit or Facebook and that they can buy carbon fibre toilets for their yachts and fuel their Bugattis for another month thanks to you.

If you spend your time on Steem you are rewarded with real value - something that is effectively a slice of the organisation.

The more you commit and contribute, the more valuable you are to the organisation and the more you are rewarded with a larger share of it. As it grows you don’t just get a warm feeling, you get genuine rewards.

If I want to get started do I have to buy Steem or something?
No, you can just sign up and start contributing and curating by upvoting.

If you think Steem is a great idea you could buy Steem and then convert it to Steem Power, effectively buying into the Steem organisation and network, but it's not necessary to do any of that. You can get rewards just by signing up and contributing to it like any other social media site.