Luke's Reply: Where Does The Money Come From?
![steem_bitcoin_pizza2dec4.jpg](https://steemitimages.com/640x0/https://www.steemimg.com/images/2016/07/24/steem_bitcoin_pizza_small6d448.jpg)
(in reply to the #bitcoinpizza conversation)
My answer to friends and family who ask me, "But where does the money to pay Steemit content authors and curators come from?" starts with a pizza.
May 22nd, 2010: The first ever purchase using bitcoin took place to the tune of 10,000 bitcoins for a pizza. Bitcoin, if you're not familiar, is a decentralized cryptocurrency. Today, that same amount of bitcoin is worth $6.5 million because right now each bitcoin is traded on open markets for around $650 each.
What Is Money?
Money, at its core, is a ledger. It's a way to keep track of value transfered from one person to another. Blockchain technology (the stuff that runs both bitcoin and steem) is a global, secure, proveable, decentralized ledger. In a sense, it's the best form of money every invented.
Many people around the world recognize this and want to move a portion of their value store into this ledger. That's why bitcoin is currently selling for around $650. It might also be why steem is selling for around $3.50. Until the marketcap grows by several orders of magnitude, both bitcoin and steem will be highly volatile, so expect these numbers to change a lot. Value, in an economic sense, is determined at the moment of exchange and both these tokens of value are being exchanged right now at these rates. The technical specifics of how the blockchain contract creates new tokens of value is beyond what I'll explain here, but, in my opinion, it makes more sense than what the Federal Reseve does on a daily basis because the blockchain protocols are completely open for anyone to investigate.
Is Steem Money?
When a post or comment on Steemit has a $ value next to it, a portion of that value is a real, liquid reward which can be converted to USD fairly easily. After 24 hours, 75% of the reward goes to the author and 25% goes to the currators. Of that 75%, 50% is given out as Steem Power (which is similar to a vested stock) and 50% is given out as SBD (Steem Backed Dollars). You can transfer SBD to either Bittex or Poloniex, sell for BTC (bitcoin), and then sell that BTC at various exchanges like Coinbase for USD or your currency of choice.
So that's where the money comes from. It's not just the value of the content or how many users join Steemit (though those things are important also). It's about tokens of value which, on the open market, people are willing to pay real money for.
So why not create an account and post some content to see what happens? A couple friends of mine found Steemit via my Facebook posts and so far have done very well:
Will you do this well? Probably not. Could you get lucky and upvoted by an influencial member of the community? Maybe.
Either way, that's my current thinking on where the money comes from. What are your thoughts? Also, check out the #bitcoinpizza conversation which this post is a reply to.
I would also argue that part of the reason post payouts are so high right now is because not only are we getting paid the blockchain governed rewards but the value of those rewards on the market is being juiced by the network effects and implied future growth of Steem. Steem's early participants are very lucky because there's so few of us but the growth is so strong.
But Steem IS money in the same way that USD is money and the same way that BTC is money. Here's my TLDR reddit comment on money and cryptocurrencies.
Great point. I have trouble with the term
social contract
and much prefersocial construct
you mentioned later in your comment. Contracts imply a signed, understood agreement. So much of culture and society is all over the place, in contrast.I do agree we early adopters are very lucky (if this thing continues to grow and be perceived as valuable). It's funny to think of this current price as "juiced by network effects" when, to me, the network hasn't really started to grow yet. When more and more people share Steemit posts on Facebook and Twitter with $$$ attached to them, that's when things are really going to take off. People will be like, "Wait, Marry Sue, you're on Steemit also?" We'll also get a little FOMO going too (fear of missing out).
Well it's a little bit of both though. Because there is an implicit social contract. If it gets pushes in the wrong direction too hard, you get a French Revolution. So many people underrate the interdependence of people. Well the price action is unsupportable based on what we are actually doing here. But you're also right that it may very well be crazy low compared to how fast it can grow. If this becomes FB size...I mean you'll pick me up in your hovercraft so we can grab a beer on my island.
Hah! Sounds good to me. I've been around cryptocurrencies too long to think that way though. :)
Not trying to be all philosophical or what not :) thought is what creates everything and the idea of steem and the support from our thoughts is what turns it into value! The dollar bill thought came and manifested into a physical form, the crypt o currency steem is the same thought and the currency is easier to be used and moved due to it being paperless/without physical form. The more minds that consume this new idea/thought the more value it forms naturally. " Our minds creates this reality how can it not create this currency" J. C aka @arcaninfo.
I love that! I'm looking forward to your entry in the #bitcoinpizza discussion.
Here's the post I wrote today on what I've learned about where the money comes from. I'll be linking your post on mine as this explains is much better than I did lol.
Probably not.
(img from freakonomics)