Making Money with Steemit (Steem Dollars and Steem Power explained)

A lot of fuss has been going around SteemIt in the past few months. Steemit is kind of a social news platform that pays users with digital currency called Steem for posting and upvoting good content. Think of Reddit, but with a nice add-on of getting paid for your participation.

The problem as I see it with Steemit, is that the concept is just too hard to grasp. There are too many confusing concepts. For example, you have Steemit which is the platform, Steem – the digital currency, Steem power, Steem dollars and it all becomes one big mish mash of unexplained terms. In the end the average user who wants to get started with Steemit is left confused and leaves the platform.

In this post I will try to make some sense out of these terms and the platform in general, and help you understand how to get started with Steemit if this is something you’d like to pursue.

A bit of history about Steem

Steem (the digital currency, not to be confused with Steemit the website) was first described in a whitepaper in March 2016. Steem and Steemit were in Beta until July 4th 2016.  Once the platform (Steemit) became live and payments were made to the contributors, the currency saw a 1800% increase in its price from $0.24 to $4.63. However, since then the hype dulled down and the currency has slowly declined back to $0.28.

This explosive growth and fast demise of the currency made people suspect Steem was perhaps just another Pump and Dump scheme. In such a scheme the founders and early adopters drive up the currency value through media hype and then sell off their coins at a huge profit. The people who get hurt by this are the late joiners who are stuck with a lot of coins that lost their value.

The Steemit platform however has grown immensely in the past few months. Here’s how the traffic on Steem grew according to Alexa’s web ranking:

In all fairness I haven’t used Steem or Steemit (the platform) personally, and I’m still just trying to figure all of this out. This article is the first step in making sense of it all…

Steem, Steem Dollars and Steem Power explained

In order to make some sense of the whole ecosystem I started digging up YouTube videos about Steem and the Steemit platform, this is probably one of the best ones I’ve found that makes complete sense:

If you don’t want to watch the whole 12 minutes video here’s a quick breakdown of what’s explained in it:

Steem – Is the basic cryptocurrency used to power this whole system. It’s like the bricks used to build Steem Dollars and Steem power (will be explained in a moment). You can buy and sell Steem, speculate on it’s price or convert it to Steem dollars and Steem power. But if you’re not looking to speculate on the price or if you’re not cashing out your Steemit earnings, you don’t need to deal with Steem directly.

Steem dollars –  This is the currency of the Steemit platform and is also known as SMD. This is what people send to one another when they upvote posts on Steemit. The reason it’s called Steem Dollar is because 1 Steem dollar represents any amount of Steem required to reach 1 USD depending on the exchange rate at that time (more or less).

However unlike Steem, you can not use Steem dollars outside of the Steemit platform. You will first have to convert your Steem dollars into Steem and only then you will be able to convert that Steem into Bitcoin or USD.

The reason Steem dollars were created is because the founders wanted to peg the value of Steem in some way to the US dollar, so that people will be able to trade inside Steemit but not be afraid of exchange rate fluctuations. This way if you trade, for example, 100 Steem dollars you know you’re giving away 100 USD worth of Steem.

The Steem dollar is just an IOU, a promise – if and when you decide to cash out of your Steem dollars, you will get however many Steem it takes to get to that value in USD. There’s also an interest acquired on any Steem dollars left in your account (currently 10% a year). This is done in order to incentiivize people to leave their Steem dollars in their account.

Steem power – Also known as SP in short, is basically a token symbolizing how much influence you have inside the Steemit platform. If you have a lot of SP your upvotes will count more and will award different authors SP and Steem dollars as well.

Powering up – means getting more SP either by upvotes or by buying it via Steem.

Powering down – means liquidating your SP into Steem.

SP can be powered down for Steem in a long process that takes 2 whole years. SP is considered as a “long term investment” in the Steemit platform. That’s why other than taking a long time to cash out it also bares a very high interest rate, encouraging people not to power down.

Why is steem’s price going down?

Even though Steem’s future seemed very bright once it launched, shortly after the price started a steady decline. The question is, if Steemit is such a great platform how come the price is continuously falling?

One explanation that comes to mine is that price changes reflect the supply and demand for a specific currency. When price goes up – there are more buyers than sellers, when it goes down – there are more sellers then buyers. So before Steem was live there were no sellers at all since the platform was in Beta. People could only buy Steem but not cash out on it. So people “bought into the dream of Steem”, investing money and time to create awesome content. These people were getting paid for their content but they couldn’t cash out on the money.

Once Steem became fully operational there was a rush of Steem users to cash out their Steem Dollars into Steem, and then cash out Steem into Bitcoin or their local currency. That’s why in my opinion the price has been falling ever since the launch. People don’t have any actual use for Steem since it’s not accepted anywhere, so once they get some Steem in their hands they quickly trade it. Combine that with the fact that there’s no real incentive to invest in Steem other than speculation and you get a larger amount of sellers that drive the price down.

One of the main reasons that Steem didn’t fully collapse after launch in my opinion is due to the fact that not all of your Steem can be traded at once. Steem power has a limitation of 104 weeks until you can cash it all out, so this stopped the steep decent of the price and made it a bit more manageable.

Should you start blogging on SteemIt?

I guess that’s the million dollar question. One of the good things about Steemit is that you can basically “copy and paste” old stuff you wrote in the past. So if you’re already a blogger or have some good content you’d like to share it may be worth checking it out and seeing how it goes. Just go to Steemit, open an account and start posting.

Personally I feel that even though the community has grown immensely there’s still not a lot of money to be made through writing on the platform. I think the idea is great – people need a decentralized Reddit where you can get rewarded for your efforts, but the execution is still far from complete. The platform is very complicated to grasp and I still don’t understand how much and when will I get paid for posting or upvoting content.

Luckily enough, one of our writers, Brian, has been generating a reasonable income stream through Steem and he was willing to share his experience on the platform today. Take it away Brian…

Building An Audience on Steem

So how can your rack up views and upvotes on Steem? First, when it comes to publishing online, you have to accept the fact that it can be hit or miss. This is especially true if you haven’t already built up a large following. There’s no surefire formula that I know of to ensure that every article is going to be a smashing success.

However, there are some things you can do to increase your likelihood of success. Steem is basically a large collection of smaller communities, or more accurately, streams. Overall, the layout is somewhat similar to Reddit and there are various “tags and topics”. In order to attract views and upvotes you have to get to know these topics and the types of readers found in each mini-community.

By and large, the topics are self explanatory. “Libertarian”, “Anarchy”, the general “politics” tag, which seems to have a progressive left lean. “Life”, “food”, “art”, and “health”, are some other popular topics. When you’re selecting your topics both consider your own interests, and also take some time to review past articles that were successful and the overall vibe of the community. By studying past articles, you can see what works. By getting to know the individual community, you’ll have a better idea of how to appeal to and reach out to readers.

In my experience (and research), two types of articles tend to enjoy the most success. Shorter commentaries on current, breaking events, and longer form intellectual pieces that really dig into a topic or issue, and are generally more “ever green”. To be clear, however, you shouldn’t take this as a hard rule, but as more of a general reflection of one writer. You should do your own research and be willing to experiment as you may uncover your own insights.

If you go the commentary route, you’re going to stand the highest chance of success if you’re the first one to analyze an issue. The analysis has to be substantive and should make a point or argument. If you just repeat what Reuters is writing on an issue, you won’t be offering as unique of content, and thus may not get as many upvotes even if you get reads.

With longer form topics you really need to focus on adding value to readers. Write something controversial, or consider an issue from a different lens. Another option is to offer some really stellar and in-depth research. Many of the articles that get to the top of Steemit are longer form, and more in-depth. These critical analysis pieces are both engaging, and offer readers a lot of value.

As for topics, you have to pursue your own interests. The great thing about Steem is that there are so many different topics, and so many readers interested in these different topics that you can almost certainly find the right topics to write on. Dieting, personal reflection, creative fiction, politics, there are many different options.

What’s important is carving out your own niche, and pursuing your passions. Also, spend time trying to create catchy, simple titles that draw readers in. And don’t forget to upload high quality pics. To be honest, Steem is a bit of a hassle when it comes to uploading photos, so some try to skip this step. Big mistake. The extra minute or two you spend uploading a pic can go a long way towards drawing in readers.

Beyond that? Be consistent. Focus on quality. Comment on other people’s posts, and follow them. In turn, they might follow you. Being active in the community will help you build your own name and help you build an audience. Over time, an extensive number of followers will make it easier for you to repeat success.

If you’ve had your experience with Steemit I’d love to hear about and perhaps learn from your experience. Let me know in the comment section below.