"Where does the money come from" - an explanation as simple as it gets
So, you are asked by your friends: "Where does the money come from", or "who's paying all that money"?
The answer is simple: "Steemit is not paying real money. It issues a virtual currency and that's what is distributed to the authors. They can then convert it to money using an online exchange."
At that point you might get a second question: And why would that virtual currency have any value?"
And the answer is: "For the same reason that other digital currencies like Bitcoin have value: Investors see something in them and they buy them."
An alternative -much- shorter version of the same Q&A could be worded as follows:
-"Where does the money come from?" or "Who pays?"
-"Investors"
This single-worded answer "investors" implies all the activity where a) investors buy steem and determine the price levels, b) steem acquires its "real life" value from the market, c) author is able to convert steem to "real life" money... Technically, this answer is a bit misleading (because there is no direct link between investor and author) but if you move back and see the larger picture, it's actually accurate.
I absolutely love the simplicity of your explanation. I just may use it when trying to explain bitcoin to my family. Although the next question is," What value do investors see in it?"
"Voting power. By buying this virtual currency they gain income from voting content, plus they have more power to determine what content ranks higher".
Thank you for such a simple explanation. There are many posts sharing this same title but they enter into a nightmare of explanations about STEEM, SP, SBD, liquidity, value, inflation... KISS :)
Good and simple explanation to a very much asked question!
@alexgr how true how true just shot you an upvote please check out my latest here https://steemit.com/steemit/@me-tarzan/the-steemit-bull-report
It's really funny how many people ask that question. So happy that I can give them answers now.
So some member of the illuminati either is making a mad grab for power by throwing the entire system into disarray or the other members made a manic effort to overthrow the top dog, mostly failed, and now he's taking down the whole system with him.
Now currency is ALLOWED to naturally evolve into its next phase with open arms by all major coporations who can save millions or billions from the normally dictated interests gained on transactions by big banks and credit card companies.
My understanding is that the success of corporations is not staked in innovation but in minimizing costs, but still. It's hard to imagine them doing anything globally that has a positive moral impact, even by accident.
Right?
I believe that in the future the money will mostly come from advertisers who will buy SP to get more publicity. So, not unlike other social networks, Steem will actually be funded by advertising. The real difference of Steem would be not in the source of money, but in the way the money are distributed between contributors.