Steem was built to empower people across the world. Its blockchain has many ways to reward regular people. Unlike Bitcoin you do not need masses of expensive computer equipment nor abnormally high amounts of electricity to power it all. Users of Steem are rewarded by creating and curating content, as well as mining, trading and holding the currency.
Steem is a cryptocurrency, akin to Bitcoin and Ethereum. It forms the backbone of a social media platform, where Steem is rewarded to users for posting and curating content. This platform is called 'Steemit', a self-described "blockchain based social media platform".
Like a lot of cryptocurrencies, Steem has undergone a meteoric rise, seeing its market cap increasing from $14 million to $400 million. At the time of writing this its market cap is around the $300 million value.
How does Steem work?
Steemit is the social network platform where users can post content. This is one way a user can be rewarded with Steem. A post accrues votes. The more votes a post or blog gets the more Steem is distributed to the writer.
The writers are rewarded for creating the content and the voters are rewarded for voting on content pieces. The more successful a post, the higher the reward is for those who have voted for the content and for the writer.
In the process, each vote is not equal. The user with more 'Steem power' has a stronger vote. As a content writer or blogger, you then want to target the users who have more Steem power, if they vote for your post, it will rank higher and you will be paid more Steem.
Furthermore, an individual user does not have unlimited votes. The more votes cast from one user the less strength those votes have. Meaning that each user must carefully pick what they vote for rather than throwing their vote around willy-nilly.
How does the reward scheme work?
So, you can earn Steem by posting and voting but how does the reward scheme actually work?
Steem as the cryptocurrency can be put into two different smart contracts; Steem power and Steem dollars. Users are rewarded with one of these depending on which practice they participate in.
Steem power is the backbone that Steemit works on, creating a hierarchy structure depending on how much Steem power you have. The more you have, the stronger your vote.
Voters only receive Steem power as a reward. The more successful the posts they vote for the more Steem power they can accrue.
Users who post content are rewarded evenly between Steem power and Steem dollars.
Steem dollars is a debt like instrument that is mostly pegged to the US dollar. It promises to distribute $1 worth of Steem to the token holder at some point in the future. Steem dollars are also traded at cryptocurrency exchanges, similar to the likes of Bitcoin, Ethereum etc.
Being mostly pegged to the US dollar makes it a stable instrument. If Steem rises to $2, you will get $0.5 in Steem dollars.
I use the term 'mostly pegged' to the dollar because it is still traded on exchanges and is affected by supply and demand, often causing slight variations in price from the US dollar.
Proof of stake
To maintain the value of Steem and to secure the network, a delegated 'proof of stake' system is used. Users vote for 'witnesses' who create blocks in the blockchain (mining) and are also empowered to manipulate the exchange rate to align with the US dollar.
Everyone who owns Steem, has a right to vote on who can become a witness.
The proof of stake system also rewards users for keeping hold of their Steem. Essentially being paid interest on their holdings, which can be up to 10% annually.
Should I buy or trade Steem?
Steem, like many in the crypto world has seen a huge increase in value. It also possesses similar risks as others in the fact that this could be a big crypto bubble.
Steemit is growing in sign up numbers and I think the idea of getting paid to post is something that will definitely attract the millennial generation. Who are forging careers out of similar practices already.
Blockchain technology is something that is not going anywhere. financial institutions and other large businesses are jumping on the blockchain bandwagon, so even if the social media blockchain doesn't catch on, I think blockchains will be around for a while.
Buy and hold strategies rely on the underlying product being of value, and although it is not the finished article, I think there is room for this project to progress. I will be signing up to Steemit before making a decision on whether to buy just yet.
You can trade Steem using exchanges such as Poloniex and Bittrex. Identifying great places to enter the market can definitely be very profitable, especially with the markets current volatility state.
With that in mind you must be aware that you will likely witness huge profit and loss swiongs and so if you think this will likely cause stress to you, then it is advisble to avoid trading and stick for a buy and hold strategy.
When you are trading Steem using exchanges you will be trading Steem dollars rather than Steem power (which is earnt for posting and curating).
Brokers are coming round to cryptocurrencies however you currently cannot trade Steem as a CFD, but I wouldn't be surprised if in the not to distant future you can trade a lot of the top 20 cryptocurrencies as CFDs. If you are interested in trading cryptocurrencies, I show you a good broker below who offers you crypto CFDs.
How to buy Steem Online - Step by step Guide:
As Steem is still a relatively new project, it is still not available on a lot of the main exchanges. This not only includes the large ones like Coinbase but also some of the smaller ones I like to use like Coinswitch. The best way to buy Steem is to use a similar process as other up and coming cryptocurrencies and buy another coin first.
I would advise using Bitcoin as the go between currency and signing up to Coinbase or Coinfloor to purchase Bitcoin using a fiat currency. You can then go to an exchange and trade your Bitcoin for Steem.
Before you trade Bitcoin for Steem, you must first get a Steem wallet. The following website offers various cryptocurrency wallets - freewallet.org. Your Steem is stored here and it acts similar to your email, you receive a wallet address where people can send Steem to you and a password that only you will know.
Buying Bitcoin using fiat currencies.
- Firstly you must buy another cryptocurrency in order to exchange it for Steem and as advised we will be going showing you how to buy Bitcoin. It's the largest cryptocurrency and the most liquid, so is very easy to buy. You'll need to open a Coinbase account.
- Coinbase requires you to verify your identity. This will involve sending a piece of identification in, sometimes this can take a little bit of time for them to get back to you.
- You then need to add a payment method, which is very simple as shown in the picture below. Simple decide whether you want pay using a bank transfer or via credit or devit card.
- Once you have been verified, you can fund your account with EUR, USD or GBP. Once completed you can buy some Bitcoin!
- You then will have Bitocin in a Bitcoin wallet found on Coinbase, you then need to use an exchange to trade it for Steem. There are lots of good ones, today I will show you Changelly. You will need to sign up using your email address (it's very simple).
- Choose BTC for what you have and choose XEM for what you get. Enter the amount of BTC you bought on Coinbase and changelly will give you the exchange rate. Hit next.
- When you opened your Steem wallet you will have received a wallet address, enter that into the section asking for the address.
- Confirm and make payment!
- The final thing you must do is go back to Coinbase and send your Bitcoins to the address you are provided with. Simple go back to Coinbase and click send Bitcoins. It will open up a window for you to input the address received in Changelly.
How to buy Steem with a credit card
You cannot buy Steem with a credit card. If you come across a way to buy Steem using your credit card, I would approach with caution.
The safest method to buy Steem with a credit card is to use the two step process using a familiar and reputable exchange.
How to Trade Steem
As we mentioned earlier, you can trade Steem using various exchanges, Bittrex and Poloniex are two of the most reputable exchanges on the market at the moment. When you trade using these exchanges you are owning the underlying asset. Rather than trading CFDs, which some brokers offer when it comes to cryptocurrencies.
Given the large price swings you see in the crypto market it is no surprise that people are attracted to trading them. When you see higher number of people wanting to trade an asset you often see brokers following suit.
Crypto is no different as you can now trade around six cryptocurrencies using CFDs. You cannot trade Steem this way but you if you are looking to trade cryptocurrencies on leverage AVA Trade is an excellent broker to do so.
To create an account you must:
- Go to AVATrade.com and sign up by providing basic details. You also have the option of signing in with Facebook and Google.
- There is a questionnaire to make sure your knowledge is at a high enough level. They do not want you to lose all your money!
- When asked to select a trading platform, select 'Floating Spread Account' with MetaTrader4 (MT4). MT4 is the most popular trading platform in the world and I would recommend you use it and become familiar with it.
- Next you need to fund your accpount. Similar to Coinbase you will need to decide how you want to fund your account. You can either download the trading platform (as shown below) or you can click web trading and trade using a web browser.
The future of Steem Trading
According to Wikipedia, as of May 2017, there were more than 170,000 Steem accounts. That number of users will not take over the world just yet but it also suggests that this cryptocurrency isn't going away any time soon.
The distribution nature of Steem is clever and I think given how social media has grown so rapidly over the last decade, the Steemit platform could well attract a new type of investor into the crytpo world.
The millennial generation and those who have taken to blogging, posting articles and other means of content I think will find Steemit a very attractive proposition. To me, it has similarities to computer games whereby you earn your stripes through the game and end up getting paid handsomely once you have proved your worth. Similar logic applies to Steemit. If you develop a following and increase your Steem power, the upside is quite exciting.
Steem also claims to be an opportunity to those who do not use or who don't have access to banks. I am sceptical of this because I would suggest the majority of those who don't have bank accounts will also struggle to access the internet, which would rule out Steem straight away.
Ultimately, I like the idea of Steem and Steemit. I don't think the technology is as innovative as some other crypto projects but I do think the idea of a social media blockchain has room to develop. If it catches on, we could potentially see a move away from more traditional social media platforms and towards blockchain platforms.
Cryptocurrency Guide list
Enjoyed this Bitcoin guide? Then see our other cryptocurrency guides:
- How to buy and trade Bancor
- How to buy and trade Bitcoin
- How to buy and trade Bitcoin Cash
- How to buy and trade Dash
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- How to buy and trade Ethereum Classic
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- How to buy and trade NEM
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- How to buy and trade Peercoin
- How to buy and trade Potcoin
- How to buy and trade Ripple
- How to buy and trade Steem
- How to buy and trade Storjcoin X
- How to buy and trade Stratis
- How to buy and trade Tezos
- How to buy and trade Waves
- How to buy and trade Wings
- How to buy and trade Zcash