Some Thoughts On Steem

About a year ago, in the middle of the Reddit soap opera that played out last summer, I wrote a post about how someone could (and would) build something like Reddit on the blockchain.

A number of developers and entrepreneurs have done that and the one that has garnered the most interest is called Steem.

The community is still small and the links are still a bit all over the place. But things are happening at Steem and I think its worth paying attention to.

At the heart of Steem is a tipping system, called Steem Power, based on a crypto-currency called Steem. All of this runs on the Steem Blockchain.

Readers can buy Steem Power with Bitcoin and then they can tip posters who receive Steem Power. Steem Power can be converted into Steem through a mechanism I don’t really understand to be honest.

So unlike Reddit, where posters receive no compensation other than upvotes, on Steem upvotes are done with money.

Steem is traded like other crypto-currencies, and currently has a market cap of $287mm. That feels a little bit ahead of itself (Reddit was valued at $500mm a couple years ago), but markets go up and they go down. We will see where the Steem market cap goes from here.

Another thing that is interesting about this whole model is that Steem can finance itself, the cost of its team, an office, bandwidth, servers, etc by selling Steem vs selling equity.

This is the Decentralized Autonomous Organization model that many blockchain entrepreneurs are following today.

So if you like the idea of Steem, and want to back this company, all you have to do is buy some Steem, some of which you might be buying from the Company. And if you change your mind, you can sell your Steem and move on.

I think Steem is a really interesting experiment that may turn into a really nice business. The Steem founders are experimenting in multiple dimensions at the same time. They are trying a “paid” model vs a “free” model for curating a content discovery engine. That’s interesting. They are using blockchain technology vs some centralized system to build all of this. That’s interesting. They could finance this business via their users vs VC or something else. That’s interesting. And their users can participate in the value creation, if this turns out to be valuable. And that is interesting.

I am rooting for Steem. They have some things to get right and watch out for (including the rapid rise in the value of Steem which is concerning) and I hope they take steps to avoid the “dollar/hype cycle” I talked about in this post. That is one of the great challenges with this whole DAO model of starting and building a company. But someone is going to figure this out. The Steem founders have already figured out a few things which I am sure others will now emulate. And that is what is great about experiments, even if they fail. We learn something. And when they are done in public more of us learn something.


Comments (Archived):

  1. James Ferguson @kWIQly

    Hmm signed up – just to take a look.Found myself a little non-plussed – no sense of an answer to “why post here”, no sense of – articles I should read. Big sense of self-important, self-hyping contribution of non-valuable content. (Did see a funny pic)I imagine I simply “dont get it” – but a narrative would help.Maybe I am so outside target audience it doesnt matter ?Bottom line – Facebook and Reddit were sign up auths (I took reddit because I dont Facebook) – from this I imputed much about the likely content – had it confirmed and decided I will let my short-lived (or still-born) enthusiasm just wither and die.Maybe I am just an early pass – or maybe the value exists but needs to be spelled out to morons like me. ;)Happy to hear contra-positions (hope feedback helps what may, for all I understand, be a brilliant initiative)

    1. William Mougayar

      They have published a white paper that explains everything, but my advice would be to participate as a user, as that’s the best way to understand it by experiencing it.

      1. James Ferguson @kWIQly

        Thanks, William to be honest though i have yet to find any motivation to participate. I am happier to reduce noise and content (as your blog does through curation). I will not get wealthy publishing my own content (however brilliant it may be it is doomed to tiny nichehood), and I imagine my opinions to be not very mainstream (so generally of little value to others)So it may be true that >> the best way to understand it is to experience it,but first – what am i missing – why should / would I ?Does it solve any problems ? (IMO – changing who gets rich by running social media or changing how they get rich by changing technology are not problems that need solving).The saddest thing about social media is the tragedy of the commons – people no longer buy content (in a meaningful way) good media thus slip to low value common denominators and accelerate their demise.- Its a rush to the bottom I think.I still prefer a book to a kindle, a newspaper to a screen, a conversation to a blog and a greeting to a tweet.If someone could re-invigorate these markets they would have my backing – I am thinking cynically a good electro-magnetic pulse might serve us all well in many ways

        1. William Mougayar

          You never know. For example, you might get a meaningful discussion and more engagement there than by blogging about something on your own blog. At least you can try and see what happens, keeping in mind that the community is still small in relative terms, but seems quite engaged on certain topics.

          1. James Ferguson @kWIQly

            Thanks William – Not *wanting* to be a “wet sponge” on this.I guess no harm in putting something up there to see if it gets no response whereupon in Sherlock style I can claimIndeed I am SO boring, that everybody confirmed it ;)…

        2. Drew Meyers

          “I still prefer a book to a kindle, a newspaper to a screen, a conversation to a blog and a greeting to a tweet.”+1

        3. jason wright

          Post of the day

          1. James Ferguson @kWIQly


  2. lightnovelist

    Thank you, fred! Being a long time lurker, I was actually just going to ask for your and William’s opinions today about steem as my first ever comment.

    1. fredwilson

      welcome to commenting on AVC

    2. ShanaC

      Welcome. What do you think about steem

      1. lightnovelist

        I’m not too sure. I think it’s a great idea, but it’s extremely hard to implement it in a way that’s economically sustainable. There’s also a potential problem with most of the users being there looking to make a quick buck, and not enough genuine users who are using it like a real social platform.But if they can solve those two problems, I think it can do very, very well.

  3. William Mougayar

    I’ve been a big fan of Steem since their early days, and was invited to do their first AMA. My experience has been very positive and I saw the direct benefits in more ways than one. And it netted me real dollars and Steem Dollars.…One of the interesting innovations about what they are doing is that it’s the blockchain that administers the payouts and awards distribution to users. It’s automated via their algorithms and you can’t game it. Everyhthing is recorded on their blockchain. A key factor for their market cap rise is that they actually delivered their first payout in early July and users saw that it was real. (Disclosure, I have a relationship with them).

    1. lightnovelist

      Interesting. Since you’ve only made that single AMA, and no posts after that, I had thought that perhaps you decided that they had some fundamental flaws in their economics or something. Thank you for your insight, William

      1. William Mougayar

        If you search my name on Steemit, you will find 63 results with me inside content, or content by me; so I’ve been supporting them in a diversified manner, including upvoting posts, and not just posting my own.

  4. Dana Hoffer

    An author of a post should have the option to enter a “Read the Rest of the Story” button in the post stream. Pressing such a button should create a Steem payment to the poster from the reader. This would encourage the real development of value exchange beyond the contemporary concept of Upvoting (which seems like charity/do good).This “Read More” value exchange is familiar to many… it is the reason people buy a magazine, buy a book, download the book onto the Kindle/smartphone and so on. Steem sounds like a solid play… it will benefit from a more familiar value model… and the payoff is very large… a lot of detail “how to” bulletin board posts will start showing up on Steem and start rivaling YouTube… no small thing at all.

  5. Rui Alexandre

    I couldn’t use it at all; registered through FB, but couldn’t log in afterwards. 🙁

    1. fredwilson

      i had login issues too. i am waiting for the email login with SMS verification option

      1. William Mougayar

        I pinged Ned Scott, the CEO, and I’m sure he’ll respond soon.

    2. erichamm


    3. Jess Bachman

      Logged in through reddit… couldn’t re-login.

    4. Ned Scott

      Due to the speed at which signups were coming in, we had a registration issue with some of the faucet code. We’ve got a fix in and it should be working again. Thanks for signing up!

  6. Tom Labus

    Where is Jim Hirsfield? I’ll toss this in for him.”They seem to be gathering steam”.

    1. LE

      Jim is in a different time zone iirc. So he has apparently come to the (near correct) conclusion that there is little point (or fun) in posting if you can’t post early and get karma (upvotes) for doing so or even reply comments. And along the lines of the topic today I don’t think that nominal rewards would in any way change that behavior.

      1. PhilipSugar

        I don’t know how you keep track of people but your comment is right. When I am in London or Dubai I can have top ranked comments. In Singapore or Sydney…..down to the bottom.

        1. LE

          You travel a great deal so I am curious (since you are an American traveling) if you are more anxious because the random things that are going on in the world, recognizing that the chance of anything happening where you are is exceedingly slim.

          1. PhilipSugar

            No the worst thing that happened to me was a bad accident in the back of an Uber Black three months ago where we were T-boned by a pickup truck (our fault we took a left in front of her in Phoenix). She was doing over 60mph and hit my door. Spun us four or five times. My Macbook Air is literally bent from the impact. I am fine.I figure if I go that is what is going to happen.

          2. LE

            Holy shit!

          3. PhilipSugar

            Better than when I was hit by a person doing 45mph while walking on a corporate walking path.

          4. LE

            That’s scary and a freak accident.This is why all of this self driving cars is such bullshit. There are so many corner cases to consider.Musk is playing with the ‘reality distortion field’ with his claims (and then the tech press and bloggers follow that pied piper) but at least Jobs wasn’t playing with lives. They are all suckers for thinking this is in anyway possible in the near future. I see cases everyday where I know an algorithm wouldn’t be able to do what a human can (even with a human’s faults machines have faults just different ones than humans).This was an interesting read:

          5. PhilipSugar

            The only thing I will say is both were caused by human failure.Where she came up on the walking path she was looking at a map.Where he took a left in front of her I believe he was very tired and she was texting.In anycase I believe when your time is up, it’s up.

  7. Guy Lepage

    Definitely excited to here of this project and feel there will be more and more blockchain/decentralized based projects that will disrupt their incumbents announced in the not so distant future. Blockchain tech is not even close to getting warmed up. 🙂

  8. Assaf Shomer

    Why a new blockchain? Why not tip with #btc?

    1. pointsnfigures

      I think you will see all kinds of private blockchains, with all kinds of other cryptocurrencies. There will be spread markets between the cryptocurrencies, and eventually it will be machines that trade and rebalance them.

      1. awaldstein

        i’m certain you are right on this one.

      2. jason wright


      3. Mark Essel

        Wouldn’t that result in a sunk fleet if you chain all the ships together and one is flawed.I can see how it lead to more stability, perhaps at the cost of some forms of innovation (rules of joining the blockchain federation).

    2. Jason Harris

      Steem aims to have blockchain production every 3 seconds. I imagine bitcoin’s 15 minutes is too long of a tie period for this use.

      1. William Mougayar

        Not only that, but the Steem blockchain is configurable natively for their purpose, specifically. So, it would have been difficult to replicate its algorithms and operations on the Bitcoin blockchain.

    3. Dan McArdle

      No reason, aside from the people behind steemit being able to capitalize on the hype surrounding their yet-another-alt-coin.Check out , which is building a community/content engine using Bitcoin.

      1. Drew Meyers

        What problem is this solving for those consuming the content?

        1. Dan McArdle

          The idea is that by allowing creators to directly monetize their content, it’ll incentivize creation of higher-quality content, especially short-form (eg, single forum posts) content where creators rarely have any means to monetize right now. That’s good for consumers.

          1. Drew Meyers

            It’s only good for consumers, if they are willing to pay those creators for it, correct? Otherwise it’s just more content no one sees/reads. I’m not convinced there are many consumers looking for “more content”; content is getting thrown at them from every direction already. Sure, they may like slightly better content, but will they go out of their way to find it?

          2. Dan McArdle

            Think forum posts. Most of them are terrible, but there are some real gems. If a site/network pumped ad-revenue into rewarding posters, it could change the dynamic. And it’s amazing how much time and energy some posters put into their posts for free. Some information is *still* only available in fora. Think things detailed practical write-ups on how to change the head-gasket on a gen-4 F150 with the inline-6, or how to calm your 5 month-old down if he’s sick in the middle of the night. Really great content is out there, in a sea of junk. If content were prioritized/sorted/etc with a monetary incentive, *theoretically* the signal to noise gets better.But we’ll see. That’s all pretty high-level, and what happens in practice of course depends on the implementation details and minutia of the design decisions. is releasing soon (I think).

  9. pointsnfigures

    I just saw Interesting. Has a tipping engine as well.

  10. awaldstein

    I’ll play with this one.Feels interesting and tangible.

  11. jason wright

    the very recent Steem price pump has to have been an orchestrated play by the very few holders of the coin, and the price is now dumping. now is perhaps not the best time to be buying. the timing of this post i find somewhat surprising, but if we’re playing that game i might recommend other chains as long term bets.the Steem people have a tendency to ‘critique’ other nascent chains, as if they feel threatened by chain innovation from others.

    1. William Mougayar

      If you are referring to critiquing the Proof of Work scheme, PoW has many critics due to its excessive heat/power consumption needs, at scale. Steem uses a combination of delegated Proof of Stake and PoW. That said, each blockchain does its thing, and the Steem blockchain serves its community specifically. So, in my opinion, comparing blockchains to each other will become a subjective thing. Eventually it will be like comparing websites or Apps. They each have their purpose and merits.

      1. jason wright

        not really. the Steem team needs to focus 100% on getting its own issues sorted out rather then being distracted by their apparent need to spend time trying to point out the weaknesses (as they see them) of other blockchain is said that the Steem team hold 80% of the supply. now it’s on Poloniex. a scam in the making.

        1. William Mougayar

          The comparative comment is an old one. They are focused on their business.Where are you getting your information Jason? Be careful when you make inaccurate claims.

          1. jason wright

            BCT threads, which has its dangers i know, but it’s still a the 80% the inaccuracy?Dan Larimer accused Nubits of being a “ponzi”. not very nice behaviour.

  12. Jess Bachman

    So unlike Reddit, where posters receive no compensation other than upvotes, on Steem upvotes are done with money.” Maybe you haven’t heard of Reddit Gold, which is given to users by other users.Also, reddits unofficial compensation is ‘karma’, and anyone who doubts its power and allure, especially OVER money, is in for a rude awakening.

    1. William Mougayar

      The difference is that Reddit Gold is for the elite, but Steem rewards are for everybody.

      1. Jess Bachman

        I’m not really sure what that means. Reddit Gold is four dollars, and is given liberally to reward great comments.

        1. William Mougayar

          well, according to quora, there were only 36K Reddit Gold users last year, so that’s a very small percentage of the total Reddit users which is estimated at 230 Million. So, that’s what I meant. Very few users use Gold or are the recipients of Gold. Comparatively, any user on Steem has the ability to give and receive Steem points without paying anything.

          1. Jess Bachman

            Well the source for the quora post is projecting almost a million for 2016, similar to 2015. And in $4 chunks thats 250K portions, which would make sense if they have 230M users. As 90% just read, 9% comment and 1%.I’m not sure if Steemit can escape these power laws. Even if any user can give, in a vast majority of comments users are barely giving their 2 cents, literally. And if you look at the new content, its just swathes of “zero value” submissions. if you look at the real reddit compensation, karma, there is 25M unites of that created each day.To be honest, I’m not sure if tying something to monetary rewards is going to be a net win. It may work in the short and small term, but marketers will ruin everything, especially when there is a this dollar sign attached to posts.

      2. LE

        but Steem rewards are for everybody”For everybody” though has lower value in some respects.And this raises an interesting point. Maybe the idea is not to start off offering rewards to everyone, but to nobody, unless the mods determine that someone is truly valuable (for some reason maybe they are just a net celeb) [1]. That way you get beyond the “lawyer pro bono” effect (mentioned in my other comment).Of course this goes against the base idea. So maybe offer nominal rewards to everbody almost meaningless and then supercharge those rewards once someone gets special status. That sets up a competitive environment that makes people want to get to another level.[1] And by making certain people appear on the step and repeat next to internet celebs you also raise the value of the nominal money rewards you give them.

    2. Ned Scott

      To date, the models in the social media / rewards space have largely been tipping (e.g. Reddit Gold) or revenue share. Steem is different in that it borrows from the concept of Bitcoin mining. Steem is created at a set and specific rate, similar to Bitcoin, but instead of just paying for proofs of work, Steem also *must* be paid to authors and curators, which means anyone can show up and earn for the posting and up-voting they were already doing in other places (e.g. WordPress, Reddit, etc.).

    3. D.#dwards

      How can I pay my taxes with Reddit Karma?

        1. D.#dwards

          So it’s possible to do it via Reddit but I’ve never managed to earn any Reddit Gold. I didn’t even know it existed. Honestly, the blockchain way just seems safer, less centralized, easier to trust.

    4. jason wright

      and Steem has just been added to Poloniex. what a coincidence of timing, or am i being gamed?- reputation is hard won and easily lost.

  13. kevando

    Still blows my mind something like this hasn’t integrated with a browser..

  14. charlieok

    I’m curious how the content moderation (e.g. should this comment be removed) part works. Is that done by employees of Steem? Or is that also in the hands of a decentralized algorithm?

    1. William Mougayar

      User down votes will identify spam or offensive comments but by nature it is a censor-free community. Like any social algorithm, the good stuff rises to the top.

  15. LE

    There was a site that tried to do something similar by paying people (in some way) for writing reviews. The monetization was by way of advertising (iirc) when it started I don’t know if that has changed or what it is doing today. It was angel backed. From memory this site has been around for maybe 5 or 6 years (could be longer). It didn’t take off because the rewards didn’t rise to the level and actually worked against wide spread adoption. [1] Could also be execution but I tend to go with the human nature underpinnings.[1] There is some psychological principle which says people are more likely to do for free something that they would turn down low or lower pay for. An example of this might be an attorney that would rather do pro bono work (for free in other words) rather than charge $150 per hour for the same work. Or you might help someone move for free but if they offered you $10 per hour you would think you weren’t being paid enough.

  16. Richard

    Feels like a digital Herbalife

  17. Demian Brener

    Great post, Fred. This model differs from Joel’s blockchain application stack, where you can leverage bitcoin’s blockchain for network effects and security. What are your thoughts on this? Do you think these two models can coexist and, if so, do they serve different purposes?

  18. Divraj Jain

    yours network with btc , akasha with ethereum and steem , soon we will see a blockchain platform reach scale. I see them driving attention away from twitter , forums and fb

    1. William Mougayar

      Well, in the case of Steem they feed into Twitter and Facebook, so it’s a symbiotic relationship.

      1. Divraj Jain

        if quality content is posted and discussed / voted on steem first naturally time / attention spent on steem will be greater, steem will become the destination. FB and Twitter are just a distribution strategy for steem articles.

        1. William Mougayar

          Good points.

  19. Kirsten Lambertsen

    I think something’s sidewise with the link in the post. This works Ah, you still have to go to from there, which is apparently falling over under the weight of all this AVC traffic?

  20. Kirsten Lambertsen

    Here are the founders when they were guests on Wayne’s World…

  21. ShanaC

    This seems uber complicated for certain subreddits (I’m thinking ones that are therapeutic and member driven, or pure community, like free random cheap gifts from your Amazon wish list). They can’t move to a cash based system, because thier community dynamics would be so disrupted that they would stop working. Other places may become even more far gone and problem driven (like awww, which has seoer spam problems in the background). Cash means losing other incentives potentially

  22. Kirsten Lambertsen

    OK, I finally got in. Fascinating.This looks a lot like the kind of thing my old friend Chris Kitze tried to launch since forever. Ever since Internet 1.0 he’s imagined a place where people could make micro-coin for their content, but in enough volume as to actually make a living.First he tried with Yaga (which was like YouTube before YouTube) and then BeforeItsNews (somehow, I have a feeling a few regulars here are familiar with it). I spent time working at both.What I saw both times was that legitimate participants were quickly if not immediately drowned out, or just grossed out, by the shucksters.So, my initial gut response when arriving at Steem may be heavily colored by my prior experience. But it feels a little sketchy, get-rich-quick-y, ishy. Nonetheless, I’ll probably give it a spin for a while 🙂 I’m rarely in this early on anything, so it’ll be fun to get on the ride.

    1. Drew Meyers

      We thought hard about enabling micro donations on’s welcome kits to add an incentive to put travel advice/recommendations into the system. But there is still a massive chicken and egg problem in most of these platforms…not enough people to leave tips. And not enough content to get an audience. I do think, eventually, someone will figure it out… but not sure who or when that will be.

      1. Kirsten Lambertsen

        Yeah, at both my aforementioned gigs, we seeded it with a special early adopters program. So, early contributors were positioned to make more money than folks who came along later.But, I also observed that there were a lot of people at both sites (more so at BeforeItsNews) who weren’t even particularly motivated by the money. They were in it for other reasons, reasons that I would now consider to be really suited to game mechanics.It seems like smart, strategic and thoughtful use of game mechanics (as in, way beyond leader boards and badges) can be a great way to spur growth of content-maker/content-consumer ‘marketplaces.’

  23. ShanaC

    Also, looking more deeply at the site (and their content)a) they had a theft/scam/hack. b) they seem to be confusing the idea of owning cryptocurrency, owning shares in a company (a person or two was angry about Oculus Rift and was comparing Steem and Steem Power to Oculus Rift)c) There seems to be confusion about what money is and what wealth/owning an asset is, what value is, and how they are interconnected. This is a common problem, but with cryptocurrency, especially a content driven cryptocurrency, that confusion could backfire really quickly if the market for the designer cryptocurrency compared to liquid money goes sour, especially for someone stuck on what the value of his/her content is/communal contributions are (… )d) the whitepaper, and the voting/paying to vote system, and liquidity. (whitepaper:… brief expansion on the whitepaper:… )from the expansionWhich brings up the next issue: Why is there such disproportionate voting power? Said another way, why do whales have so much influence? Well, there’s a technical answer and a practical answer. The technical answer is spelled out quite well in the Steem whitepaper (anti-collusion, etc.). The practical answer is rather simple: Those with more to lose should have a bigger say in what happens than those with less. Perhaps the whales were wrong in their assessment that the make-up tutorial represented a potentially huge new market for Steem? If so, then they will pay a much larger price than minnows for their poor judgement in upvoting it so. And…that’s as it should be. That’s how self-sustaining and self-regulating systems work. Put too much decision making authority in those with little to lose, who are not sufficiently vested in the system, and…well…you end up with a fiat economy. Head’s they win and tails you lose. (emphasis theirs)from the paperA proven system for evaluating and rewarding contributions is the free market. The free market can be viewed as a single community where everyone trades with one another and rewards are allocated by profit and loss. The market system rewards those who provide value to others and punishes those who consume more value than they produce. The free market supports many different currencies and money is simply a commodity that everyone finds easy to exchange.Both of these statements have underlying ethical and philosophical views on the world that may or may not be true (and I would guess as much, not true, or argue that the underlying philosophy is not true). However, the community is very manipulatable and will grow as long as it stays within a localized set of people who likes the ideas underpinning the community as well as surrounding, interdependent ethos. Once other less strongly tied communities in the network are drawn in, you probably can make money by both the cryptocurrency if you cash out regularly and by forcing traffic elsewhere (and a run of ads to monetize/some other method), but the underlying community value and the system may blow up shortly.Basically, if you can have two sets of reddit users who have very strongly opposing views on one very important points of politics and make reddit war on each other, why would you not assume it couldn’t happen on STEEM, and it would not eventually affect the currency?

    1. Paul Robert Cary

      Great analysis. Unfortunately on Disqus I can only pay you in eSteem.:)

  24. DesignedToFail

    Interesting idea, bad implementation. (Hint: or are dirt cheap sweatshops)I predict it will succumb slowly over the next couple of years.Blockchain is a technology; it’s not a business but it can be used by businesses. A cry of “Come for the technology!” in a consumer-oriented website is a prelude to a swan song. Technologists tend to suffer from hubris when it comes to business because they are very clever in one domain that is only part of the “total package” needed to successfully run a business.Cain (the farmer) killed Abel (the shepherd) then Chase built the first city. 1.0 was pure Wild Wild West (shepherding). The current iteration Reddit is between shepherding and farming. Reddit is like Yahoo 15 years ago, big and full of potential but languishing under bad management. (Let’s break open the piggy bank to buy and Geocities and then do…. nothing with them! Let’s hire CEOs who have no coherent vision whatsoever and watch them flail! It was bizarre to watch).Reddit is still kind of Wild Wild Westy but becoming more stable (like a farm). What is needed? A place just like 🙂 Man this place is smooth as silk. It’s a pleasure to visit. But comes at a very high cost: urbane curation. Curators are like the maitre d’hotel pour le web.How do you monetize to pay staff and curators? The normal ways: either donations (large and small) like Wikipedia or commercial revenue (such ads, product placement, interviews) . Of course relying on ads inevitably leads to bias and a loss of credibility. But for every one Wikipedia there are myriad paid sites because businesses demand a way to market their products and services.

  25. Fran Strajnar (@techemist)

    How to democratize the $65B publishing industry (with examples for steemit):

  26. LE

    Not for sale is almost always a ploy to keep out the nudniks and pains in the asses who aren’t in a position to offer big dollars. It’s kind of like at the high end car dealership where they tell you you have to make an appointment for a test drive.