Steem Cryptocurrency Investment
We signed up at Steemit.com and bought 1 Bitcoin of Steem. After watching random youtube videos we stumbled onto the video below. The video is Jeff Berwick’s interview with the creators of Steem and how he made over $15k from his first post on Steemit.
After watching the long video and checking out steemit it is easy to get really impressed with the idea. Initially it seems like a much better version of Reddit but then with all the steem applications (Youtube, Instagram and Twitter application equivalents) it gets even more impressive. From looking at these we decided to comment and write some posts that we would normally do on Reddit. Overall the content quality was pretty good (although sometimes spammy) and it was a more positive environment than reddit.
If you are already (or are about to sign up) on Steemit you can follow our account here steemit.com/@btcmillionaire 🙂
So what is Steem?
We will not go into any technical depth as the whitepaper is a better resource for that but below are some high level points.
- The first social media cryptocurrency.
- It has the ability (and many are up) for multiple social media platforms to be built on top of Steem (think Facebook, Twitter, Instagram, Youtube Reddit, Snapchat, Pornhub etc).
- The Instagram (called steepshot) & Youtube (called Dtube) versions are up and being improved as you read this.
- At the moment Steemit.com is like Reddit except you get paid when people upvote you.
- It has instant transactions with 0 fees.
- Half of the blocks released go to the miners and the other half goes to content creators and curators.
- The amount of Steem available inflates at 9.5% a year.
- Remember Steemit.com is not Steem, but just an application of the Steem blockchain.
How does Steem get paid to authors and curators?
Again the white paper is a better reference for all the details, but here is a basic overview:
- There is currently about 267,000,000 Steem in circulation and Steem can be actively traded on Binance or another exchange for other cryptos.
- Steem can also be converted into Steem power. Steem power is like owning a share in the ecosystem.
- The more Steem Power you have the more Steem (or money) you give people when you like their content, comment or post your own content.
- People also get a reward for curating (or liking) the good content first. This allows the best content to come up in everyone’s feed.
- You get paid 7 days after you post your content in Steem dollars which you can convert into Steem Power or Steem (that you can sell for other cryptocurrencies and cash if you want).
If it all sounds confusing, setup an account at steemit.com do some posts, make some Steem and you will get a feel for it. Remember it is completely free to join so you have nothing to lose. There is also very good content written on explaining Steem better under the tag steemit.
If quick high level videos are your thing then check this out for an intro into Steem:
Why did we Invest in Steem?
As opposed to being overly verbose here are two main reasons:
- The platform is extremely useful for sharing content. There is value in getting the targeted Steem audience to your site (this site being crypto related) and maybe some value in backlinks (helping with SEO).
- Speculation on the price going up in the future. Comparing the current model of social media with the Steem model we are blown away. Facebook, Twitter, Reddit and all the others, basically use our content for free and sell it to advertisers, whereas Steem is kept with the content creators.
Where does the value in Steem come from?
At this stage it can quickly jump out of the screen and appear as a Ponzi scheme as there is essentially no income going into the system (like the other social media platforms) in the way of paid advertising. However, you only need to look at the early days of any social media platform and you can see the potential.
Generally only after they reached multi billion dollar valuations did other social media platforms start to monetize their platforms and bring in money from advertising. I see the same thing happening for Steem. With over 1 million user on Steem and millions of views a month that traffic has to have big value!
So then how do you value Steem?
Arguable the following factors need to be considered:
- The number of users and the growth of the user base.
- The potential of other social media platforms (currently being developed) like Zappl as the Twitter competitor for example.
- The quality of the team developing the applications.
Once those factors are looked at it comes down to comparing them to the historical reference points for Facebook, Reddit, Youtube etc. So Peter Thiel originally invested in Facebook for around 10% equity when it had less than 1 million users for around $500k and the rest is history.
From what we have found there are over 1 million accounts on Steem as of today. The market cap of Steem fluctuates a lot but is worth hundreds of millions as of today. This means that going on the metric of users alone it is probably on the high side of price valuation. However, it is growing fast and the potential for the other applications going viral is there.
Generally when evaluating the price of an asset we would add up all the potential future cash flows and apply a discount based on the minimum returns we need to invest in that asset (discount cash flow). So valuing Steem is extremely difficult as it is very early stages and the potential future cash flows are very obscure.
What is the downside risk with Steem?
The downside risks we see are:
- There are currently about 1,000,000 users and the market cap of Steem is over $300 million meaning it is higher valued than other social media platforms at that user base level.
- The growth could slow down, stop or go backwards.
- Automated posting bots could destroy it.
- The other platforms like Dtube might not be successful.
- It may be hard to get people to change from other social media platforms to Steem.
- The code may not be solid, and it may be hacked or have issues.
- How will it eventually be monetized? Will advertisers use it (or other methods)?
Voting Bots Explained Further On Steem
Currently our Steem balance grows by about 2-4% a month by investing in Steem voting bots. So not only does our Steem balance grow by content creation and the value of Steem increasing but we also get income from Steem voting bots
So why are there Steem voting bots?
There are a lot of voting bots (visit MinnowBooster to get a better idea) on steemit that can help users make the trending page on Steemit. This attracts more people to like your content (and make more money) people can pay Steem voting services to upvote their content and make it more visible. In a way it is almost like a facebook or google advertisement payment.
Now the Steem voting bots need to have a lot of Steem to give value to the people paying for it. As opposed to holding a huge amount of Steem in a voting bot account Steem users can delegate their Steem power to other accounts. You can use this steem delegation tool to check out what accounts are doing it and also delegate Steem to other people here.
Delegating steem is a really cool feature as it is completely in your control when you take the Steem power back and what you do with it. This means you still hold onto your Steem and it is safe, but you get to enjoy the benefits of lending it out to voting bots if you choose too.
Most voting bots pay the delegators anywhere from 80-100% of what they make from people using their services and they pay you daily. So they are definitely worth checking out!