Continuing on from my last post The Ultimate Guide To Steemit Payouts, this time we're talking about "money."

Money is in quotes because the money on Steemit is more like game tokens than what we traditionally think of as money. When playing the Steemit game, you earn tokens. These tokens have value outside of Steemit because there are users and investors who are willing to pay for what the tokens represent - A claim to partial ownership of the system.



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Money

Can I earn money on Steemit? How?

You can earn money various ways on Steemit:

Blogging - By sharing your original and unique posts, you can get upvotes by community members. Depending on the upvotes you receive, you will get a portion of that day’s total payout.

Commenting - Not everyone has the desire to blog. But that's just fine, because there are plenty of rewards to be had by leaving comments and interacting with other users.

Curating - If you own some Steem Power, discover a post, and upvote it before it becomes popular, you'll receive a curation reward (assuming the curation award is at least 0.001 Steem Power).

Investing - If you believe Steem tokens will increase in value, you may purchase STEEM. You have the option to "Power Up" your STEEM to turn it into Steem Power.
See: What is the difference between STEEM, Steem Power, and Steem Dollars?

How can I invest in Steemit?

For clarity, you would be investing in Steem the system, not Steemit the private company.

You can invest by purchasing STEEM or Steem Power.

• Purchasing STEEM is similar to buying shares of a company.
• Purchasing Steem Power (SP) is similar to buying restricted shares of a company.

You can also invest your time by commenting, curating and posting.

When you invest your time into the platform, you'll receive upvotes, and with the upvotes a proportionate amount of the newly-created STEEM.
See: What are STEEM, Steem Power, and Steem Dollars?

What are STEEM, Steem Power, and Steem Dollars?

There are three types of tokens within the Steem Ecosystem, each playing a unique role:

STEEM - STEEM represents ownership of the Steem blockchain. It can be sold on an exchange or transferred to another user at any time. The drawback to STEEM is that it doesn't give you any voting rights.

Steem Power - Steem Power is the same as STEEM except it's locked away for a period of time, it gives you influence in the system that STEEM does not, and it gives you some protection from dilution.

You can't purchase Steem Power directly - you need to purchase STEEM then "Power Up" your STEEM.

Owning Steem Power (SP) is kind of like having restricted shares in a company, or in this case, the Steem blockchain. Increase your SP and you’ll have more influence on the network thanks to a more powerful vote. You'll also be able to use your SP to determine the Steem witnesses, who in a way, act like board members of a company. SP is restricted because it's less liquid than STEEM. You cannot sell your Steem Power - it must first be converted into STEEM.

Converting your Steem Power into STEEM is done by "powering down." If you go into your wallet and click "Power Down," exactly one week later you'll receive a payment of STEEM. You'll get 1/13 each week for 13 weeks. If you had 1,300 SP when you first powered down, you'd receive 100 STEEM per week for the next 13 weeks. You can stop the power down process at any time.

While Steem Power cannot be sold, it can be lent out by delegating it to another user.

Steem Dollars - Also referred to as STEEM-Backed Dollars, or SBD, each Steem Dollar is a claim ticket to $1.00 worth of STEEM. If you go to your wallet and click "Convert To STEEM," the system will take the average price of STEEM over the next 3.5 days and give you the appropriate amount. If the average STEEM price during that 3.5-day period is $2.00, you'll receive 0.5 STEEM.

Where does the money come from?

The currency of Steemit.com is Steem. The value of Steem comes from investors, users, and traders on exchanges.

Using a pre-determined mathematical formula, the Steem network continually creates new Steem tokens to reward content creators and curators. Some of the newly-created currency gets transferred to users who add value to Steemit by blogging, commenting, and voting on other people's blog posts. The remainder is distributed to holders of Steem Power and Steem witnesses.

The "money" at its core is like game tokens, distributed to creators and curators as rewards for successfully playing the game. What makes the system robust is that the tokens, traded on markets, have a real-time value. The markets allow Steem tokens to demonstrate their value. This way, when one has a Steem token, that person can know what their token is worth to other people. It is similar to how someone playing a video game could obtain a rare item by playing the game. If they have the scarce item, then they could potentially sell it on video game item markets. Think of Steem as a game system for content, where the rewards people earn are video game tokens that have real market value and are readily tradable for Bitcoin and USD.

Another way of looking at Steemit is as a website much like Reddit. However, it is different in that it pulls its information from a decentralized blockchain and cryptocurrency database called Steem rather than a centralized, private database. In this way, Steemit is also analogous to other blockchain-based businesses such as Blockchain.info, which pulls its data from the Bitcoin network.

Rewards paid to bloggers do not come from Steemit Inc, or investment in Steemit Inc. It comes from the Steem blockchain itself. Steemit does not and will not ever compensate the contributors of the Steem network for curating and creating content. Steemit is not a middleman to any of the blockchain processes, and the technology remains completely open source and transparent for anyone to audit and verify. Steemit is a social network built on the Steem blockchain, whose users are paid by the blockchain.
For a more in-depth look, check out: https://steemit.com/steem/@steemrollin/steem-where-does-the-money-come-from

Since new STEEM is always being created, how am I affected by holding STEEM, Steem Power, and Steem Dollars?

STEEM - Today, the inflation rate sits at about 9.25%, and it is decreasing by about 0.5% each year. 9.25% is your annual dilution rate.

Steem Power - 15% of the newly-created STEEM is paid as interest to holders of Steem Power. If you receive zero curation rewards, you will still have some dilution, but not as much as if you were holding STEEM.

Currently, the top curators on the platform are earning significant returns after taking into account dilution.

Steem Dollars - No dilution. At times, Steem Dollars earn interest (go to your wallet to see the current interest rate).

Why won’t Steem Dollars become inflated?

Steem Dollars work differently from standard STEEM tokens. The issuance of STEEM tokens back Steem Dollars. When the value of the STEEM token goes down, more STEEM tokens are used to back the Steem Dollar. The Steem Dollar is affected little by the inflation of Steem with one exception: If the price of Steem tends towards zero.

In general, the price of 1 USD is a target price but the network cannot guarantee it under all circumstances. In particular, there are a few unlikely "Black Swan" events, like USD hyperinflation and STEEM going to zero, which can affect the backing mechanism. Additionally, the number of Steem Dollars in circulation should not exceed 20% of Steem’s market capitalization for safety reasons.
To read more about the limits of Steem Dollars, check out: https://steemit.com/steemit/@dantheman/steem-dollars-have-limits

What is Powering Up and Powering Down?

Powering Up - If you wish to gain more influence in the network, you must increase your Steem Power. Powering Up is the process of turning your STEEM into Steem Power.

Powering Down - If you have Steem Power, and wish to cash out, you can begin to Power Down. While powering down, the network has calculated your Vests, which are a stable measure of STEEM supply. The system will transfer 1/13 of your Steem Power, computed as Vests, to STEEM each week for 13 weeks.
Example: 1,300 Steem Power will be paid out as 13 weekly payments of 100 STEEM.

Users can continue to curate and earn curation rewards while powering down and may stop a power down at any time.

What are Vests?

To put it simply, Vests are your investment tokens whose value is represented by Steem Power. Steem Power is akin to Steem held in a fund. Vests are Shares in that fund.
For more details, check out: https://steemit.com/steem-help/@hisnameisolllie/what-are-vests

How do I get more Steem Power?

If you have Steem Dollars, you can convert them to STEEM from your wallet. Once you have STEEM in your wallet, click Power Up to turn it into Steem Power.

If you don’t already have STEEM or Steem Dollars in your wallet, you’ll first need some Bitcoin or another cryptocurrency. You may purchase Bitcoin on various exchanges. A couple popular Bitcoin exchanges are Coinbase.com, and Localbitcoins.com. Once you have your bitcoin:

Click the three horizontal lines in the top right corner of Steemit.com
Click “Buy Steem”
Send the amount you want to purchase to the address on the screen.
Here are a few other tutorials on how to buy Steem and transfer it to Steemit:
For more information, this post contains a few tutorials about buying STEEM: https://steemit.com/steem-tutorials/@psylains/steem-tutorials-2-how-to-buy-steem-and-transfer-them-to-steemit

How do I withdraw money?

You can withdraw money many ways. Here are step-by-step tutorials for several different options:

Sell Steem Dollars via Poloniex
https://steemit.com/steemit/@ash/steemit-how-to-sell-steem-dollars-via-poloniex-newbie-friendly

Withdraw Steem Dollars to a bitcoin address
https://steemit.com/steem-help/@piedpiper/how-to-withdraw-your-steem-dollars-in-less-that-a-minute

Convert Steem Dollars to a country’s currency and withdraw to a bank account
https://steemit.com/tutorial/@beanz/how-to-get-my-usdteemit-money-into-my-bank-account

Convert Steem Dollars to WIREX debit card (USD EURO & GBP Supported)
https://steemit.com/money/@b0y2k/convert-your-steem-dollars-to-physical-money-to-spend-or-withdraw-anywhere

Convert STEEM to many other cryptocurrencies via ShapeShift
https://steemit.com/steemit/@shapeshiftio/official-announcement-shapeshift-has-added-steem-to-the-exchange

Why should I Power Up and not cash out?

Everyone has different priorities. Some may want to power up to increase their voting influence and curation rewards. Others may want to cash out. It’s strictly a personal choice.

If you believe Steemit has the potential for significant growth, you might think it wise to power up. Not only will you immediately gain more influence in the network, but it also has the potential to increase in value.

Is it true that payout money is coming from new investment in Steem?

Yes, but it is highly misleading to say so. When someone cashes out, he effectively decreases his investment in Steem. At the same time, another individual increases his investment in Steem. Therefore, it is not fair to only mention the "new investment" and skip the fact that simultaneously a current investment ceases to exist.

Payout money is always in the form of Steem tokens. For your convenience, and to hedge against price volatility, those tokens are packaged as Steem Dollars when the blockchain pays you.

STEEM has value since they are like shares in an enterprise which has a real market value. When you cash out, you sell those tokens (shares), and somebody else buys them from you. Therefore, these are just shares of a company changing hands: one person exits, the other takes their place.

Let's consider an example: If Mark Zuckerberg wanted, he could reward the most popular Facebook pages with shares of the Facebook. Those users could then cash out by selling their shares, and somebody would surely buy them. This hypothetical scenario is akin to the daily happenings in Steem, just on a different scale.

What determines the price of STEEM?

Much like how the price of a stock goes up and down, the value of STEEM varies, determined by buyers and sellers on exchanges.

Will I make a profit by powering up?

Powering up does not ensure that you will automatically earn a profit. Profit is contingent on how the price of STEEM changes over a given period as well as how much you earn as a content creator or curator.

Powering up does a couple things for you:

• Increases voting power and curation rewards
• Protects against dilution (15% protection compared to the running inflation rate)

How do I send money to another user?

• Click on your avatar to get the drop-down menu, and select ‘Wallet.’
• Click the down arrow where your STEEM or Steem Dollars are displayed
• In the drop-down menu, click ‘Transfer.’
• In the box ‘To’, type in the username of the account you want to send the STEEM/Steem Dollars to.
• Type your password to authenticate.
• Check your history to confirm your transfer.
  Check out this post for instructions with photos: https://steemit.com/steem/@steemrollin/steemit-how-to-send-another-user-steem-dollars

What are fees for transferring money between Steem’s three currencies and between other users?

There are never any fees for transfers within the Steem network. However, if you transfer Steem to an exchange and convert it to another currency, you will incur a small fee.


If you have any questions, let me know in the comments!

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