Ana Sullivan

The Majority of People Think Steem is a Ponzy Scheme

by Ana Sullivan February 2, 2018

Steem (STEEM) is a relatively new cryptocurrency, which is used to power the Steemit platform. Steemit is a blogging and social networking website that allows publishers to monetize their content. It was founded in 2016 by Ned Scott and the Bitshares`s CEO, Dan Larimer. The platform is something like Reddit but the writers get paid in Steem for posting, discovering, upvoting, and commenting others` content as well as when their posts get upvoted.

The Steem blockchain has two tokens: STEEM and Steem Dollars. There is also a vested or stored interest known as Steem Power. STEEM is the fundamental unit while the two others derive their value from the value of STEEM. The idea here is not to keep your STEEM in their cryptocurrency form but to use them to buy Steem Dollars, Steem Power or convert them into Bitcoins. Steem Dollars are pegged to the U.S. Dollar. When the content of the writes becomes popular, 50% of their pay per post is in Steem Dollars while the rest is in Steem Power units. Steem Power Units are a long-term investment as holding them entitles you to a proportionate ownership in the network. When you buy a Steem Power unit you cannot sell it for 13 weeks. This tactic aims to prevent people from dumping their units on the market and crashing the price.

The current STEEM price, according to coinmarketcap.com, is $3.67 USD (it has decreased significantly since the beginning of this year). STEEM has a total supply of 265,130,786 STEEM, circulating supply of 248,156,692 STEEM, and a market cap of $909,538,945 USD.

Even though the idea of being paid for creating content sounds great, Steem is being much criticized and many people are skeptical. Petar Zivkovski, director of operations for full-service bitcoin trading platform Whaleclub expressed his concerns by saying that his first impression was “a 'pump and dump' crypto where accumulators (founders, early adopters) will be looking to cash out on a major pump in price (distribution).”

The overseas marketing manager for Bitcoin trader Richfund, Kong Gao, gave a similar opinion by saying:

"Most of the articles on Steemit are promoting steem, which makes it seem like a variation of a Ponzi [scheme]. Furthermore, it is the same group of people behind Bitshares. I don’t think it is sustainable and I don't take it seriously. I've also spoken with a couple of serious altcoin traders in China and they have their doubts as well.”

The algorithmic trader Jacob Eliosoff backed up Gao`s point that Steem might be a Ponzy scheme, predicting that it will end up “the Ponzy way”, namely, the currency "will grow and grow until there are no fresh users to suck in and then quickly collapse. I’m skeptical about 'appcoins'/'appchains,' and Steem is very much one.”

The bottom line is that the majority of people think Steem is a scam. A quick look on the Internet and you will find numerous articles, screaming “STEEM IS A SCAM”, “Where Does Steem Fit In With the Numerous Altcoin Scams?”, “Proof Steemit is a scam and a ponzi scheme”, and many others. Be extra careful. The cryptocurrency business is risky enough as it is, without you making thoughtless and reckless decisions.

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