Developed in 2016 by Dan Larimer and Ned Scott, Steemit is a renowned blogging and social media platform built on the blockchain. Dan Larimer is a big name in the Blockchain community who has also founded Bitshares, the decentralized asset exchange, and EOS, the cryptoasset whose ICO raised $4 Billion.
Yes, that’s billion with a B!
Steemit has an interface similar to Reddit but with a tinge of Medium to it. Just like other famous social networks, it has a newsfeed that incorporates trending posts as well as the posts of the users you follow. Anyone can create an account for free and write a blog post with embedded images and videos, as well as comment on others’ posts. But that’s about where the similarities end.
How Steemit Works?
The blockchain based social media network looks like any other social network but its business model has disrupted the industry. Steemit is based on the Steem blockchain which not only stores the cryptoassets but the content too. That is, all the content posted on Steemit is stored in the Steem blockchain and cannot be removed by any central authority like in the case of Facebook. Its regulated/moderated by the users to prevent plagiarism, illicit content, and other unnecessary-unwanted-useless-content.
The platform works on the Proof of Brain concept. There’s a reward system where content creators and curators are paid out which, in theory, should be based on the value they add to the platform. The platform uses the 3 different decentralized cryptocurrencies to reward both content creators as well as curators who can upvote, downvote, comment, and flag posts.
- Steem – Their tradable cryptocurrency (utility token) that you can buy and sell on exchanges. Steem can also be used on the Steemit platform and can be powered up into Steem Power, traded for Steem Dollars, and transferred to other accounts.
- Steem Power – Steem Power is often referred to as the frozen Steem. It is held by content creators and is used to increase their influence on the Steem Network. The more Steem Power they hold, the more value their posts and upvotes have. The more value their posts and upvotes have, the more is the reward potential.
- Steem Dollars – The stable cryptocurrency, designed to be pegged to US$1, that serves as a way for content contributors to know exactly how much they are getting paid. It can be traded with Steem and can be transferred to other accounts.
How Are The Users Paid On Steemit?
The way Steem comes up with these tokens to reward users is simply by creating them. Unlike bitcoin, the tokens are already pre minded, and each year they inflate the supply to have more tokens to distribute.
Everyday Steem rewards 90% of the new Steem units to the people who hold Steem Power Units and 10% of the new Steem units are paid to content creators, curators, and commenters.
The payout reward for each post is as follows:
- At least 75% of the amount goes to the author.
- At most 25% is distributed among the curators.
The contributor’s job is to write content that they think will add value.
The curator’s job is to then vote on the content based on how good they think it is. To try to keep it somewhat of a meritocracy, Steemit has some clever ways of incentivizing curators to vote only on quality content.
According to Coindesk,
To incentivize this sort of voting, there is also the curation reward paid out in the form of Steem Power. If a post does well, you earn more Steem Power than if a post doesn’t do well, thus incentivizing you to only vote for content that you believe is high quality.
Not every vote from the same account is equal in value. Voting on multiple pieces of content reduces the strength of each of your votes depending on how much time passes between each vote.
Contributions are paid out half in Steem Dollars and half in Steem Power, with the option to boost that up to 100% Steem Power.
Curators are paid out only in Steem Power.
How Does Steemit Make Money?
Steemit doesn’t monetize its platform with advertisements. Rather, it uses the following ways to earn money.
Steemit makes money when its users invest into Steem Power so their posts can be seen by a larger audience, thus getting more votes which translates into more money. Steem Power is locked for two years, so theoretically Steemit could use that money as an investment in the platform by which they can make a larger return than what they’re giving back with rewards.
The developers have also held a portion of the tokens, which they can cash out or reinvest back in the business.
Steemit also allows its users to promote their posts to reach a larger audience. Steemit has its own built-in way to promote each post. This is not unlike other decentralized platforms such as Minds, which also allows users to boost posts this way as well. Think of it like a Facebook Ad, your essentially paying for people to see your content, hoping that will convert to sales for your business, or in this case, upvotes and earning potential for your post.
The best way to think about posts in Steemit can be summarized by the following statement from this article,
“Steemit has no explicit ads, but you can imagine each post as a single advertisement. In order to attract attention or “sell the contents”, one should invest his money. If people like your post you will get your money back and even earn something. Other content creators will lose.”
Can You Make Money Blogging On Steemit?
According to their website, they have distributed a little over $40 Million dollars! So someone’s making money.
Here is a great article that takes an objective look at if you can really make money blogging on the Steemit platform
The verdict from the article is:
Yes, you can.
But it takes two things.
- An initial investment – While creating an account and blogging is free, if you want your posts to have any kind of reach you’re going to need Steem Power. In which case, you’d have to buy Steem then ‘power up’ to Steem Power.
- Hard work and consistency – Like any business, making money on Steemit takes persistence and a time commitment. It’s not as simple as signing up and getting paid to put in minimal effort.
Also note that, while the payouts are still very real, there are a lot of hoops you have to jump through in order to actually exchange your Steem Dollars or Steem Power for U.S Dollars
And the way the incentives are structured, it’s in your best interest to keep your money in the platform, which does create a risk if it doesn’t end up succeeding.
Steemit is a new and interesting platform in the blockchain/crypto-space that has gotten many excited about the future of blogging and content creation. However, some have been sceptical about whether or not Steemit’s business model will actually work or it’s just a house of cards.
The platform has also received criticism as there are a number of third-party service providers that use bots to automatically upvote the posts to boost it and increase its earning potential. This reward system has created a whole market of ‘whales’ that take advantage of the system by buying large amounts of Steem Power and using the bots to promote their posts.
Go On, Tell Us What You Think!
Does Steemit business model seem sustainable? Come on! Tell us what you think about our article on how Steemit makes money in the comments section.
An aspiring entrepreneur, technology and finance enthusiast, avid learner, and a surfer. Currently working with one of the first blockchain powered Real Estate platforms, ShelterZoom.