Steem for Dummies - A short Intro

Perhaps like me, you were simply browsing through coinmarketcap on a whim, and came across this thing called steem. Or perhaps you weren't even interested in cryptocurrencies, and only heard about it through reading random news articles online. 

Either way, the concept piqued your interest. So you come here to learn more about steem. Being the lazy guy you are, you decide to not read the near 50-page whitepaper, and look for simple explanations instead. You go to the FAQ, but are surprised that there are only 3 questions, none of which really answer all that much. But you are unfazed; you are intelligent and logical, you always play games without reading the tutorial and build things with a manual.

Then you come across steem. What the heck is steem power? or steem dollars? Just how many "steem" currencies are there? And what do they mean by "power down"?

So you go search for some articles on steem. There were a few that seems to answer these questions, but to your dismay, they seem to be too much hype and low in substance, almost as if they're shills for some pyramid scheme. This turns you off slightly, but you also have seen some very legit people using steem, so you decide to give it another chance.

Well, here is the basic gist, without all the hype and possibly even misleading stuff. But if you are really interested and also the skeptical type, I suggest just accepting the pain and read the whole whitepaper.

Steem essentially uses 3 different types of currency (although it really is just 2): 

1. Steem, which is what you see on coinmarketcap and other sites

2. Steem Power, which is basic steem with some restrictions and benefits (more on this later). 

3. Steem Dollars, which is what you get when you make posts, and other people like your posts.

So why are there 3 different types of currencies, what do they do and which should you buy (if any?)

Well, first of all, Steem is just the basic Steem currency. It's what you see on coinmarketcap, and is kind of the basis for steemit. However, like all cryptocurrencies, Steem will probably be quite volatile for quite a while. As we have seen, there have been huge changes to its value in the past few days. 

This is why there are Steem Dollars. Steem Dollars are worth approximately 1 dollar each (it's kind of complicated, read the whitepaper if you want to understand it), and are awarded when your posts receive likes and stuff like that. While not completely volatility-free, it gets rid of a lot of the potential volatility, which helps people who only want to get some rewards for their content creation, but don't really want to take on the potential risks of Steem's currency volatility.

And then we have the big elephant in the room, Steem Power. You see a lot of these people going on and on about how create Steem Power is, and how investing in it will compound your wealth so much you'll make Bill Gates look like a pauper. But what is it, exactly? Is it really that magical?

Well, the answer is not really. All Steem Power is, is Steem currency that is locked up. You cannot withdraw and sell your Steem Power (or "Power down", as they call it) immediately at any time you like. You can only withdraw 1/104th of your Steem Power per week. That's about 2 years to withdraw the whole amount, for those too lazy to do the math. 

Why should you lock up your money in Steem Power? Well, pretty much the only reason would be if you think that Steem, the currency will increase in *market cap*. Essentially, buying Steem Power is like buying any other cryptocurrency to hold (only that it's locked up for 2 years). If you think Steem will go to say 2 billion market cap next year, you should probably buy some Steem Power. 

The reason you would buy Steem Power and not Steem if you want to speculate in the currency is because of the inflation rate. Steem has a super huge inflation rate of 100% per year. This means if you are buying Steem to hold, it'll quickly get inflated into the abyss. 

But with Steem Power, you get 90% of all newly created Steem, which essentially means your inflation rate is much smaller. But it isn't like you're getting super super high interest that will compound until you can buy the entire Universe. Your Steem is still being diluted, just at a much slower rate than holding Steem the currency itself. If you think that Steem is the next big thing, and it'll surpass reddit and facebook, then it would probably be a good idea to get some Steem Power.

Also, Steem Power increases the importance of your vote. And since votes mean payouts, the more power your vote is, essentially the more payouts you can give yourself (and other content creators you like), since you can vote for your own stuff. So if you're really active in the community and vote a lot, you may also want some Steem Power to make yourself louder, so to speak. 

Well, hopefully now you have some basic understanding of what steem is. Again, if you're interested, I really suggest just reading the whitepaper.