Steemite: Bitcoin news or snowball system?

A few years ago, personal data was only a by-product of business relationships, but today it has become a valuable currency in its own right. Many companies, especially in the digital industry, regard customer data as their most important resource. Heavyweights such as Facebook and Google define their business model and their high market capitalization in the stock markets through their ability to retrieve and analyze unimaginably large amounts of data from users. The analysis of customer data has moved to the center of the digital industry and enables a completely new business model.

Whoever manages to gain as much customer data as possible for himself and to evaluate it efficiently can become extremely rich in a very short time – Mark Zuckerberg sends his greetings. The users of these platforms or services, on the other hand, do not participate in the profits, although each individual user supplies the corresponding resources, i.e. data, for the profit of the digital companies. It therefore seems logical to look for fairer alternatives that give consumers back control over their data and compensate them financially when publishing their data.

In order to achieve this, the blockchain can be used as it offers not only autonomous data management but also smart contracts for payment transactions. The blockchain would therefore function as the Robin Hood of Internet users, protecting data from access by the rich and powerful Silicon Valley corporations, while at the same time returning a piece of the big pie to each one. The extent to which this noble motif can really be realized cannot yet be assessed.

Steemit, a cross between Bitcoin news and Reddit

The first blockchain-based social media Bitcoin news platform, Steemit, has made an attempt to change the Bitcoin news in this review, and we have already described how it works in the following article: BTC-ECHO now also on Steemit.

Behind the platform are Daniel Larimer, founder of Bitshares and Ned Scott, a former financial analyst. With Steemit, they want to give people an opportunity to create their own content, promote it or comment on other content while earning money.

To what extent Steemit manages to assert itself in the long run and to offer users, due to paid content and data autonomy, a real alternative to existing social networks cannot be seriously predicted. At first glance, Steemit seems like a mixture of Facebook and Reddit.

The opportunity to monetize your published content on the net without passing the data on to large companies is undoubtedly very attractive. In addition to many euphoric voices, there are also sharp critics of the platform. The main accusation lies in the distribution of steem, 90% of which is owned by a few insiders (whales). They theoretically have the possibility to use the social network, similar to a snowball system, and let it drive against the wall after sufficient self-enrichment.

Proof-of-Stake – a disadvantage?

A problem or accusation that many blockchain applications have to struggle with. Even at Bitcoin it didn’t look any different during the development phase, since the inventor, known under the pseudonym Satoshi Nakamoto, owned practically 100% of all Bitcoins at the beginning. However, Bitcoin’s so-called proof-of-work concept allowed a redistribution over time to take place. If a blockchain uses the proof-of-work concept, a very high effort is required to calculate the blocks. As a result, increasingly higher hardware capacities and energy costs are required to mine the corresponding crypto currency. Since a single person or group normally does not have the sufficient capacities to operate mining in the long term as the only actor, mining is distributed among several investors or operators of mining.

Exactly this possibility does not exist with Steemit, since the so-called proof-of-stake principle is applied here, which we have already described in the above mentioned article. The revenues are not primarily generated by the mining activity, but are defined by the ownership structure of the respective currency holders. Simplified this means that a redistribution is more difficult, because there is no possibility to change the ownership by mining. Consequently, there is the accusation that this is a less than fair platform and that there are corresponding risks of power asymmetries and abuse.