Crypto Currency Economics History - Part 1: Where Does the Money Come From?
I took Mom out for lunch today and we always have the same questions when explaining this new "International Phenomenon" to others...
It really is amazing how many subjects this 1 question can bring up!:
What is currency?
What is Fractional Reserve Banking?
What is a Central Bank? (Federal Reserve Bank)
What creates value in a society or given community or country?
Who has the power to print fiat currency and why?
How was money invented?
Why is digital money better than paper money?
What are Peer to Peer Apps and Why are they so Powerful?
But if we focus simply on what is Cryptocurrency and where does the money come from then I think we really have to talk about 1 particular invention first:
Bitcoin - (2009)
There have been many previous attempts at digital money but there were remaining problems of "Double Spending" and various other issues with Immutability that had not yet been solved mathematically or in actual software applications before Bitcoin first appeared.
Part of this was Proof of Work (POW): the decentralization and distribution of "miners" that distribute the Bitcoin token based on powerful computers burning vast energy attempting to guess private keys to each new block created on the blockchain. This creates "scarcity" that lends a barrier to entry in creating more tokens; they cannot simply be printed like our US dollar, or other "fiat" currency of any government.
Ethereum - (2013)
Smart Contracts - The idea that an automaton could replace my lawyer, appealed to me ;-)
With a programming language available to arrange multi-signature contracts where money is delivered when all signatures are received, is the basis of much new thinking in blockchain technology.
Where Bitcoin tends to be a digital replacement for Gold, Ethereum looks more to be more oriented around automation of bank contracts and business processes involving funding of deliverables also received digitally.
Ethereum also uses POW (for now). It is the first blockchain to consider running Distributed applications, or DAPPs. DAPs are actually what INSURE that the blockchain is never going away..
DAPPs are UNSTOPPABLE APPLICATIONS and WILL NOT BE SHUT DOWN for any reason once popular and a given community supports it. Because it is simultaneously run on hundreds or thousands of computers world wide, no one government can control it.
The first popular form of DAPP was probably BitTorrent. While many governments attempted to shut it down, others attempted to shelter it as human knowledge and catalog not open to being regulated. The term now usually refers to blockchain driven distributed applications, but technically, any Distributed App run on servers around the world by a community of users, is a DAPP.
STEEM - (2016)
POW brings up several challenges which STEEM attempts to solve using Delegated Proof of Stake (DPOS). Instead of mining, it uses user involvement on the blockchain like mining for a "Rewards Pool" that pays investors a dividend for active participation.
DPOS: Being much more efficient, has no miners, and instead has "Block Producers" that issue new blocks to a group of elected "Witnesses" sharing in a rewards pool for looking after and shepherding the blockchain. A democratic pool of experts, rather than machines guessing keys, is in fact is so much more efficient and appropriate for some applications (maybe not replacing Gold) than POW, that there can be NO FEES.
Unlike Bitcoin and Ethereum and many other blockchains, there are no fees to make a transaction on the STEEM blockchain. There are instead "bandwidth limits" based on your share of vested STEEM in the network.
And finally, STEEM creates rewards for upvoted posts by generating SBD and SP from inflation controlled to be 5% per year. This generates millions that are distributed by the STEEM network every month.
Across the board, blockchains like Bitcoin have been pretty slow. There have been forks of Bitcoin as various mining groups prefer possible solutions to this problem. New blockchains are created when a given chain splits or "forks".
STEEM was designed by Dan Larimer and team to be much faster. And free to use if a user has "staked" a claim to user bandwidth on the network. So fast, that often transactions are completed in less than 3 seconds. STEEM is currently the most used blockchain on the internet, with the most transactions.
Many believe STEEM is a new model for the internet. It will soon have competitors but it has a 2 year lead on those competitors, and was the first blockchain used for Social Media applications.
If we look at what @ned says about it, I think his recent interview is completely on point and helps dialog further, which is not a trivial issue. It takes years to understand what is involved, and the community is constantly experimenting to find what works and what does not seem to work as well..
Today Ned was interviewed and answered this question himself:
"I get that question all the time.."
Just like points on social networks - Reddit and Digg were his examples of points for curation.
Digitizing that concept in the code for STEEM, as points on a marketplace; can buy and sell, and see the current market price.
These are the mechanical issues he cites Steemit ase using. (Not really talking about controlled inflation, and the engineered economy).
Then he talks about cryptocurrency in general, and why does IT have value?
Which I've touched on above very lightly.
interesting post! i think doubters are still concerned where the usd is coming from. so maybe instead of saying we should shift towards a more complex issue maybe add a simple, straightforward answer as well. like money comes from the pool and steemit is a democratic way of distributing it.
Steem Power (SP) and Steem Backed Dollars (SBD) are distributed as a Rewards Pool (RP) 7 days after content is published on the STEEM blockchain and divided up between the users that posted that day. The Rewards Pool is created by Block Servers and Witnesses that maintain the network and keep a portion of a controlled inflation rate of 5% for doing so, the rest is distributed as the RP to users daily for their content and comments.
Upvoted 100% and restemeeed MON and that @artzanolino original Surfyogi black and cannabis leaf animation is fuckin SIIIICK now THAT is a nice animation logo WOOOO that is NIIIIICEEE
@surfyogi sir,i'm faima new steemit join from Bangladesh.see my introduce and support me this platform.
Hey! Checkout blog post on eSteem! esteem://introduceyourself/@faima/introductionyourself-i-m-faima-i-made-a-new-entry-on-steemit-and-i-love-traditional-dance-f027802d153ca
thanks for the details 😄
it's a new way to reward content creators without having to go through advertising or sponsors if they wished to monetize. certainly something i've never seen before.
I look forward to part-2-where-does-the-money-come-from
You can get paid to post it and your book(chapter by chapter) onto SMOKE network and get paid like on Steemit.
https://smoke.network/
Uses the STEEM blockchain, thought you would want to know.
Peace bro.
Does this still mean that money is generated out of no where? May be the answer to Where Does the Money Come From? will be in part 2 or did I miss that in the post?
It is not generated out of nowhere, you have to have a huge Computyer network with protoicals everyone can agree upon
in Proof of work its genertaed from computational work
with Proof of Stake its just a consensus that everyone holding these coins for a certain amount of time gets to "Mint" new ones" and Steempower is like this but has voting hence Delegated Proof of Stake, or DPOS and in our system yes youc an justs ay its printed money out of thiun air but you can't just print it you need steempower so its consensus based INFLATION
The amount of steem and SBD is inflated yes they generate newones, WITNESSES do they Sign Blocks, but you cannot just say they print money out of thin air, it has to be AGREED upon and MARKETS buya nd sell it, THAT'S the big distinction people mist make, this is NOT paper and this is NOT a money printer its more like a CONTROLLED mopney Printing Press and it can go Faster the more Steempower you have, but there wil ONLY be a ceryain amount of steem priunted everyyear, right now its l8ike 8% or somethinga nd veeyryear it gfoies down here are the stats
banjoBOT - Today at 9:34 PM
so you see 8.6% inflation or 25.8 million steem tokens created and next year its 8.2% and then in 2020 its 7.8% inflation or 27.4 million new steem tokens created (at 2024 it finally starts going down from 28.4 million steem tokens in 2023 to then 28.4 in 2024 and then 28.1 in 2025 and then it just keeps going down but isnt it INTERESTING that we still have 6-7 years left of an INCREASING supply of steem until the NEW steem supply actually starts to go down ;) Let the good times roll
Well explained @ackza , love it...
I certainly like this one. I like the way you broke down how Steemit works. A layman could understand this. Thank you!!!
you remind me of an exam in economics at the faculty where we had almost the same kind of question, I always liked this matter, thank you very much for this sharing
Thank you sir.. your comment is great...
Sir,your magazine
Thank for you,,, great post 👍👍👌
This s one of the questions people get to ask over and again.
Where does the money come from?
They find it difficult to believe that you simply get rewarded for creating and distributing contents on the blockchain.
I'm going to have to save this video so that when next I'm asked this question, I'll just send the video over.
@ned really broke down the points....
Thanks @surfyogi
This would be educative post for everyone. Steemit being biggest media platform and steem token will come top ten listed cryptos in future. Steemit platform created steem token. As your info, steem created 2016. It has no longer history. BTC has longer experience. It's main token already yet. Thanks to your details @surfyogi.
Thank for you,, great post 👍👍👌
@surfyogi, That's perfect review about Crypto Currency Economics History. I'm pretty stunning these conversation. I didn't know every crypto history. But now I updated my knowledge via you valuable contents. Absolutely Thank you very much.
Wow...excellent information history of when cryptocurrency modules come from. Excellent review @surfyogi.