Steemit Corner #1 : Where does the money come from on Steemit?

Background :

Last week there was a misunderstanding of an interesting question in the Academy competition of the eighth season of the Steemit Engagement Challenge, and it is our duty to interpret it within a series I called Steemit Corner that will be weekly to spread the culture of Steemit Blockchain among users.

The question is where does Steemit's money come from and how does it reward its users? It's no secret and money doesn't fall from the sky.

The first friend I wanted to persuade to sign up to the platform asked me, is there no Ponzi scheme behind this platform? So where does all this money come from when everything is free?

It was my duty to research all this in order to convince him, and if you have such doubts, do not leave the article until you have read it all! In fact, I will explain to you almost everything related to this topic.

I will try to simplify things to make it simple and to better understand the source of this money, the topic only requires that you have knowledge even if it is superficial in the world of virtual currencies such as (Bitcoin, Ethereum, TRON, Solana and many others) ... like millions of people, so the system will be familiar to you.

To explain where the money comes from in Steemit, that sounds like a mystery, but behind that, there's actually a complex process that uses a technology called Blockchain.

What is a Blockchain?

_{Do not be afraid and be confused!}

In a simplified explanation from Wikipedia it tells us:

The blockchain is a distributed database that is transparent, secure, and works without a central control body.

Imagine, your best friend. His mother was in the hospital and he wanted more money immediately to perform the operation, and he called you and said: "Hello , I want some money, I have run out of money."

Me : "Some are being sent now." I got up and spoke to the account manager at your bank and told them, "Please send me $2,000 from my personal account to my friend 's account."

The account manager replied, "Okay."

He took the initiative to open your record, and check your account to see if you have enough funds to send $2000 to your friend.

Since you have so much, it makes an entry in your account like the following:

You -> $2000 to your friend

And just now you called your friend and said to him, "I transferred some money to you."

What just happened? You and your two friend trust the bank to manage the money.

There was no real movement of physical objects to transfer money. All that was required was an entry in the log. The entry in this log that you and your friend neither control nor own.

This is the problem with the current system.

To build trust between us, we have been relying on individual third parties for many years.

• What if the register in which the transaction was recorded burns in a fire?

• What if your account manager mistakenly writes $20,000 instead of $2,000?

• What if he did it on purpose?

• Can there be a system through which we can transfer money without the need for a bank?

Think about it for a second, what does money transfer mean? Just an entry in the registry. Is there a way to keep the record between us instead of someone else doing it for us?

The blockchain is the answer to the deep question, it is a way to keep that record between us rather than relying on someone else to do it for us.

The requirement of this method is that there must be enough people who don't want to rely on a third party. Only this group can keep the log on their own.

We will assume that four individuals, by mutual agreement, had each other's account details all the time without knowing the other's identity.

First, they all have an empty folder with pages to start with. These pages will keep a record of all transactions so when a transaction occurs each person in the network writes about the details of the transaction, let's say the third member sends $10 to the first and then makes the transaction, the third shouts out and tells everyone so that everyone can write it down on their pages.

Everyone checks if the third member has enough credit to transfer $10 first. If she had enough credit, everyone would write down the transaction on their now blank pages, and transactions between them would continue in the same way. This exercise continues until everyone has run out of space on the current page. When the page is full, it's time to put the page away in the folder, eject a new page, and repeat the process from the step above.

Before we put the page into our folders, we need to seal it with a unique key that everyone in the network agrees to. It's called mining by mining, and we'll make sure no one can make any changes to it once we put their copies in everyone's folder. This is why it is called a decentralized system.

Where does this cryptocurrency come from?

This cryptocurrency is generated every day in a certain volume directly by the Steem blockchain. It is called Steem (STEEM). The creation is done according to a very specific algorithm called DPoS (Delegated Proof of Stake). Concretely, blocks are generated approximately every three seconds. Each block contains a portion of this coin (actually 2.94 Steem per block).

It increases in value when it enters the cryptocurrency exchange market. This value is measured on the basis of its usefulness, its rarity and the confidence with which it is placed in the markets. In addition to a product, service, etc. Useful, sought after and rare, its value increases.

The same is true for money as we know it (Euros, Dollars, etc.). Moreover, when a block with Steem is generated, it is as if the bank printed a new ticket.

A banknote, in fact, is just an insignificant little piece of paper, but it has been given a value and this value has been recognized.

The same is true for all cryptocurrencies including Steem. The more people join the Steem platform, the more Steem is used, the more valuable it is.

Also,

The money mainly comes from new people who buy Steem and therefore inject money into the network in a way, by valuing the tokens already issued. And without an injection of external capital, inflation would quickly cause Steem's value to drop dramatically.

What is the real value of all this, what does it represent?

As of today (April 7, 2023), 1 Steem is worth approximately $0.241. Steem's market capitalization (i.e. the total value of its market) is $104,340,661 and currently consists of 431,052,050 STEEM
Steem is in circulation.

Source: coinmarketcap.com

It is important to remember that every day there are around 85,046.4 new Steem created through new blocks of the Steem blockchain (about 2,953 STEEM per block).

It has been distributed in the following way in the past 30 days:

• For Authors (32.5% %) / Curators (29.8% %) / Comments (0%) of content (articles, votes, comments): 62.3% = 52,983.9 Steem/day;

• Interest on Steem Power: 22.6% = 19,220.48 Steem/day (yes, in interest!);

• For Witnesses (These are the Witnesses who take care of the operation of the network and the platform. They are the ones who make the blocks with their hardware. Without them: there are no Steems) 15.1% = 12842 Steems / day.

These numbers were found on 04/07/2023 on SteemDB which is a tool that allows you to visualize blockchain data.

Currently, users receive tokens worth a total of $52,983.9 * $0.241, or just over $12,769 per day just for participating in content creation and evaluating its quality.

How can we get paid just by participating in the platform?

Unlike many blockchain networks like Bitcoin that pay only the miners responsible for sponsoring and securing the network, Steem Blockchain rewards users who provide content like creating posts, comments, and voting for other users. This is how the Steemit.Inc ecosystem was born.

Hence, we know the value of creating content in the development of the platform, so users who comment and vote on it also are paid because they help in detecting high-quality contents, and from here we know the value of objectivity and sincerity on comment.

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I hope that this first post in this series helped many users to understand this point about Steemit Blockchain in the hope that the series will continue in future episodes.

Best Regards,
@kouba01

Cc- steemcurator01