Steem, Steem Power and Dollars - A Metaphor

somethingsubtle (56) in steemit • 8 years ago (edited)

Many a minnow swims into the Steemit stream confused and confounded by the basic economy. What are these dollars? What is this Steem power, I now wield? How does this relate to Steem? Why is only some of it liquid? I just came on here to blog! Please just let me blog! Below, I've tried to list out a fitting metaphor for how this all works and how to make the best of each value type.

So, the metaphor I'm going to use is a rather familiar one - the current banking system. Below, I'm going to describe how SBD, Steem, and Steempower are analogous to the dollar in your wallet, the money in your bank account, and finally investment accounts. Ideally, you will then easily see how the Steemit economy works together.

Steem Backed Dollars

Steem Dollars are like the cash in your wallet. They are relatively price stable, which means your dollar will spend the same pretty much everywhere. Within the Steem ecosystem, it is always assumed to have a rough value of $1 USD. Like the money in your wallet, you can not contribute this money to earn interest or provide power each in value.

Steem

Steem is like your checking account at your bank. From your bank, you can easily write checks, transfer it, withdraw it from an ATM, or wiring it to an investment firm (i.e. Powering Up). Steem acts as a flexible and central location for you to withdraw dollars, invest elsewhere, or give your money to someone else. It maximizes flexibility at the trade off that the value could fluctuate a bit more than the dollars in your wallet.

Steem Power

And lastly, Steem Power (SP) is like you placing your money in an investment bank. You are literally investing in the future of Steemit. You increase your SP to improve how much your vote pays to the author and how much you get back in curation rewards. Think of this as dividends from the Steem Economy. You are investing in the platform itself with SP. The primary cost of this is liquidity. You cannot easily draw your money out of Steem Power in the same way that is it trickier to draw money from your investment account than your wallet. This is one reason there is a draw-down period when you decide to 'Power down' and return your SP to Steem, you are removing your investment from the system and putting it back in your bank.

Summary

I hope this metaphor has been helpful in better understanding some of the nuance between the currencies. Steem Dollars are an easily accessible, system-defined USD in your wallet. Steem is a dollar in a bank account, which gives you a lot more flexibility on where and how you invest it next. And, Steem Power is an investment account that allows you to earn dividends and rewards with your money in ways that your wallet just can't compete with. With these combined, you get to choose how you want to interact with Steem either by being paid in 50/50 split of cash and investment dollars or completely in investment power.

Bonus Metaphor

If, for some reason, you don't like my metaphor, there is an old, but solid, post by @donkeypong that equates all this to a Steem Power plant. I recommend giving it a read: https://steemit.com/steemit/@donkeypong/still-confused-by-steem-steem-dollars-and-steem-power-the-power-plant-analogy

New To Steemit? Check out the Minnow Support Project

The Minnow Support Project is a 2000+ strong community of Minnows. It was created by @aggroed and is sponsored by people like @ausbitbank, @canadian-coconut, @teamsteem, @neoxian, @someguy123 and @theprophet0 to be a community of Steemians that wish to help each other grow. We advocate the sharing of great content to help increase your audience as a minnow. We also help with basic questions, guidance and general Steemit camaraderie. I recommend checking out the topic or the step-by-step starter guide created by @discordiant

Join the Discord chat room here: https://discord.gg/HYj4yvw

Crypto	Career	Creative
_{Steemit & Quality}	_{Hostage Negotiation}	_{A Drone's Eye View}
_{Before Bitcoin}	_{Interviewing @ Google}	_{Monkeys with Knives}

^{^{Follow Me || SomethingSubtle.com || New to Steem? || Minnow Support}}

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8 years ago by somethingsubtle (56)

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randowhale (67) · 8 years ago

This post received a 3.5% upvote from @randowhale thanks to @somethingsubtle! For more information, click here!

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1 vote

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watchout2017 (46) · 8 years ago

Great post and lots of help.

One question: If a Steem Dollar is fluxuating between 1.50-2.00 what happens when you convert from Steem Dollars first and then convert it into Steem Power? Do you get the current rate in Steem Power from Steem Dollars since they are more valuable?

Domi

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somethingsubtle (56) · 8 years ago

Yea, if SBD are worth more than $1 on the markets, you are likely better off taking a 50/50 payout and then using the Internal Market (NOT the conversion) to buy Steem and then SP.

@papa-pepper had a decent breakdown here a few weeks ago: https://steemit.com/steem-power/@papa-pepper/don-t-100-power-up-i-think-you-can-make-more-steem-power-by-not-powering-up-100

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1 vote

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watchout2017 (46) · 8 years ago

Hey, that was fast.

Thank you very much.

Im glad you understood the question.

Great advise. Im changing now....

Domi

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1 vote

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behemoth18 (49) · 8 years ago

This my friend has to be one of the best articles i've read today! Really great info and even better metaphors! Brilliant + Resteemed

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1 vote

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somethingsubtle (56) · 8 years ago

Thank you. You'll come to find, I adore metaphors. :D

They say a picture is worth 1000 words, but a great metaphor is worth 1000 pictures.

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1 vote

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behemoth18 (49) · 8 years ago

Haha really like this quote :D well worth a follow!

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amberquamme (48) · 8 years ago (edited)

Much easier to understand now. Thank you!!

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1 vote

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somethingsubtle (56) · 8 years ago

Your welcome. Glad it was helpful!

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diverse-thinker (49) · 8 years ago

@somethingsubtle nice article upvoted i have a tutorials for minnows to join project can you look and upvote that thanks

https://steemit.com/minnowsupportproject/@diverse-thinker/free-upvotes-in-5-steps

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1 vote

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crisjecamo (42) · 8 years ago

Excellent post friend thanks for the information, I am new to steemit if you can pass by my blog there I am telling you what happens in my country, I hope your support God bless you

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somethingsubtle (56) · 8 years ago

Thanks. Glad you enjoyed.

Your blog is interesting. Good to see some of the news and interesting sites of Venezuela.

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1 vote

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crisjecamo (42) · 8 years ago

Thank you for supporting and reading brother. You do not know how much help we need now. thank you very much.

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beatseb (53) · 8 years ago

Very helpful. Thanks for explaining.

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somethingsubtle (56) · 8 years ago

Glad it was helpful!

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jwolf (70) · 8 years ago

They can easy read your post now to understand everything!

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somethingsubtle (56) · 8 years ago

Metaphors are pretty great to help understanding.

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rizatr (45) · 8 years ago

Great explanation should spreat it more !

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somethingsubtle (56) · 8 years ago

Thank you for the upvote and resteem!

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mohammadreza (47) · 8 years ago

very good
i voted

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the-housewife (54) · 8 years ago

Great post, thank you :)

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somethingsubtle (56) · 8 years ago

Thanks for your time and attention.

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soeminmp (36) · 8 years ago

All are very good plan .I am very instrested but help me because of my password is lossed.How to i can reget my password.

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somethingsubtle (56) · 8 years ago

You seem to have longed onto your account just fine...

You can't reset a password in Steemit. When you generated one, you should have backed it up:

The first rule of Steemit is: Do not lose your password.
The second rule of Steemit is: Do not lose your password.
The third rule of Steemit is: We cannot recover your password.
The fourth rule: If you can remember the password, it's not secure.
The fifth rule: Use only randomly-generated passwords.
The sixth rule: Do not tell anyone your password.
The seventh rule: Always back up your password.

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eightyyroldself (50) · 8 years ago

Nice illustration. It takes hearing this a few times to get a handle on how steemit works. Do you know much about buying and selling steem on the internal market?