The difference between STEEM, Steem Dollars (SBD), and Steem Power

When I first joined Steemit a little over two months ago, the 3-currency system was a bit confusing to me. Here is a simplified overview of what I wish was explained to me at that time. Here are the key differences between STEEM, SBD, and Steem Power.

1. STEEM. STEEM is the basic building block and currency of the blockchain that Steemit is built upon. When one buys STEEM, they are investing in the future of Steemit's underlying blockchain. STEEM can be used to "power up" and become Steem Power. It can also be exhanged into SBD on the internal market within Steemit or traded on an external exchange like Bittrex or OpenLedger DEX.

2. Steem Dollars (SBD). Steem Dollars are the internal currency of Steemit. It is relatively pegged to the US Dollar as each SBD is entitled to $1.00 of Steem when converted. It can be converted to STEEM, exchanged on the internal market to STEEM, or exchanged into other cryptocurrencies on exchanges like Bittrex or OpenLedger DEX.

3. Steem Power. Steem Power (SP) can be viewed as an internal "currency" that is not traded on external exchanges. A purchase of SP is essentially a staked interest in STEEM. SP provides a variety of benefits to Steemit users. SP holders gain an automatic stake in the Steem reward pool. SP holders also gain increased influence in their voting power, allowing for the user to issue higher rewards to authors (including to oneself) and claim higher rewards from curation. SP can be powered down in a process that is spread over many weeks in which the holder slowly loses SP in exchange for STEEM on a 1:1 basis.

Some practical implications of this 3-currency system is stated below.

The value of STEEM dictates the value of the rewards throughout the Steemit ecosystem.

Steemit essentially serves as a proof-of-stake platform for SP holders, while also rewarding those who simply interact with the ecosystem.

While platform users are not required to use their own capital in order to gain in the rewards, it immensely helps to invest in some Steem Power (to both reward onself and partake in the staking reward).

SBD serves its purpose to provide stability to the platforms currencies. It also provides a soft floor for the price of STEEM around $1 as SBD can be converted for a gain any time STEEM falls under this level.

Steem Power helps to restrict the amount of tradeable STEEM that is available to to the external markets. As such, it "locks in" fiat currency into the worth of the blockchain. It also prevents a mass exodus with its power down requirement which further shelters the Steemit community from violent price volatility.

Overall, Steemit is a well thought out platform that encourages long term investment, stabilizes price movement, and locks fiat into the system. New users of the platform are most efficiently rewarded by investing in Steem Power. And all users are able to generate crypto-income that can easily be traded for other cryptocurrencies.