Is First Decentralized Social Network Still Relevant: Steemit Retrospective Review

21.05.2020

The Web is all about generating and consuming content. While during the web 1.0 era site owners had to hire content creators, the arrival of web 2.0 streamlined the process. Users started generating and consuming their own content and you only needed to give content creators a platform to profit off their activity. For decades centralized social networks made billions of dollars for their shareholders, allowing only a fraction to trickle down to content creators.

The nascent decentralized media has many goals in mind. From privacy protection to fighting against censorship and digital tyranny. But a fair and viable monetization model is the crucible of it all.

As promised in our previous articles, we will start reviewing the existing blockchain-based social networks, to raise awareness of their existence and to help our readers pick up one to try out. While we understand that Facebook, Twitter, YouTube are too big to drop at this point, we still think it pays to also support the alternative media. This is the only way we can bring meaningful change to the social networks’ landscape.

As far as we know, Steemit was the first blockchain-based decentralized social network in existence. It is only fitting that our opening review will be dedicated to this industry veteran.

What Is Steemit?

Steemit, Inc. is a New York-based private company, created by Daniel Larimer, co-founder of BitShares and EOS, and Ned Scott, financial analyst, and crypto enthusiast.

Initially launched in March 2016, the platform attracted more than a million registered users over time, which is spectacular for a blockchain project but somewhat underwhelming for a global social network.

UI-wise Steemit essentially resembles a bulletin board website, an old and well-tested format today most notably represented by Reddit (or 4chan if you’re that kind of person). But instead of subreddits, Steemit uses a tag system, where people can find content by searching for relevant tags.

Like Reddit, Steemit’s lifeblood is the upvotes. But on Steemit the stakes are real, as upvotes lead to actual financial rewards paid in the platform’s native cryptocurrency, Steem. Each post generates a monetary reward for its creator dependant on the number of upvotes and Steem power of each upvoter. Users are also rewarded for curating (discovering and upvoting quality content before it becomes popular). So upvoting a post that gets popular will also garner you a fraction of Steem.

Steemit also includes a host of applications operating within the Steem ecosystem (explained below), such as d.tube, a decentralized video-sharing platform. akin to YouTube. Similarly to Steemit d.tube relies on Steem-powered upvote economy instead of ads.

How does it work?

Steemit sits atop the Steem blockchain. There are other platforms that use Steem, like d.live, d.sound, IPFS protocol.

Steem supports three types of currency.

Steem (STEEM)—Steem is the native token of Steem blockchain. Steem can be converted to both Steem Power and Steem Dollars.
Steem Power (SP)—Steem that has been committed to a 13-week vesting schedule is referred to as Steem Power. Steem Power creates an incentive mechanism where holders take a long-term interest in the project. Vote strength and curation rewards are influenced by the amount of Steem Power held.
Steem Dollars (SD)—A token pegged to the US dollar, not unlike Tether. This is the main monetization vehicle on Steem.

Steem is not being mined but instead, tokens are drawn from the so-called Reward Pool and then distributed among the users for their contributions. Reward Pool generates tokens according to the annual inflation, which decreases each year, thus simulating token’s scarcity.

A Wee Catch

On paper, Steemit offers the creator up to 75% of the sum their posts earned (25% go to curators). In reality, this reward is paid in two parts: 50% Steem power and 50% Steem dollars. You can choose to receive 100% in Steem power, but can not have 100% in Steem dollars. So you only get half of what you earned in “cash.”

Another not so obvious catch is all content being monetized only for 7 days after being initially posted. After that posts will still accumulate upvotes, but will no longer be rewarded with Steem.

Pros and Cons

There are many subtle but profound differences between Steemit and the legacy social networks, like Reddit.

Here is our comprehensive list of Pros and Cons.

PROS:

Most importantly, participation in the community is financially incentivized.
No ads.
Everything you ever post is indefinitely stored in the blockchain. This bears two important implications:

1. Users usually put more thought into each post because they know it can not be deleted at a later time.
2. Content censorship is only possible via a hard fork.

Steemit is community-driven. Despite it having a dedicated dev team (until recently) all important decisions are being voted on by all users with vested Steem Power.
Transparency and open code.

CONS:

Google is apparently not very fond of Steemit. Web searches do not rank Steemit results particularly high even when searching with perfect keywords.
Steem is a cryptocurrency and thus susceptible to volatility. Token’s volatility is great for traders but a bane to those who actually want to use the underlying product.
Curation system being dependent on Steem Power is a bit underwhelming for newer users. Whales who control the majority of Steem Power have almost unlimited control over what content gets rewarded.
Steemit is less user-friendly then legacy social networks. Users who are not familiar with cryptocurrencies will find interacting with Steem blockchain difficult. Not to mention that a forgotten password means your account is lost forever.
Justin Sun. Just kidding. Or am I? Tron Foundation has acquired Steemit in February 2020 and ever since the platform has been in turmoil. After Tron’s takeover, Steemit’s original dev team left the platform and most Steemit whales also chose to go their own way.

The Sun vs. Steemit whales situation uncovered another possible downside of Steemit—DPoS. As Sun weaponized the ninja-mined stake and enlisted several large exchanges which hosted sizeable sums of STEEM, he was able to overtake a seemingly decentralized platform in a matter of hours. Despite the exchanges backing down immediately after the community backlash, the whole scandal left a bitter taste in the community’s collective mouth. Which eventually resulted in a community-initiated hard fork.

Conclusion

Steemit is certainly not in a position to rival the legacy social networks when it comes to both outreach and monetization. Steemit’s active userbase size has been more or less stable for the last few years and it’s hard to say why it is not growing. Difficult to get started for people who are not into crypto? Small and very specialized community? Reddit does it better?

One thing’s for sure, Hive hard fork is likely to actually decrease it and the new overlords at Tron may actually choose a somewhat different direction for the platform, which remains to be seen.

That being said, it’s a decent place to make some ancap friends or just consume topical content of above-average quality.

Stay tuned for our Mastodon review next week.

This article is a part of our Occupy the Internet series, where we review the current trends in the nascent decentralized web and cover the burning issues of privacy and censorship.

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Tags: blockchain, social media, Steemit