User Tips: Where Does The Money Come From

9 months ago
3 Min Read
610 Words

Simple concept understanding of how things work is sometimes enough. If you are not coding and just starting to understand Crypto and more specifically Steem, you likely have more questions than answers.

Concept Level Understanding of Where the Money Comes From, this post is a rerun. I made this post when SBD was still printing, and I am leaving in the references because I think SBD will soon be printing again.

For as long as there has been crypto, people have been asking . . . Where does the money come from?

This is meant to be a simple concept guide only.

When enough people decide something has value or is tradeable, people begin buying and trading it. When you purchase something you give it a value. If I buy Steem for a $1.21 I have reaffirmed the value of Steem is $1.21, at least it is worth that to me. When enough people think it is worth $100, it will be worth $100, because that is what they will be willing to pay for it.

Why would someone buy a digital token? One common reason is "As an Investment". I am going to buy it at $1.21, because I think in some time frame that is acceptable to me it will be worth more than $1.21. When you take Fiat and put it into crypto and buy and sell the crypto, you are monetizing it, which is just another way to say, you are exchanging the tokens for a currency that has monetary value.
Each day the blockchain creates and distributes new Steem with the help of our posts and our votes.

When you vote on a post in a way you are creating new Steem and SBD. This week's reward pool is roughly according to @banjo. The reward pool is distributed by votes. The value of my vote is based directly on the amount of Steem Power I hold. If I hold a lot of Steem Power I get to have a greater say in the distribution of today's reward pool. If I hold less, I get to distribute less of the new Steem the blockchain created. As I read through the posts, when I click upvote I am saying, I want to give some of the new Steem to this Author. Depending on the power and number of votes the blockchain calculates the value of each post. Down-votes or flags subtract from the amount allocated to each post and upvotes raise the value.

After 7 days the Steem Power and SBDs (when they are printing) earned from the post goes into your wallet where you decide if you want to keep it, spend it or sell it. If you decide to sell it, you will have to decide what is the amount you will accept for the Steem. You enter that information on the exchange and when someone is willing to pay the amount you set for your Steem, the value of Steem has once again been set.

Generally speaking if no one wants to purchase or trade Steem the value goes down. The more people who want to buy it the value goes up. Since we create new Steem each day, it is important to create demand for Steem and SBD.

this chart represents what the current price and volume of Steem is as trading on Bittrex in 30 minute candles.

If there are no buyers for Steem and SBD the value goes down.

I am always looking for simple conceptual ways to describe SteemIt and Steem to people. Questions, Thoughts, Feedback.. I would love to hear them in the comments.