The idea of cryptocurrencies is not new, but the technology behind it – blockchain -is. The concept was first introduced in 1991 by Stuart Haber and W. Scott Stornetta, but it wasn’t until 2008 when Satoshi Nakamoto published his famous whitepaper “Bitcoin: A Peer-to-Peer Electronic Cash System” that people started to realize they could use this new type of coins for everyday transactions just like fiat money.
Today, there are numerous cryptocurrencies out there. You can either mine them or buy them on an exchange platform. They have different purposes and serve various audiences with their final goal being to decentralize our financial system.
People have already invested millions into these currencies because they know how profitable it can get. But not many people know how to use them. This is the reason why today we will talk about Steem and its cryptocurrency siblings: Steem Dollars and Steem Power says Brian Colombana.
Let’s start with a quick introduction to Steemit, which is the social network where most of this cryptocurrency activity takes place:
What Is Steemit?
Steemit is a social network for bloggers launched in 2016 by Ned Scott and Daniel Larimer (who also founded Bit Shares). People who decide to join the platform create an account, write their posts and get rewarded for it. Even though it’s still considered to be in the beta testing phase, it has managed to attract more than 430,000 users in this short period of time.
While some people think that Steemit is just another blogging website like Medium, it’s actually much more than that. Even though you can create your posts and get rewarded for it, there are other activities on this network that will result in the user receiving ‘Steem’ cryptocurrency tokens as well – mainly curating (up voting or down voting) someone else’s post. It should be noted that Steemit has two different sets of tokens: the first one is called “Steem” and the second one is “Steem Dollars”. We will talk about them later but for now, let’s just say that the Steem token itself has real value while Steem Dollar represents a smart contract that’s pegged to the U.S. dollar.
So, you’re probably wondering now what Steem Dollars are for? Well, they’re actually pretty close to any other cryptocurrency – they can be mined, bought and traded with other people on an exchange platform or directly between friends/family members, etc. You can also convert them into real U.S. dollars if you want by selling them back on an exchange platform like Bittrex, Poloniex or HitBTC (the truth is that you won’t receive the exact amount due to fees but this step is still used by many people).
Understanding Steem Power, First of all, let’s figure out what power means because it might look weird at first glance. Steemit’s users are not only rewarded with tokens but they’re also given the ability to earn more money through the so-called power delegation. Power represents a certain type of votes that can be used by the user when it comes for example to choosing who should get paid in the next round or which post should go viral. You need to have a minimum of 1000 Steem Power delegated to your account in order to participate in this kind of voting. The higher amount you have, the more impact your vote has on other people’s rewards. As an example, if someone has 30% upvote power and another person has 10%, then that second person will receive five times less than what is being received by the first one (even though they both provided the exact same value).
Understanding Steem Dollars, Just like we’ve mentioned earlier, it’s a smart contract that is pegged to an actual fiat currency. It has nothing to do with the Steem token itself but you can trade them if you want because they have real-life worth. The truth is there are people who buy these tokens just for speculation purposes – they’re hoping for an increase in their price because of all the activity on this social network.
Steem Power VS Steem Dollars How Are They Different?
When you look at them closely, things might get confusing so let’s try to set everything straight. First of all, Steem Power cannot be turned into U.S dollars – not directly at least. You can only sell it on the open market for Steem Dollars or you will need to trade it into Bitcoins and then into regular fiat currency. The truth is that there are also some people who choose to leave their earnings on the website instead of withdrawing them, which means they’re hoping to get more Steem Power in the future – this is called ‘powering up’ (if you convert your funds into Steem Power tokens).
On the other hand, while Steem Dollars can be traded like any other cryptocurrency, they’re still pegged to actual dollars (which makes it more like a traditional smart contract). However, these tokens cannot be converted back into regular U.S. dollars because what you actually get when selling them is the U.S. dollar equivalent of the Steem Power tokens you already had.
Conclusion by Brian Colombana:
To put things bluntly, Steem Power is a much more profitable option than Steem Dollars but there’s also a drawback – you can’t withdraw your earnings to your bank account directly. You can only get paid in Steem Dollars, then sell them for Bitcoins and convert them into U.S. dollars (or any other fiat currency).