User Tips: Where Does The Money Come From
Simple concept understanding of how things work is sometimes enough. If you are not coding and just starting to understand Crypto and more specifically Steem, you likely have more questions than answers.
Concept Level Understanding of Where the Money Comes From, this post is a rerun. I made this post when SBD was still printing, and I am leaving in the references because I think SBD will soon be printing again.
For as long as there has been crypto, people have been asking . . . Where does the money come from?
This is meant to be a simple concept guide only.
When enough people decide something has value or is tradeable, people begin buying and trading it. When you purchase something you give it a value. If I buy Steem for a $1.21 I have reaffirmed the value of Steem is $1.21, at least it is worth that to me. When enough people think it is worth $100, it will be worth $100, because that is what they will be willing to pay for it.
Why would someone buy a digital token? One common reason is "As an Investment". I am going to buy it at $1.21, because I think in some time frame that is acceptable to me it will be worth more than $1.21. When you take Fiat and put it into crypto and buy and sell the crypto, you are monetizing it, which is just another way to say, you are exchanging the tokens for a currency that has monetary value.
Each day the blockchain creates and distributes new Steem with the help of our posts and our votes.
When you vote on a post in a way you are creating new Steem and SBD. This week's reward pool is roughly according to @banjo. The reward pool is distributed by votes. The value of my vote is based directly on the amount of Steem Power I hold. If I hold a lot of Steem Power I get to have a greater say in the distribution of today's reward pool. If I hold less, I get to distribute less of the new Steem the blockchain created. As I read through the posts, when I click upvote I am saying, I want to give some of the new Steem to this Author. Depending on the power and number of votes the blockchain calculates the value of each post. Down-votes or flags subtract from the amount allocated to each post and upvotes raise the value.
After 7 days the Steem Power and SBDs (when they are printing) earned from the post goes into your wallet where you decide if you want to keep it, spend it or sell it. If you decide to sell it, you will have to decide what is the amount you will accept for the Steem. You enter that information on the exchange and when someone is willing to pay the amount you set for your Steem, the value of Steem has once again been set.
Generally speaking if no one wants to purchase or trade Steem the value goes down. The more people who want to buy it the value goes up. Since we create new Steem each day, it is important to create demand for Steem and SBD.
this chart represents what the current price and volume of Steem is as trading on Bittrex in 30 minute candles.
If there are no buyers for Steem and SBD the value goes down.
I am always looking for simple conceptual ways to describe SteemIt and Steem to people. Questions, Thoughts, Feedback.. I would love to hear them in the comments.
Simple is good, and I applaud you for keeping things as simple as possible.
I believe one of the ways non-tech, non-crypto people often get lost is in looking at "value" vs. "utility." At least, that has been my experience, when pitching Steem to the external world.
People can "understand" that a $20 bill has no tangible value by itself; the value is simply something we agree on. But I can give you a $20 bill, and you might give me some eggs and some apples in exchange. But if I give someone 20 Steem... it doesn't represent any utility to people. Or the utility is purely conceptual. If you switch gears and liken Steem to shares of stock — because we are talking about investments — it breaks down for people, again. Common stock represents an ownership share in a tangible company. The company way not be worth a used Kleenex, but there's a thing there. With Steem... there's no thing, just an idea; a concept. So that leaves it hanging (in currency AND investment terms) out in the dodgy territory of exotic derivatives.
Which is why I have been shouting that we need tangible use cases from the rooftops around here for three years... and it usually falls on deaf ears. To validate what we're doing, we need use cases that extend beyond our little "inner circle" of developers, nerds and blockchainiacs... LIKE the new LeoShop that has grown out of the SteemLeo SCOT tribe. We need something like an eBay/Craigslist like peer-to-peer market that makes it incredibly obvious to observers "Ah, I see that there is a real PURPOSE to this thing you call Steem! I want to get involved!"
Sorry for "going off" a bit, there... but this is an old hobby horse of mine...
I'm really glad you made this excellent point here! Thanks for "going off"
Thank you... as often happens, I may need to take this comment, go look for my "expounding plank" and turn it into a post again. For all the good it'll do me... but still...
knocking our heads against the wall is just as good as any other activity on Steem.
:)
You jinxed it! :D
Simply put. The more the demand, the more the value increases.
On the other hand, the less the demand, the less the value.
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Simply put. Nice 👍
I'm never sure if it makes sense to others.
Lol. They'll get the point eventually..
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Hi @whatsup
Your simple and good explanation should be a separate section of the Steemit FAQ.
If you allow me, I will add a link to this post in my posts as I keep getting new Steemians coming to my digital photo contests.
Quite simple for the understanding of any fresher. Thanks for this
I can use this as a tutorial guide for my Steem referrals.
You made it simple to understand, the old "where does the money come from" is always hard to explain to people since they have their brain configured to the current fiat system and Web 2.0, especially when the question is about STEEM and their current understanding of what "inflation" is isn't the one we normally use in the crypto community... I normally say something like, "The value of it is all based on supply and demand and demand comes from people seeing value in it..."
I do think however that all Steem dapps should put ads and use their ad revenue to buy and power up STEEM and upvote their users to decentralize the SP throughout the more active users, this would provide more demand, less supply on the market and would decentralize the SP hodlings more. Doing this would provide a much easier way to explain where the money comes from... ad revenue being stored on STEEM.
Regarding the upvote part, can you believe that there are still some steemians who have been in this for a long time(3 years +) that didn't know that the reward pool comes from STEEM's inflation...
To be fair, not every needs to understand in order to use a social media site.
However, it does get frustrating when those who don't understand how it works start giving advice on how to fix things.
This was the question I asked before joining steemit
But surprisingly I can't really explain.
Thanks for the post
I was in the same boat for a while and then one day it clicked.
What I think I sound like when I explain where the money comes from to a normie
Make belief, duh.
LOL from Satoshi Claus or the fairy god miner
The one and only Dr. Wright.
I think that's true for most of us.
"Demand" , that is the key word