How Steem works? A Brief Introduction

STEEM is a cryptocurrency based on the BitShares concept. It is interlinked with the social platform Steemit, where users can “mine” Steem-coins by collecting upvotes for posts. This “subjective proof of work” is a clever combination of Proof of Stake and Proof of Work. The system as a whole is relatively complex, as it contains “delegates”, which are elected to do the proof, and three forms of token, STEEM, STEEM power and STEEM Dollar; also it is hard to assess if STEEM is as decentralized as Bitcoin and Ethereum, as large parts of it are based on the privately hosted platform Steemit, which is the main client of Steem. There seem to be no other wallets available.

However, the address concept is intriguing. In a more centralized way, STEEM implemented what Ethereum aims to build with smart contract name registrars: The users gets a private key, which he can use to sign his transaction, like with any other cryptocurrency. Addresses, however, are no cryptographic derivation of the private key, but just the usernames on Steemit. Probably these usernames are connected to the public key in a public database on Steemit, so that, at least, it is possible for every user to validate a transaction. But still, the most important part of the validation – the connection between public key and address – is not based on math, but on trust to the platform Steemit.

The username based address scheme of STEEM is interesting because it provides an ideal usability. But its centralized and trusted nature makes it inadequate for most blockchain use cases, which aim to decentralize verification and substitute trust with math. At least, the system lacks transparency.

A smart contract based name registrar, like Ethereum, aims to build on top of its blockchain, however, could combine the best of both worlds: the decentralized, trustless nature of Bitcoin – and the ease of use of STEEMs name based addresses.