Still Confused by Steem, Steem Dollars, and Steem Power? The Power Plant Analogy
Welcome to all of our new users! Like most people who discover Steemit, you’re probably wondering about the currency tokens: STEEM, Steem Dollars, and Steem Power. Why do we need three of them? How are they different? When will I get paid? These questions are understandable, but they focus on the pieces. What we really need is a 200-foot view.
Let’s power up the drone
The basics of Steemit are easy to understand: you make money by posting and voting on good content. But as you get hooked on the great articles and moneymaking potential, you’ll want to understand how it really works. Steemit and the Steem economy are a complex system with lots of moving parts, so you’re in for quite an education.
If you try to understand the each part of Steemit, you’ll get there eventually. But I think there’s an easier way to begin. Turn on that monitor, please, and I’ll take the drone over STEEM CENTRAL, our main power plant. When you see the whole platform functioning, I think you’ll have a better understanding of the parts themselves and the roles they play. It's an imperfect analogy, to be sure, but a helpful one also!
What Powers Steemit?
What powers Steemit? The blockchain spins the gears. Witnesses keep it honest. Developers enable the Steemit social media platform and the payment systems with which we interact. Average people like us provide the content that gives the site its chief value. And we curate it, too, deciding which content is rewarded. Everybody tells their friends about it.
Put that together and what does it give you?
Holy guacamole! If a holistic whole is what you want, here is a model for you. We can compare Steemit to a conventional thermal steam electric power plant. Steam power, get it? Wink, wink. Change the ‘a’ to an ‘e’. But before we go there, I need to explain how a normal steam power plant works.
By then, our drone should be in position.
Steam Power Plants
Thermal steam power plants are used to generate power from coal, nuclear, geothermal, solar thermal, waste incineration, and many natural gas sources. Though there are many variations, these plants basically turn heat energy into electricity. This basic model forms the bones for much of the world’s energy generation.
Here is a picture of a geothermal power plant in Iceland, which uses steam to convert heat from the earth into electricity. Don’t worry about pollution; there isn't much of that. It is just releasing extra steam into the air. This is a very renewable and sustainable energy source.
Here is a diagram of how the main parts of a steam power plant work:
A steam power plant requires water (which can be recycled and reused) and a heat source. The heat could come from geothermal, solar thermal, coal, nuclear, natural gas, or some other source that is hot or can be burned. A pump sends the water to a boiler, which heats it into steam, and then that steam powers a turbine. When the turbine spins, it creates electricity with help from the generator. The generator is connected to an electrical grid, and customers who plug into the grid are able to use that electricity. The steam condensate is then collected an cooled, and that water gets pumped back into the system for reuse.
The Steemit Power Plant
The weather is nice today and they have the top down. Love that retractable roof, Steemians! Did one of the witnesses spring for that? My, it's a sleek machine. STEEM CENTRAL sure looks so light and airy. Such a transparent place.
Now the drone is directly overhead. STEEM CENTRAL sits right below us and we’re looking down inside. The inner workings are plainly visible on our monitor. They look something like this:
Content provides the value to the Steemit social media platform. It is most similar to the water that circulates through a conventional steam power plant. Vaporized into steam one day, more content appears instantly. Content is ever present, always changing, and capable of reuse and regeneration as content creators contribute fresh ideas with new written blog posts, videos, photographs, art, music, and more.
The Blockchain drives everything, like the great pump at a conventional power plant. Spinning out new blocks, generating new data that grows continually, it verifies and enables transactions and posting information. Content can be posted, more currency can be created, and people can get paid. This beast never sleeps.
Steem Power (SP) operates like a concentrating force. Like a boiler, it superheats the content and creates steam. Oops, I misspelled that; I meant STEEM! When you earn rewards for posting and voting, part of this is paid to you in SP. When you Power Up, you are increasing your SP also. Congratulations, you are becoming a virtual Class A shareholder with your bucketful of shiny tokens. SP gives you stronger voting influence. It also gives you a virtual stake in the future growth of Steemit and the Steem economy, since most of the new currency tokens created are paid out to SP holders. Where does the real muscle come from? From your hard work, of course. Creating and curating content makes it all start to bubble happily.
Steem Dollars are the price-stable currency tokens that represent about $1 each in value. You will get paid partly in Steem Dollars (SD or SBD). There are so many possibilities with SD. You can spend these in the virtual economy which is soon to come, you can hold them and accumulate a 10% return, or you can sell or transfer them into Steem, Bitcoin, or other currencies. Like the turbine that’s spun by steam power in a conventional steam power plant, SD bridge the raw power of Steemit with the real world applications of a price stable currency.
STEEM is the liquid currency, much as electricity is the final product from a conventional steam power plant. You can transfer it, spend it, or Power Up into SP. Passing through this generator is the final step before the product of all your hard work is realized. Through bridges, gateways, merchants, and exchanges, your STEEM plugs right into the online economy. When the market cap of STEEM goes up, you are paid more for bringing your STEEM to the market, just as if wholesale electricity rates had gone up and a conventional power plant operator cashed in by selling it back to the customers on the grid.
The drone is out of power now. We’re grounding the sucker. Fortunately, we have an appointment with the man himself, the evil genius in charge of the Steemit Power Plant. Let’s see what he can add to our understanding of how Steemit works.
What’s that? He says he has no time to speak at the moment. He’ll make one statement and that’s all the time he can give us. Let the great man make his statement: