Steemit: Where Does the Money Come From?
Many of you will have seen the news in your feed today that Steem has passed bitcoin in the number of transactions over a 24 hour period. This is fantastic news for the community and another notch in our belt towards mass adoption of the currency.
Whenever we are explaining Steem to our family and friends one of the most common questions we receive is where the money comes from.
It is imperative that we have a simple answer to provide for those that we love in order to see the mass adoption that we all desire. Now that we have passed bitcoin, it is a golden time to have an answer so that our use case is more readily accepted.
Keeping it simple
There is a saying in Christendom that would be helpful for our discussion. The saying goes, "If it is foggy in the pulpit it's cloudy in the pew." Put another way, keep it simple stupid - the classic K.I.S.S. acronym.
So what is a one sentence response we can give people when they ask where the money in Steemit comes from?
Answer: Money is created in Steemit when people vote on valuable content from their peers.
Explaining the reward pool, inflation rate, and any other of the finer details is akin to showing how the Federal Reserve works. The question is not a how, what, or why question, it is a where question. Thus, the answer we give is founded on what products and services are exchanging hands in Steemit.
The product we create is our blog piece. That product is then rewarded accordingly by the community based on its quality, and the trust we have in the individual for creating quality pieces in the past.
Defining Money
Most of us have watched enough bitcoin documentaries or followed the gold and silver markets to understand that money is a medium of exchange and a store of value.
Those two characteristics are a strong point for the Steemit community and the currency we are bootstrapping. In order for any medium of exchange to have value (gems, goat dung, cattle, bitcoin, dollars), it must preserve the trust of the people using it.
It is a hard sell to convince our loved ones that any crypto is a store of value until they understand the farce that is the fiat monetary system employed by every government around the world. When we remind them of what happened in 2008 and they see how all those dollars are backed by nothing, their trust in those dollars will begin to erode.
We continue to use Steem or any other crypto because we trust the technology behind it - the blockchain. In order to explain that to Pap or Grandma, it will take some time. The first step to that is giving them a clear visual of what the Steemit economy looks like. Yes, it is much bigger than blogging for dollars but the rest of that comes after step 1.
me for more great content.
I have a question. Is the chain adding coins to the circulation every time someone receives a payout? Is there an unlimited number of coins that can be introduced to the market?
the created amount of token is fixed.
9.5% annual interest rate of steem
Okay so there is more introduced at a rate of 9.5%. I really appreciate your response. I worried that by introducing steem it would make its value drop. But after thinking about it more as the interest grows in steem as well and this will balance out hopefully as steem becomes main stream.
Thank you for your response @joshbreslauer - I did not know what the current interest rate was.
Great questions @nicnas.
feel free to also upvote on comments in your posts if you like them ;)
you could support @nicnas for good questions !
Noted. ;)
YES PLEASE.Much appreciated. I think that this is a great discussion. Where steem is heading is important if you are going to dedicate your self.
Don't forget that the steem that is in one's wallet before the new steam is created is weighted heavier than the new steem. This is why we are the master race of steem... or it is a pump and dump.
If you ask any conservative person with money about the inflation rate. They will all tell you roughly 5% is right/ they have confidence in the currency at that rate. Also from what I've read on other posts the inflation rate percentage of Steemit will decrease each year.
there is no right amount of inflation !
steem inflation will not change by fixed pattern in the near future.
this system needs inflation to run !
and it seems to be fairly balanced for now.
Changes for these basic mechanisms can be made through hard forks, this already happend in the past.
but don't worry about the supply, this is where the magic happens.
(e.g. btc had 8%+ interest rate before 2016)
inflation is good if it also enables distribution.
I must have read that wrong then, regarding steemit inflation. Also I agree with you that there is no "right" inflation rate. Any rate that keeps confidence in the currency is a good inflation rate, the perfect rate would keep confidence while expanding the currency as the population expands!
Boom. Right there!
Haha, yes!
Fantastic work my friend. Explaining STEEM to my parents/wife was difficult at first, but I came to a conclusion similar to yours :
Once they wrapped their minds around that, it started becoming easier.
Great minds think alike! Thank you for the encouragement. :)
🍒 Actually I'm not sure I understand fully how cryptocurrencies work or how we are getting money out of interacting with others here on Steemit, but your explanation keeps it nice and simple :)
Your honesty is beautiful @mariacherries. I don't fully understand how cryptocurrencies work either. :)
https://steemit.com/crypto/@heiditravels/cryptocurrency-pros-and-cons
I recommend Heidi's article above, and her Youtube channel. She does an excellent job at simplifying digital currencies and the technology behind them.
I will check that out, thanks :D
You are most welcome.
Thank you for sharing! ☆☆☆☆☆😎
You are most welcome. :)
this question is very likely to come up very quick.
how to answer this question should be very individual.
Sometimes it's better to skip the technical understanding about the process and simply start experiencing .
Quite true. Many of us jumped on the bitcoin wagon once we started using it.
Completely agree, Keep It Simple, Stupid. Too easy to get lost in the weeds and give up on the whole idea, or be scared away.
Absolutely. When we talk about the why we'll attract the right people.
Excellent.
Thank you @digicrypt.
I am going to resteem this! I was going to do a post like this, but I could not write it any better :)
Haha, thank you! You are too kind.
Hell yeah slowly but surely
Haha, yes!!
I do hear that question all the time. The part I cant figure out is why folks don't stick with it here. I had one guy that was killing it...$10 to $20 every post...just seems to have stopped. Another guy I brought over got $98 on like his 3rd post...gone...Neither even took out the cash... Seriously what more do folks want???
Wow, not certain of their motivation there.
Steemit does seem to attract and keep the Entrepreneur type and a lot of others come or go with the price of Steem - just my observation.