Steemit (STEEM) is a blockchain and blogging platform that seems to be banking on writers’ and journalists’ ignorance of cryptocurrency.

Like Medium and Patreon, Steemit is a platform that pays bloggers to blog. The difference is that Steemit pays in the STEEM cryptocurrency.

The basic idea here is that a blogger is supposed to get paid for every reader they attract. The underlying concept is trying to finance journalism and commentary without advertising. That has strong appeal to many intellectuals, particularly Marxists.

Why Steemit sounds like a Poor deal for Writers

The big problem I see with Steemit is that it is not compatible with ERC20 tokens. An ERC20 token is compatible with any Ethereum based cryptocurrency.

Unfortunately STEEM, uses a proprietary system that is compatible with Ether (ETH). To make matters worse the Steemit website states that its Smart Media Tokens (SMTs) are “like Ethereum.”

Basically, Steemit is a completely self-contained monetary system which means Steemit is useless in the real world. The ERC20 tokens can be converted into some money — if you are willing to jump through a few hoops.

STEEM has to be traded on the system, and sold at the price Steemit determines. That sounds like an effort to disguise the traditional way writers have been paid.

The greatest problem here is that writers would be at the complete mercy of the Steemit system. How is that any different from Medium or Patreon?

Steemit has been Very Successful — at Marketing

Steemit is very good in one aspect of business — marketing. It has attracted a lot of users mostly through some very clever marketing.

The Steemit network supposedly has 920,800 user accounts and attracts 1.5 million monthly posts. That has reportedly generated $40.15 million in rewards paid and 3.78 million monthly comments.

The disturbing thing about Steemit is that it admits to being: “The social network doling out millions in ephemeral money.” Here is the Merriam-Webster’s dictionary definition of ephemeral: “lasting a very short time.”

Is Steemit a Real Cryptocurrency?

In other words Steemit admits its money disappears fast, that defeats the whole idea of currency. A currency is supposed to be a permanent means of payment.

Cryptocurrency is supposed to be a permanent, immutable means of payment. That means the SMTs might not be a cryptocurrency which is a smart reason to stay away from STEEM.

It looks as if Steemit is a vast rewards points scheme for writers. The rewards are called “Proof-of-Brain” which is supposed to be pay people for brain work. The problem is that you are being paid in SMTs and not currency.

A Frightening Problem for the Blockchain

Steemit represents a potential abuse of the blockchain. That is an attempt to pay workers in something other than money.

The inherent advantage to cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) is to offer a better alternative to fiat currencies. The inherent disadvantage with Tokens like Steemit’s SMT is to create an inferior product.

This is likely to create a legal mess at some point, especially if millions of people do thousands of hours of work and do not get paid for it. It sounds like a recipe for lawsuits and regulatory action.

Cynics will say Steemit sounds like a pyramid scheme based in the blockchain. A better description is an attempt to build up a community with hopes that it will make money at some point.

That strategy has worked for companies as diverse as Amazon (NASDAQ: AMZN) and Facebook (NASDAQ: FB). It has failed miserably for platforms like Twitter (NYSE: TWTR) and Groupon (NYSE: GRPN).

My advice is stay away from Steemit until it proves it can make money. Yet, strangely enough STEEM is worth some money.

Is the STEEM Cryptocurrency worth anything?

The funny thing about STEEM is that it has some value right now. The STEEM tokens achieved a Coin Price of $1.34 on July 15, 2018, which is great for a cryptocurrency.

That Coin Price led to a Market Cap of $356.50 million and a 24-hour Market Volume of $1.432 million on 15 July 2018. Those prices are also great, although there is no guarantee they will last.

There was a circulating supply of roughly 266.624 million STEEM and a Total Supply of 283.598 million STEEM on July 15, 2018. This means that STEEM is popular.

My advice for writers getting paid in STEEM is sell it now while it is worth something. If a better solution particularly one that can be converted into Ethereum comes along, STEEM is toast.

Cryptocurrency investors and speculators should stay away from STEEM because it can collapse at any minute. All it would take is one blog calling STEEM a scam to go viral to crash this cryptocurrency.

This story first appeared at Market Mad House, your monitor of cryptocurrency lunacy.

Daniel G. Jennings is a writer who lives and works in Colorado. He is a lifelong history buff who is fascinated by stocks, politics, and cryptocurrency.