One currency, but two smart contracts

What is difficult for some users are the different forms of representation of the currency of Steemit.

On the one hand, the digital currency Steem fulfils all classic functions like it serves a currency or digital currency, i.e. Bitcoin and Co. On the other hand, Steem can also be used for two different types of Smart Contracts, depending on the individual benefit.

The first Smart Contract is called Steem Power and aims at the influence of an individual in the Steem network. Steem Power thus provides voting potential, which defines the voting weight of an individual participant on steemite. The more Steem Power someone has, the more his voice counts on Steemit.

Scott explains that he wants to build a mechanism that offers users a long-term perspective for the project, while allowing others to participate in speculation. In the white paper, Steem Power is primarily presented as a long-term investment, similar to a venture capitalist.

Even if users can invest their money immediately, it takes some time to expect returns on the paid-in capital. In the case of Steem Power, 104 weekly payouts would be required to make a full exchange into the base currency Steem.

The second cryptosoft Smart Contract is called Steem Dollars

This is a type of bond or debt instrument that promises the cryptosoft investor 1 US dollar in the form of Steem at a certain point in the future: The repayment takes place on seven consecutive days. This repayment modality is intended to help reduce volatility and prevent arbitrage attacks from being exploited. If it were possible to exchange the Steem Dollars directly into Steem, the user could generate an advantage by exploiting the price differences. This could lead to the person in question receiving more than the one US dollar provided for in the Smart Contract.

Steem Dollars should serve as a reliable debt instrument, with Steem Dollar owners not participating in Steem price increases. Thus, if the exchange rate of Steem during the exchange phase is one US dollar, the user receives one Steem for every Steem Dollar. However, if the exchange rate of Steem rises to 2 US dollars, the person receives only 0.5 Steem for each Steem Dollar.

As compensation for the lack of Steem Dollar exchange rate adjustment, the owners receive interest. Accordingly, an owner of Steem Dollars would be compensated with an interest rate of 10%, in the form of Steem Dollars.

Earn money with letters and votes

There are two ways to earn steem on Steemit Steem. The first possibility is to write a blog post. If the post gets votes, the number of steems the author gets for his blog post increases.

However, not every vote on the platform corresponds to a certain amount of money. Instead, the revenue depends on both the number of votes and the Steem Power behind each vote. For example, if a user has 1,000 Steem Power and another 10,000 Steem Power, it is understandable that the latter has more influence on the content of other users.

As a result, the authors are very anxious to attract the larger owners of Steem Power in order to generate upvotes. A vote by Larimer or Scott would raise the value of a posting to several 100 US dollars, as many would follow the post.

To support this type of voting, there is revenue in the form of Steem Power to support high-quality postings. If a post is successful, you get more Steem Power than if it performs poorly. This should encourage you to vote only for high quality content.

Furthermore, not every vote from the same account is worth the same amount. If many different contents are voted for, the strength or weighting of each vote is reduced depending on the time that passes between the individual votes.

There are two different types of pool yields. The first earnings are transferred after about 12 hours of posting. These yields are denominated in US dollars and are equally divided between Steem Power and Steem Dollars. Voters receive their earnings exclusively in Steem Power. The second tranche of the pool proceeds will take place one month later.

Proof of Stake
A blockchain without a corresponding security concept would have no chance to gain the trust of the users.

Steemit gets its security through a delegated proof-of-stake algorithm, first developed for Larimer’s BitShares project and a modification of the classic proof-of-stake algorithm d