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Overview of Steem Economics Model
Overview of Steem Economics Model
Jun 17 , 2018 · 7 min read

What is Steem Blockchain

Launched in April 2016, Steem is a blockchain-based platform that rewards content creators, curators, remitters for distributing meaningful content and helps them build their communities. It uses DPoS as a scalable blockchain consensus algorithm for publicly accessible and immutable content. The native digital asset on Steem blockchain is a Smart Media Token (SMT) called STEEM. STEEM has nearly instant settlement and zero transaction fees which makes ad-free business models possible for publishers.

STEEM has two unique properties when compared to other cryptocurrencies. First, it has a pool of tokens (called the “reward pools”) dedicated to incentivizing content creation and curation. Second, it has a voting system that utilizes the knowledge of the crowd to determine the value of every content on the network. When coupled together, these two unique properties are referred to as Proof-of-Brain by the development team. The Proof-of-brain works a lot like the Proof-of-Work algorithm where tokens are distributed to the participants based on the amount of work they have done.


One of the successful implementations of the Steem blockchain is the website It is a platform that allows both amateur and seasoned publishers to monetize their content like many other social content websites. You can think of Reddit, but in a way that the website pays content creators and curators. The Proof-of-Brain mechanism rewards writers when their articles get upvoted as the content adds value to the network and attract new users. To encourage engagement and discovery of meaningful content, it also rewards people who help curate the best content by upvoting other people’s content. To put it simply, the system values collective wisdom.

Reward Structure

Let’s take a look at how Steemit rewards its content contributors. There are three important parts of the content rewards on Steemit: STEEM, Steem Power (SP) and Steem Dollars (SBD).

Overview of Steem Economics Model

STEEM is a liquid cryptocurrency that can be bought and sold on exchanges, as well as transferred to other parties as a form of payment. It is an SMT and the backbone of the Steem blockchain. Note that all rewards issued on Steemit are in the form of SP and SBD but not STEEM. Users have to convert their SP and SBD to STEEM to trade on public exchanges.

Steem Power is the STEEM that has been committed to a thirteen-week vesting schedule. SP balances are non-transferable and are generally non-divisible. It can be converted back to STEEM, on request, over a period of thirteen weeks, via 13 equal weekly payments. Because it represents users’ long-term commitment to the website, SP can be viewed as users’ influence on Steemit. When users vote on content, their influence over the distribution of the rewards pool is directly proportional to the amount of SP that they have. Another incentive for holding SP is that 15% of yearly inflation is paid to SP holders as interest on the balance of SP that remains vested.

Steem Dollars, also called Steem Blockchain Dollars (SBD), is the vehicle implemented to protect the system’s stability. It is similar to convertible notes (short-term debt instruments) in the real world. SBD allows the holder to convert to the backing token (STEEM) with a minimum notice at the fair market price of the token. One SBD can be traded for roughly $1 worth of STEEM. Under normal market conditions, the trading price is expected to fall in the range of $0.95 to $1.05. Whenever the price falls below $1, SBD holders also receive interests.

Every time a writer receives a content reward, 50% is paid as SP, and the remaining 50% is paid as SBD. The proportion is the same for curators. Users also have the option to get paid in 100% SP, as well as decline content rewards. When a user declines a content reward payment, the amount remains in the reward pools. Thanks to its unique features, has grown immensely since its inception. It now has an active user base that is responsible for 1.5 million monthly posts and over 3.7 million monthly comments.

Yearly New STEEM Token Distribution

The rewards we discussed above come from newly generated STEEM tokens on the blockchain.The new token generation rate on Steem was set at 9.5% per year in December 2016, and the inflation rate goes down by roughly 0.5% per year; it will eventually stop when it reaches 0.95% in about 20.5 years.

Overview of Steem Economics Model

Of all the coins generated each year, 75% are sent to the “reward pools” which as we have discussed, are distributed to content creator and curators on the network. 15% of the new tokens are distributed to vested token holders, and the remaining 10% is distributed to the witnesses, who are also called delegates that are elected to produce blocks on DPoS blockchains.

DPoS Mechanism

With Steem, the witnesses are elected by the collective Steem Power-weighted witness approval votes from Steem accounts. Each account can cast up to 30 votes to 30 different candidates, and votes can be added or removed at any time.

Once elected, witnesses are responsible for the block production of the Steem blockchain. Although each account can vote for 30 members, there are only 21 active witnesses. Twenty of those witnesses are selected by approval rating, and one is time shared by every witness that didn’t make it to the top 20; the chances of being selected is proportional to their total votes. The sequence of the 21 active witness is shuffled every round to prevent one witness from constantly ignoring blocks produced by the same witness placed before. Any witness who misses a block and hasn’t produced in the past 24 hours will be disabled until the witness updates the block signing key. According to, we observed that witness need to get at least 14% votes to be in the top 20. Also, we note the top 20 witnesses tend to vote for each other to stack up the votes. For example, 12 out of 30 votes from the top 1 witness gtg go to the top 20.

Overview of Steem Economics Model

As an incentive to stay reliable witnesses, each of the top 20 witnesses will receive block reward, in Steem Power (SP), calculated as follows (as of June 8, 2018, block reward changes over time, as well as STEEM price):

SP per round: 0.196

Round time: 3 seconds/block * 21 blocks = 63 seconds

Number of rounds per year: (60*60*24*365)/63 = 500,571 blocks

SP reward per year: 500,571 * 0.196 = 98,112 SP

Monetary value: 98,112 SP * $2.28/STEEM = $223,625

As calculated, each active witness is stand to make roughly $223,625 per year at the current market price of STEEM.

Scalability of Steem

Steem blockchain has proved itself over the past 2 years that it can handle traffic on social media site To assess the network’s scalability, we can benchmark it against Reddit’s traffic volume and determine if it will survive.

First, let’s calculate how many transactions Reddit was handling on its site. In 2015, Reddit’s 8.7 million users generated 73.15 million new posts and 725.85 million new comments, for an average of 2 posts per second and 23 comments per second. Also, there were 6.89 billion upvotes which is equivalent to an average of 218.5 upvotes per seconds. In total, was registering an average of 245 transactions per second. Second, we need to know the actual capacity of Steem. The Steem blockchain is built upon Graphene which powers the decentralized, blockchain-based asset exchange Bitshares. Graphene has been tested that it can maintain over 1,000 TPS on a distributed test network. The technology has the potential to scale to 10,000 or more TPS with relatively straightforward upgrades on server capacity and communication protocols. As of today, the TPS on Steem blockchain is ~18.441 tx/sec according to SteemDB, meaning Steem only uses about 2% of its total capacity.

Thus, Steem is more than capable of handling transactions of large websites like and has room left for sudden spikes in the number of transactions as well as upgrade potential when needed.


Steem is a blockchain-based platform that made ad-free, membership-free online publishing profitable for publishers. It presents earning opportunities to content creators as well as their readers in ways that were never implemented within the social media industry before. The unique reward and incentives system of the Steem blockchain are well-crafted to make the system self-sufficient. The performance of the system is designed with mass adoption of the platform in mind and are proven to be reliable so far.

With Steem’s lightning fast processing time, fee-less transactions system, unique rewards system, and its scalability potentials, we could expect more social media websites adopt this innovative blockchain technology.


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