Everyone IS making money out of thin air. That's the catch. There is no catch. Just like Bitcoin and the US Dollar, Steem springs to life out of thin air.
When 12.5 new Bitcoins are mined every 10 minutes, they just appear out of thin air. That's approximately $8000 of new Bitcoin being created ever 10 minutes or about 1.1 million US dollars every day. The price of Bitcoin doesn't go down every day because of the newly created Bitcoin because people want to buy the newly created coins. There is demand for the new Bitcoins.
The Federal Reserve does essentially the same thing when it creates new US Dollars. Only it's network of miners are the Big Banks who take the Dollars the Fed created out of thin air and loan it out to businesses and consumers who want it to buy goods. They demand the new Dollars to make purchases.
The only real difference between Steem, Bitcoin and the US Dollar is how it's distributed. Since Steem is distributed to people who earn it by by using Steemit. Since Steemit is a sort of feedback loop (the more Steem you have, the more Steem you can earn) demand for Steem is created. And like other currencies or coins, where there is demand, there is value.
This article only confused me more, bud your explanation makes it al understandable:P.
I'm glad you found it helpful and welcome to Steemit!
Can I ask you this: when I upvote someone's post am I giving them some of my Steem or is it being newly created? For instance, I currently have 0 Steem, a small amount of SP, and some SMD. I just upvoted your reply, and the $ didn't move at all. Is this because I have very low SP or because I have no Steem tokens currently?
When you upvote someone's post, or your own post for that matter, you are rewarding them with Steem Power (SP) and Steem Dollars (SBD) that will be newly created at the next scheduled payout. The amount of the reward your upvote is worth is based on the amount of SP you have.
For example, I have about 570 SP and when I upvoted your post just now, your reward jumped to $0.02 because of my SP. As you get more SP, your votes will be worth a bigger reward of newly created SP and SBD for posts you upvote.
@gregory-f: I liked your reply and tried to up-vote you. I have a huge amount of Steem Power and when I upvote people it is usually worth a couple of dollars to them. However, your balance didn't move. Is the reason:
Number 1 is mostly correct. You cannot give a reward to a post or comment that is over 7 days old. Actually the cut off for a reward is 12 hours before the 7 day mark.
Number 2 is a little correct, in that you have a limited amount of rewards available and every full power upvote reduces your voting power by 2%. You also recharge voting power by 2% every 2.4 hours. So if you only give out 10 full power upvotes every day you will stay close to full power.
You can see your voting power level here: https://steemd.com/@swissclive
You've given the best explanation i've read on this post. It's just simple.
Thank you!
Upvoting this because I wonder the same thing. When I upvote someone and say I had a lot of SP (which right now I have a new account) is that money that I am sending from my own account or is that being distributed from newly mined STEEM? Say I had a lot of SP if I upvote the hell out of everything am I essentially spending my SP? Should I be more careful in only upvoting the very best content? TY in advance for whoever can reply.
Upvoting everything is not a good idea. Steemit is designed for 20 upvotes a day. You could give up to 20 votes at full power and every vote over 20 would weaken the reward for all your votes. So voting for only the best content is better.
When you upvote someone's post, you are rewarding them with Steem Power (SP) and Steem Dollars (SBD) that will be newly created at the next scheduled payout. It does not come out of your SP.
gregory finally ,that was the answer i was looking for the whole day. Thanks man 🎉
Glad I could help.
This is very important and should be stickied somewhere.
I am also confused about this.
Sounds kind of like a ponzi to me.
Which one, The Federal Reserve or the US Dollar? Because if they sound like a ponzi, then you must have been listening very closely.
Only since 1914... ;)
But you need lots of electricity to generate BTC.
And it's not same, BTC is limited while $ printing is unlimited.
Limited or unlimited, all money is created out of nothing. Some just takes a little more effort or energy. In the end it is not how money is created that gives it value, it is people who are willing to accept it as payment for goods or as a value transport that give money value.
Almost all . But that could change if we tried a Mutual Credit System such as Local Exchage Trading System.
Nonsense. Money are assets that have REAL value. Like gold or silver. Those have value because of their rarity, the work it took to mine them and the use they have. ONLY Fiat money is created out of nothing. Even bitcoin takes WORK to create, so it can't be created in unlimited amounts like paper currency.
I do pay for my electric bills too but I don't like mining with a cpu
instead mining with my brain seems much more productive...and efficient.
steem it just use the ledger to confirm transactions and not to generate value.. is the short answer to your question.