Steemit is a blockchain-based social media content platform, which rewards its users with Steemit’s own cryptocurrency, STEEM, for producing content and using the voting system of the platform. Steemit is a part of the Steem network. [1] [2]
Steemit is powered by Steem, an open-source blockchain. Founded by Daniel Larimer and Ned Scott, the CEO of the organization, the main objective of Steemit is to incentivize the users of the platform to create quality content and promote the content they like, as well as commenting on stories. [3]
Since the platform’s launch in March 2016, the most popular topics on Steemit included cryptocurrencies, politics, and technology.
Both the user base and the market capitalization of Steemit has significantly increased from the platform’s launch. It has been reported that, between March and June 2016, the membership has doubled every week since the launch of the platform. Furthermore, between the same period, the market capitalization of the organization has increased from $7 million to $17 million. According to Ned Scott, in the course of three months, the page sessions of Steemit had jumped nearly six times. Scott added that, at the time, the Steem blockchain experienced twelve transfers, posts or votes on average in a minute. As of October 2017, the market capitalization of Steem is over $252 million. [4] [5]
Steem highlighted three principles, which the organization used for guiding the design of the platform. The first and the most important principle is that everyone who contributes to a venture should receive a pro-rata ownership, payment or debt from the venture. Steem stated that the organization’s first principle is the same as the one applied to startup firms as they allocate shares at founding or during funding rounds.
Secondly, according to Steem, is that all forms of capital are equally valuable, therefore, those who contribute their time and attention towards producing and curating content for others are as valuable as those who contribute funds to a project.
The third principle states that the community should produce products to serve its members. The Steem community provides services different services to its members including a source for curated news and commentary, means to get answers to personalized questions, a cryptocurrency linked to the United States Dollar (USD), free payments, and jobs providing services to other members.
According to Steem, the economic incentives provided by the company will potentially result in “fairer and more inclusive” results for the community than social media and cryptocurrency platforms launching prior to Steemit.

Contributions

The Steem network allows different types of contributions, which are rewarded by the organization.
Steem offers two different types of capital contributions to its investors. Buying ownership generates profit for the investors when the community grows, however, losses can be also generated when the community shrinks. Ownership can be held in two ways: liquid and vesting. While liquid ownership can be sold at any time, vesting ownership comes with a long-term commitment from the investor with setting a minimum period of time before the ownership can be sold. Investors buying debt are guaranteed a certain amount of interest on their investment but they do not get to participate in any potential profits when the community expands.
Users in the Steem community can also contribute by Subjective Proof of Work (PoW) system, such as mining. According to Steem, Subjective Proof of Work allows the community to collectively fund the development of the community’s values along with enabling the monetization of previously non-monetizable time.
The primary goal of Steem’s reward system is to “produce the best discussions on the internet”. On an annual rate, 75 percent of the yearly inflation of the Steem network’s cryptocurrencies are distributed to individual users for submitting, voting and discussing content. The actual rate of distribution depends on the voting patterns of the users but Steem assumes the vast majority of the content-related rewards are distributed among the creators of the most popular content on the platform. According to the organization, Steemit’s content-related reward system’s goal is to offer large bounties for quality content while still rewarding the “smaller players for their long-tail contribution”.
After a post has received a payout, the payment will be distributed 50 percent in Steem Dollars and 50 percent in Steem Power. While Steem Power provides the user with benefits relating to voting and transactions, the Steem Dollars benefit the community with the stability and liquidity of the currency. Contrary to the Steem Dollars, users in the Steem community are encouraged for the long-term hold of Steem Power rather than selling the tokens in a short period of time.
Users have the option to receive payments for their content-wise contributions a 100 percent in Steem Power and to decline payouts. The declined payments are transferred to the rewards pool and will be distributed in the community.

Currencies

The Steem network has three various cryptocurrencies: Steem (STEEM), Steem Power (SP) and Steem Dollars (SBD).
STEEM is the base currency and fundamental unit of the Steem blockchain with the other tokens derived from the value of STEEM. STEEM has liquid features, therefore, it can be bought and sold on cryptocurrency exchanges and can be also transferred to other users in the Steem network as a form of payment.
Steem Power is a 13-week vesting schedule where the users and investors can commit their STEEM while the organization provides such users and investors additional benefits within the platform. Steem Power is also an access token granting its holders exclusive perks within the Steem platform. SP balances can’t be transferred or divided except via requesting for an automatic recurring conversion, therefore, Steem Power can be hardly traded on cryptocurrency exchanges.
Holders of Steem Power benefit from the additional influence they get as, when voting, their influence is directly proportional to the amount of SP they hold, thus, users who have more Steem Power have more influence on the distribution of rewards.
The holders of SP receive interest from Steem on the balance of Steem Power remaining vested. 15 percent of the yearly inflation of the token is paid to the token holders as an interest. The amount of the interest the token holders receive is directly proportional to the amount of Steem Power they hold relative to the total amount of vested SP across all community.
While transferring STEEM to SP is referred in the Steemit community as “powering up”, exchanging SP to STEEM is referred as “powering down”. When a user chooses powering down, he will receive STEEM in 13 equal week payments, starting one week after the power down is initiated.
Steem Dollar or Steem Blockchain Dollar (SBD) is a token within the Steem network, which is designed to bring stability to the Steemit community. SBD is created by a mechanism similar to convertible notes (often used for funding startup organizations). Steem Dollars are short-term debt instruments that can be converted to ownership at a rate determined in the future. SBD holders can convert the backing token with a minimum notice at the current market rates.
Steem Dollar is linked to the price and the value of the United States Dollars, with Steem turning a major focus for the SBD to stay near the price level of the USD. As SBD is a short-term debt, it pays the holders interest.

Transaction Fees

Transactions conducted in the Steem network are cost-free as, according to the organization, it would be counterproductive to “turn around and charge people every time they attempt to interact with the community.” Steem also sees problems regarding low amount transactions as, in many cases, the high fees prevent users sending out cryptocurrencies to a wallet to another in the case of low amount transactions.

Graphene

The Steem network is built upon Graphene, the same technology the decentralized cryptocurrency exchange BitShares is using.
The public demonstration of the Graphene network has proved that it can sustain over 1,000 transactions per second on a distributed test network. According to Steem, with various improvements, Graphene could be “easily” scaled up to or over 10,000 transactions per second.
Without any significant efforts towards optimization, Steem claims its network is able to process approximately 10,000 transactions per second.

Decentralized Exchange

Steem operates a decentralized exchange on its blockchain similar to the BitShares cryptocurrency exchange. Through a public, decentralized market, the exchanged allows the users of the Steem community to trade their STEEM and SBD tokens. Order matching is performed automatically by the blockchain while users are able to both buy and sell their tokens by placing orders for the actions. [6]
The decentralized exchange includes a publicly accessible order book and order history providing the users the chance to analyze the market. Users can interact with the Steem decentralized exchange via the Application Programming Interface (API) or Graphical User Interface (GUI).
Steem provides escrow services to its users. Users can send and receive transactions on the Steem blockchain with a third-party escrow service operated by the community. The user acting as the escrow service will determine whether the terms of the agreement related to the transaction have been met. If the terms have been met, the user operating the escrow will allow the funds to be released from the escrow, if not, the funds will be returned to the sender.

Token Allocation and Supply

Steem started with a base supply of 0 STEEM. The Steem network allocates STEEM thorough mining via a Proof of Work structure with generating approximately 40 STEEM per minute for miners and an additional 40 STEEM per minute created for the reward pool to incentivize content creators and curators. Steem also rewards users who converted their tokens to Steem Power. As of August 2017, due to the combined effects of various rewards for contributions, the STEEM generated increased to a rate of approximately 800 STEEM per minute.
In December 2016, Steem started creating new tokens at a yearly inflation rate of 9.5 percent. Every year, Steem expects the inflation to be decreased by 0.5 percent until the inflation rate reaches 0.95 percent. The organization expects this rate to be reached in 20.5 years counting from December 2016.
75 percent of the new tokens will go the reward pool, which is split between the content curators and authors, 15 percent of the new tokens will be awarded to the holders of Steem Power while the remaining 10 percent will be transferred to the witnesses who publish price feeds to power the Steem blockchain.

Censorship

As the Steem network is operated by witnesses of the Steem community from different jurisdictions on a global scale, the organization claims that there is no single entity that can censor the content that is “valued by STEEM holders”. All of the user actions are publicly recorded on the Steem blockchain, which can be verified anytime by anyone.
Although, on individuals websites in the Steem network, such as Steemit, may censor content on a single website. However, according to Steem, all of the content created in the Steem network is published on the blockchain, thus, the censored content could be made available on the mirrors of the websites.
Steem stated that the organization values the freedom of speech and turns a major focus on keeping it. According to Steem, freedom of speech is the “foundation of all other liberties and any infringement upon freedom of speech undermines the only peaceful means of reaching consensus: discussion”. Steem argued that freedom of speech allows the individuals to be fully informed. According to Steem, an uninformed voter is a greater threat to society than losing the right to vote. Steem sees censorship as means for “stealing votes through limiting public discourse”.

Content Monetization

Steemit’s monetization model for content is reward-based instead of the content creators relying on advertising. According to Steem, in some cases, monetization through advertising decreases the value of the created content from the viewpoint of the consumers. Steem stated that while advertising model allows the content creator to make money more easily, the lack of advertisements would allow the content to be “richer”.
Apart from the reward-based model Steem offers, content creators can post or share their content with social media outlets connected to Steem. If the creators’ work is recognized or liked by the Steem community, they can successfully monetize their content.

Smart Media Tokens

In October 2017, Steemit announced the launch of Smart Media Tokens (SMT), which will allow the connection between content hosting websites and new revenue streams, consumer bases, and development opportunities. [7] [8]
The expected launch of the new software is the fall of 2017. Steemit’s software will allow publications, publishers, and social media platforms to create native tokens based on the Steem blockchain. With the new software, the organizations will be able to integrate a customizable token system into their website, portal, or platform.
Integrating the protocol of the software will enable the organizations to launch Smart Media Tokens for their websites, applications, or communities. Steem seeks to provide an opportunity to the organizations to eliminate paywalls and subscription-based monetization models. Instead, the organizations can switch to a model similar to Steemit’s: Smart Media Tokens are used to reward publishers and consumers based upon their contributions to the platform, such as likes, votes, views, shares, and comments.
Smart Media Tokens can be integrated into a platform or application without changing any infrastructure or functions. Steem expects this will “break down barriers” for the organizations to enter the fintech industry, and that the Smart Media Tokens will create a “mutually beneficial” bridge between the consumers, content, and media revenue.
According to Steem, Smart Media Tokens have a “near instant settlement” with no transaction fees. Furthermore, the Smart Media Tokens can be used by the organizations to raise funds through Initial Coin Offerings (ICO).
Ned Scott, Chief Executive Officer of Steemit, said that print is “dying” while the integration of advertisements is inefficient, distracting, and generally unwanted by the consumers. According to Scott, this has led to a “widespread battle” to monetize content. He argues that the solution for this are Smart Media Tokens, which represent the “new frontier of the tokenized internet”. Scott expects that with the launch of Steemit’s Smart Media Tokens, numerous mainstream publications will change from advertising model to the token model, therefore, the content will be curated by the public. Furthermore, he stated that with Smart Media Tokens, the content hosts are able to create dedicated revenue streams allowing “richer and smarter” content directly targeting to a specific user base. Scott sees the Smart Media Token as a user-friendly and inexpensive way for organizations to raise funds, launch their own digital currencies, grow their community, and to generate revenue.

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