At some point, beyond the blogging on a blockchain aspect of SteemIt, it can become quite complex. How to get the payout out, for instance. And what cryptocoins are. Or how a service like Blocktrades dot US can be used to exchange Steem Backed Dollar. But a lot of fellow Steemers are allready lost in the actuall payout system. The dollar sign, the potential payout, a lot of votes but zero value, it can be quite confusing. In this post I will do my best to explain some of that part of the SteemIt realm.
About two weeks ago I allready explained about how Steem on Graphene is in fact a census suffrage stakeholder company on a blockchain. And it could help if you read that first, because in this post I will asume that you understand how a census suffrage system actually works. Summarizing it means that the more stake you have in Steem, the more voting power you have and the more you can monetize your investments. In your SteemIt wallet you can see this as Steem Power, but when you go to the SteemD website, you can see this to be known as VESTS.
By the power VESTed in you
VESTS are calculated in huger values then Steem Power. How this is calculated can be seen at a special page at the SteemDollar site. As a Steemer it is enough for you to understand that VESTS are the same as Steem Power, that has the same value as Steem. And by the Power VESTed in you, you can vote, earn and so on. To put it simple and straight: the more VESTS you own, the more power you have. And in your SteemIt wallet you can recognize this as Steem Power. That is calculated relative to the value of VESTS. Keep that in mind, because it is not a 1 to 1 value conversion. But the important value to focus on, because it is being used in real life situations is Steem Power.
Steem Power is what makes your votes more or less strong. You can change this per vote, with a slider, you can only vote a certain amount of times before it is back at normal levels. But the actual strength comes from the Steem Power you own. (In the realm of SteemD being known VESTS, the power inVESTed in you.) Maybe you have seen it happen that your upvote just kept zero, or many vote counts just resulted in a low Potential Payout. While your posts went down in value, every time you checked. So what kind of magic is going on there? Well, actually it is kind of complex math, which I won't dig into, but I will give it a go at explaining it in a simple manner.
The pool of Steem to be divided
Every 24 hours the Steem Blockchain Network will create a lot of value. That value is about 1.152.000 STEEM. (You may correct me if I'm wrong in a reply.) That is a lot, right? True, every 24 hours the pot of Steem coins is filled with that amount. And that can be spread amongst all content creating and curating Steemers? For a part only. About 10 percent of that will be used for payouts. That still is 115.200 STM per 24 hour round. Of which part will be in STEEM, STEEM POWER and STEEM BACKED DOLLAR. And how that pot of Steem gets divided amongst the creators and curators depends not on the amount of votes, but also on the Steem Power that is involved. That is why some posts have a lot of votes and almost no potential payout, while a reply can have a huge amount. The key here is Steem Power that is linked to voting account.
So many votes of low Steem Power owning accounts are needed to create the same potential payout as a few votes of high Steem Power owning accounts. And all that is mixed inbetween. And the more Steem accounts that are created the harder it gets for low Steem Power owning accounts to make a difference in potential payout. The 7 day averege market price also plays a part in it, it always shows a relative value for the potential payout. The dollar sign in front of it can also better be regarded as a symbol for value.
Also understand that it is a fluctuating value, for as long as the posting round is open to collecting votes. And to make it difficult to vote in the last minute, to get more payment out of the pot of Steem, by self voting for instance at the right moment, there is no exact 24 hour round. Timing can be essential when a vote is casted too, as to get maybe a larger part out off the current filled pot of Steem.
Welcome in the rabbit hole, let's turn on a light
Now imagine there is a chest full of golden coins. At a certain point the people that have become member of the golden chest club are allowed a part of the content. This will be divided according to certain rules. There are some tasks to be done, that can raise the amount of coins to be earned. And those who kept some of the previous coins can vote for for who gets the most coins as a rewards for their contribution to the GC club. The members that saved the most coins decide how high the rewards are. The whole proces takes 24 hours and then starts again.
This is a highly simplified analogy of how the Steem on Graphene system works. And there is one important thing left out so far. Because in the Steem realm only 10 percent, more or less, of the created value will be going into the reward system. Where then is the other 90% going? Well, that becomes Steem Power and gets divided amongst the shareholders. And in effect that is every member registered in the Steem on Graphene blockchain. Spreading the 90% Steem Power, that is more than one million in Steem, is done relative to the amount of shares, in VESTS, an account holds. Put simply that means: the more Steem Power you have, the more you get every 24 hour round.
More Steem Power, means more Steem Power growth and more voting power
For an account to get a part from the pot of Steem created every 24 hours it would be best to have a good amount of Steem Power. Even if an account only would curate, even if it was doing so automated, with enough Steem Power it would pay for itself in return. And even though Steem Backed Dollar gives interest of 10%, for the time being, it pays way better to have a lot of Steem Power. That pays for itself on a daily basis as a relative part of the 90% share of the pot of Steem. That even can make a stakeholder earn from the 10% that goes into the curation system.
Now it is easy to see what that means. Just look at you wallet and keep an eye on the amount of Steem Power. If you have a little you might not notice it right away. But when you have like a 1000 SP, you'll notice the magical growth. And maybe you'll understand also that going to the Steem Fest in Amsterdam from 11-13 november 2016 really repays itself when you get the 1000 SP, offered by SteemIt incorporated, just for attending. Even when the price of Steem stays around 0,50 dollar. To get a lot of Steem Power just by posting is a tough job though as it is kind of biased to large stakeholders.
The fluctuations effect in potential payout
Remember it is a relative value that is shown behind the '$' sign. It is not exactly a Dollar value, more or less. And after the round for a post has ended it will be split up in relative values partly of Steem, Steem Power and Steem Backed Dollar. During the posting rounds where 10% of the total Steem created will be divided every new post has an influence the second it is valued with an upvote. This will virtually move some of the Steem out off the pot to the upvoted post. Just like a downvote will remove an amount of potential payout back to the pot.
If more posts are being made that get upvoted seperatly then the virtual payment per post will drop accordingly. For posts that have a few cents that could mean they end up with votes, but zero on the counter. And I think it is good that every owner of a Steem account understands how this works. Also that a relative huge drop in potential payout could mean that there are lage Steem Power holders active voting for a famous fellow Steemer. Where in effect that would mean they get a nice curation award also, besides the Steem Power they get every day. That comes out off the 90% of the total created Steem.
And the more accounts become active in posting, the harder it might get to make a good payout. Votes get more spread out, the 90% Steem Power from the pot of Steem gets more divided up among all Steemers and so on. But as every Steemer is a shareholder, they will always get a part of it anyway. Where the biggest advantage comes from the growth in Steem Power for any account. Even powering down might not be a problem, as long as the level of Steem Power stays about the same. And the potential payout value will fluctuate no matter what.
It pays to inVEST in Steem Power
In conclussion I think that the amount of Steem Power any account has determins how good it will do in the Steem realm. Previous fame helps, being known from other fora, being a known crypto specialist and so on. And therefore it is kind of biased towards 'trending'. Making it amongst those big Steem Power players is very hard. Lucky strike is needed to get noticed even. Or to get a response after a reply. It might be wise to understand this before commiting your time and energy to the Steem realm, because there is no guarantee that you'll get payouts worth your investment. So, it absolutely helps to stay real.
You like to blog, be active in a community and think the blockchain idea is awesome, then you allready are enjoying yourself at SteemIt. If you expect big payouts, or any payout guerantee for every post you put time and effort in, then you might be disappointed. But still, you can start reading, curating others, or invest and see your Steem Power grow even more, even if you stay away for a while.
But it is about attention competition. It is a kind of decentralized stockholder census suffrage company on a blockchain. This might work for you, or it might not be what you wanted or even maybe needed it to be.
Still, there are developements where Steemers are supporting each other, building smaller networks inside the big one. Less focus on the big Steem Power holders, not wasting votes there by choice. Following your own strategy, where you stay true to who you are, seems to be the best choice. Meeting others, building sub groups, voting up as much as possible, getting how it works, and stil doing what you want.
Hope this post could help you understand some of the more complex underlying technology that is Steem on Graphene. This is not ment to be a complete and exact technical breakdown of how it works. And if you think I took a wrong turn somewhere then feel free to reply.
Have a nice one!
