As I said in my introductory post, I have been apprehensive about Steemit--and quite frankly, most altcoins--since I first learned about digital currencies. And as I've watched new coins launch left and right, new "projects" that are going to be the future, I watch in disappointment as people lose so much money. That's why I've always stayed on the sidelines and held my bitcoin.
But people were saying the same thing about bitcoin early on and it has proven otherwise.
If anyone has ever found my writing about the stock market, one thing that becomes pretty clear is that I'm not really a fan of gold. As Warren Buffett once said, "gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head."
He also said: " Gold is a way of going long on fear, and it has been a pretty good way of going long on fear from time to time. But you really have to hope people become more afraid in a year or two years than they are now. And if they become more afraid you make money, if they become less afraid you lose money, but the gold itself doesn't produce anything."
That, fundamentally, has been my problem with gold. We dig it up, turn it into bars, and then put it in another hole. And, unless people are more afraid in the future and are buying gold, the price isn't going to do anything. Along the way, it does nothing for you. It doesn't generate income, it doesn't become a business, it doesn't innovate; it just sits there.
But bitcoin is different ... Because it possesses the traits of a store of value (limited supply, etc.) while also being a fantastic method of value transfer, suddenly you have an asset that has utility. And once something has utility, its growth is not based on an emotion, such as fear, but rather, it is based on how much demand there is for that particular asset.
My bitcoin is one part hedge against economic calamity and one part investment in that value transfer tool. Therefore, because there is utility behind bitcoin while it also has fundamental traits of a store of value, bitcoin has a bright future.
What About Steem?
Back to my original point, though, we're left talking about altcoins. Let's talk about some of the top coins on the market and what their use cases are:
Bitcoin: Store of value and, essentially, decentralized wire transfers
Ethereum: Smart contracts, but which ones currently exist?
Steem: I'll get to this in a second.
Ripple: Wire transfers, but not much adoption
Litecoin: The silver to Bitcoin's gold.
For the most part, Bitcoin is the only coin that is production ready. Ethereum is interesting, but is about to bastardize itself by initiating this hard fork. And really, other than proofs of concept, what scalable products have launched? Ripple is interesting, but I still don't see much going on there. And then Litecoin, which is the silver to Bitcoin's gold.
Now we talk about Steemit.
The use case of rewarding people for creating high quality content, curating content, and voting on whether that content is valuable is impressive. And when a coin has utility, suddenly, my interest is slightly more focused.
The value of Steem is derived from the level of activity on this site. If there are more people that are looking to become whales on the site, there's the potential that they'll buy steem to give themselves a head start, thus increasing the value of said steem. That boosts the strength of the platform, which results in more people participating. Hell, this is my third post in a week, so clearly the rapid rise in value piqued my interest.
Further, as the utility becomes more pronounced and more people realize its existence, it creates liquidity, which is necessary for any coin survival. Many of the little ones can't provide that, which results in a slow, painless death.
Creating an environment whereby people are rewarded for contributing to that community is a viable one and, presently, is not one that exists in bitcoin. That could change one day, but for now, this self-funding machine seems to have some room to stretch its legs.