Steem = Ponzi? Here's what you might reply when asked this question.
I've probably already told you about it, but when I arrived on Steem, I wanted to embark everyone in this crazy adventure (like probably all of you, you will tell me!). And strangely enough, most of the people I've talked to have told me Hey, it's a Ponzi, that's why you insist at this point (meaning, you're going to make a lot of money on our backs).
I was so disgusted that people might think that, so I immediately stopped shouting it from the rooftops. It's true, no, why would I want to share such an easy way to make money without moving off the couch, without making anything?
Sometimes the world lacks trust in people and people are afraid of seizing opportunities.
Too bad for them.
Nevertheless, I still wanted to dig deeper into the question and think about a solid, simple and clear answer to give if this situation should ever arise again.
But by the way, what is a Ponzi system?
According to Wikipedia,
A Ponzi system is a fraudulent financial arrangement which consists of rewarding clients' investments mainly with funds provided by new entrants. If the scam is not discovered, it appears in the open at the moment it collapses, i. e. when the sums provided by new entrants are no longer sufficient to cover the remuneration of customers1.
A little bit of history
In the 1920s, a certain Charles Ponzi invented a fraudulent financial system that allowed him to become a multimillionaire (billionaire?) in a few weeks. The business only lasted six months.
And no, he didn't build a pyramid with all his money, but he was at the top of the pyramid. Basically, his idea (dishonest but so genius) was to offer people to invest in his (false) company and to obtain an interest rate of 50% after only three months.
The idea behind this is to recruit as many people as possible. These people invest and the people at the top of the pyramid get richer.
Except that there is one thing: if everyone decides to collect their money or if there are no more new investors... Everything collapses!
For a little more info (so that you have even more knowledge to convince your friends), there is this video:
Personally, I know this technique as Ponzi Pyramid. I had vaguely been approached when I was twenty years old by a girl who asked me to invest 100 euros in exchange for much more (like x% interest) if I found x investors of my own (but as all my girlfriends were broke, I had refused!). Already, I felt that there was something going on that wasn't sound (she seemed quite stressed out when she told me that it would be so easy to find investors...).
And so people are suspicious of things that are too good to be true. And I understand them because I myself will never invest any money to earn more.
What is Steem?
The blockchain is totally open source, which means that everyone who uses it has the right to propose modifications, create an alternative version and above all, to create applications that use it.
When an account is created and users start posting content, these actions are not stored on servers owned by a company. The content is stored in different parts of the world, on a distributed network, maintained by users who make resources available (in exchange they are paid with the encrypted money of this network: STEEM).
The Steem crypto-cryptography is directly created by the Steem blockchain. It is called Steem (STEEM).
New STEEMs are generated every day, in a certain volume, according to a very specific algorithm. More concretely, blocks are created approximately every three seconds. Each block contains a bit of this currency (currently about 1.67 Steem per block).
It gains value by entering the crypto-currency exchange market. This value is measured on its usefulness, scarcity and the confidence placed in it in the markets. The more useful, sought-after and rare a product, service, etc. is, the more its value increases.
It is the same for the money we know (euros, dollars etc.). Moreover, when a block is created with 1.67 Steem in it, it is as if the bank were printing a new note.
A banknote, in reality, is a small piece of paper, insignificant to all but those who have given it value and this value has been recognized. It is the fact that it is exchangeable for goods or services that gives it its value.
It is the same for all crypto including STEEM. The more people join the Steem platform, the more STEEM is used, the more its value increases.
The blockchain Steem has the particularity of redistributing a large part of the value produced by the blockchain, more than 75%, to content creators.
What are the differences?
Ponzi
- The power is pyramid-like and held by a single person at the very top of the pyramid (and then, power is held by all the people above you);
- This person can decide to run away with all the money;
- You earn a defined percentage depending on the people you recruit;
- You are obliged to make an initial investment (in cash);
- The pyramid starts from scratch (there is no money at the start);
- There is no value creation (no goods or services). Money just goes from hand to hand.
Steem
- There is no initial investment required to be able to use Steem (and potentially earn STEEM);
- You can only invest time and still win rewards;
- You don't have to recruit people (but it would be a shame to make them miss such a social network) in order to win rewards;
- You don't know how likely you are to earn. It will depend on your articles, your involvement in the community and therefore your popularity;
- The platform lends (free of charge) Steem Power to new users;
- Steem being based on a blockchain, control is in the hands of x Witnesses (and not the founders); These Witness are voted by users; it is a kind of mini democratic system;
- If a Whale powers down its account, it doesn't change the accounts of others;
- Steem price fluctuates between supply and demand;
- You can earn much more than just money by participating in Steem: new friends/new acquaintances/knowledge...
- Steem users create value on a daily basis (mainly content creation).
- In short, there is no risk to register on Steem!
I hope this convinced you, and that now you will know what to say when Steem is called Ponzi!
And if you have other advice, share it!
Follow me at @roxane to have more information about How to share quality content on Steem and others tips. And have a look at Comprendre-steem.fr!
You will find everything you need to start on Steem the FAQ, videos, tutos, tools etc.
If you like my work and want to support me, this is my BTC adress : 1H4faCE3f37JDi8bQqADXn4V1nQutr13oj
Hello @roxane;
I always tell people that the price of STEEM will inevitably go to zero. Just as the first email to be sent out cost thousands of dollars (had to buy a computer; had to have an email server; had to have an email program; had to have the internet) we are in the time that STEEM is expensive. By itself STEEM is a protocol that instead of sending emails allows people to interact in Social Media that is no longer controlled by a few individuals. If you want to post bad puns it will always be there. While certain people might make your post less visible - it will always be there. The fact that this is going on the blockchain could mean that my descendants 100 years from now could read my posts and gain insight into my thoughts, goals and dreams. Posting the same content on twitter/facebook means that this insight will be lost either when I go a step too far and they cancel my account, or in some cases are removed due to inactivity or the facebook/twitter will disappear.
In this context people are not putting money into a Ponzi scheme but are investing in the future.
While I say that STEEM will go to zero value, it has many uses on top of its social media function. I have been working on a model of STEEM that would allow it to disrupt education. Currently education requires funnelling a jumble of information into the heads of unwilling students and costing thousands of dollars per year per person. Having all the courseware on STEEM would allow one to read and watch all of the courses (including lectures). The students would be tested through another process. This is just one area that STEEM will be able to increase its value.
As more people consider the potential of aggregating information on STEEM it will quickly match BTC in price.
you are confusing cost with price. The cost of email was initially high, and now it is low. The price of email is also low. The cost of steeming, initially was high, because of low returns on investment, but now the cost of steeming is lower, while the price is higher.... basically, what you just said lacked clarity, and is contradictory. not sure why this is at the top of the comments list for this post.... oh... because you upvoted it.
I agree I tend to be a little obscure (lack clarity) because I try to be brief - Brevis esse laboro, obscurus fio.
No I didn't confuse cost with price. To set up a mail server continues to have a certain cost, but nobody expects to pay to send an individual email.
Steem network maintenance is facilitated by witnesses. I have no idea what the mechanism is being employed to have these computers manage the data flow. While it will never cost zero (computers cost money) - in the long run STEEM will go to zero in price. Everything goes to zero. Napster used to have a marginal cost (hard drive space), had zero price but had a huge value - spelling the end of the way the music industry conducted business.
STEEM will always have a cost (as long as its active), would go to zero price (as technology evolves) but will have a huge value because it can disrupt how media companies will work. Just today I saw a presentation describing how Twitter and Youtube will end. Twitter (because people won't care) and Youtube because of the loss of Net Neutrality. Would you subscribe to Youtube for $50 per month when alternatives will be free?
I'll suggest that YouTube will go to 0 long before Steem will. Btw, your long answer didn't make any more sense than the short one. The reason Steem can distrupt social media is because the token has value and people are getting paid to create content. I guess I'll stop trying to reason with you, because you'll likely just reword what you already said
I agree here is a video citing 10 companies which are in crisis and could disappear soon (including YouTube)
Each of these were social networking sites. They were very large, very profitable.
Either they wiped out earlier forms or they were wiped out by Facebook.
The STEEM community is 500,000. Facebook has 2.07 billion monthly active users. I expect STEEM will add Facebook to the upper list. Eventually something will supplant STEEM.
small fish can not ..
eem I just kept quiet. @roxane thks sharing
Small fish can work their way up in reputation, followers, Steem power.
Yes.. l"m agree. Thanks
hust as with any social media, therefore it is opissible
tthere is also even more cryptoeconomics involving including how post promotion burns Steem Tokens so is an act of deflation of the money supply increasing the scarcity of the tokens.
Thank you for your post, very interesting read. I think the main differentiating factor is that there is no initial investment required. You can invest and it can be beneficial but it is not essential!!
You are right, people should remember that there is no investement required ! The most important part to know ;-)
This is a good post! my Two favotire qsentences:
"You can earn much more than just money by participating in Steem: new friends/new acquaintances/knowledge..."
and
"Sometimes the world lacks trust in people and people are afraid of seizing opportunities."
@lpv thanks for sharing your fav' quotes :-)
I think they are 100% true... and we need to remember that when we are on steem.... Otherwise -> frustration...
The reason why you insist on people getting to Steem is because you think it will be good for them.
But they are not like you...
How do you know if they will be succesful, happy, and enjoying the experience here ?
There are tons of parameters that you are not aware of that will make each of them a different experience than yours.
In short, what is good for you (or a few or even for a lot) is not necessarily good for everyone.
The best you can do is share your own experience on it and let them the freedom to decide if it is good for them or not ;)
Good article on Ponzi schemes, I was wondering how Steem and Bitcoin were different from it. Now I know. Thanks.
@eternalsunshine, I don't know indeed if Steem will be good for them. But... Many people are like me : high quality level content creator. They have Youtube channels for years. They have personnal blog for more years even. They have Instagram account, etc.
So... If theses people are like me : content creator : why they wouldn't be successfull on Steem ? They work hard every day/week to produce content..... without being paid.
So, at least, here, they can make some money.
Sure.
I was just reacting to this :
and this :
By saying that if you got "strong" reactions from people, that might be because you were "pushy" in the first place.
If you are very "pushy" people will wonder why, before ever listening to you.
Not really pushy, no. I never push people when they are not receptive. I am not that kind of person. I give the information. That's it.
English is not my mother tongue. I didn't know that Disgusted was a strong word. I use it in my everyday life (in french).
Oh my God I had no idea!!!
Excellent super interesting post, that needed a lot of hard work as it seems! Thank you @roxane!!!