The most common question I get when telling people about steemit.com is:

Where does the money come from? 

As I pointed out in a previous post, new steemians need to be able to explain some of the basics of this revolutionary, experimental new social media platform, so that they can spread the love while not sounding sketchy (If you want to skip to the best part, scroll down to "The Good Stuff").

This question includes the implied follow-up question - “And how can I get that value into my hands so I can use it at Starbucks”? There are much more detailed answers out there for people with higher IQs than mine. The best way that I can explain it so that hopefully ANYONE can understand it is this: 

First, let’s rephrase the question and I’ll explain why - 

Where does the value of steem come from?
And how do I turn it into U.S. dollars?

Most people are confused by the term “money” when talking about cryptocurrency. Money is usually equated with the local currency, U.S. Dollars in my case. Let’s try to avoid confusing people by saying “money”. When people talk about Amazon stock, they don’t call it money. We should also stick to the correct terminology: Steem. Steem is just like any other commodity. It’s value is based on perception and trust. Similar to every other commodity, Gold, Stocks, Stamps, bartered goods, marijuana, digital assets like Bitcoin or WoW characters, or even baseball cards, the value is based on what you can buy, sell, or trade the commodity for at a given time. Once there is an established perceived value for a commodity and there is confidence(trust) in the security and genuine-ness of the commodity, it can be purchased and sold with local currency because they all have a measurable value. 

Let’s break it down some more:

Steem is the digital equivalent to a postage stamp in many ways. They both have limited supply(scarcity). They both have usability. Stamps can be used to send mail but they can’t buy milk at the supermarket. Their use is limited to the postal service and preserving(collecting). Likewise, steem can be used to reward bloggers for good content. It can be used to pay contest rewards, incentivize development, allocate curation rewards, and many other uses just within the steemit.com interface. But it can’t buy milk at the supermarket. 

Okay, can we possibly break it down even further? Let’s try!!

The Good Stuff

When a user “likes”(upvotes) a post, steem dollars are allocated to that post. How much steem depends on the steem power of the voter. "Allocated from where?" you are wondering. There are currently 235 million portions of steem in digital circulation. The software(blockchain) allows the voters to control how steem is spread among all the bloggers in the whole network, rewarding the good content. That's it in a nutshell. The awesome thing is that the voters aren’t using their own steem. The only cost to vote is a temporary decrease in allocation power(Steem Power). Voting too much means less steem you allocate with each vote and the longer it will take for your steem power to charge back up to full. Pure genius.

For more seasoned users that have around 500 Steem Power or higher, there is the ability to adjust how much power you use with each vote so that you can fine tune your voting frequency without draining too much steem power! I’m not there yet but I can’t wait!! Currently my full power(100%) vote is worth $0.03 steem dollars. I’ve seen others votes that are worth $26 each and I’m sure many are much higher. 

The two ways to get steem:
You can work at your day job, register with an online exchange like Poloniex and use your credit or debit card to buy steem shares.
Or you can work here, blogging decent content and receive steem for your work.
Let's go.

Alright! That about covers it. Now go out and tell your friends and family how this crazy thing works! Tell them they will all be rich in a year! And then when they aren’t, tell them they are just too boring!

I’m just kidding about being rich in a year. Don’t tell them that. It does happen though. My very first post on my first day on steemit.com earned over $50 steem dollars! If I did that every day… I still wouldn’t be rich. But many people make over $150 on almost every post they make! @papa-pepper and @gringalicious come to mind!

I hope some veterans will weigh in on any mistakes that I’m surely making in my explanations. I will edit this post as I am corrected. Please help all of us to understand further!

Stay tuned for my upcoming posts where I will deal with the following questions:

What is the difference between Steem Dollars, SBD, Steem, and Steem Power? 
How do I buy more Steem to use on steemit.com using my personal money? 
How do I turn value in my steem account into US dollars(or whatever currency I use at the local supermarket)?